Reference no: EM131646047
California Braces As NUMMI Auto Plant Nears Closing
At the New United Motor Manufacturing, Incorporated plant, known more simply as NUMMI, in Freemont, California, workers are still reeling from the news that the operation will be shutting its doors in a few weeks. The plant closing will render some 4,700 people unemployed, and force the layoffs of many others in associated industries. NUMMI is a first-of-its-kind joint venture formed in 1984 between Japan’s Toyota and the United States’ General Motors to build cars and trucks. Since its inception, the pant has produced some eight million cars and trucks including U.S. models like the Chevy Nova and Chevy Prizm, as well as Japanese models like the Toyota Corolla and Toyota Tacoma. Moreover, despite the announcement of its impending closing, the plant is still running at full capacity today, producing new Corollas and Tacomas at the rate of one every 54 seconds.
The decision to form NUMMI came about 25 years ago when Japanese automakers wanted to expand into the U.S. market, and U.S. automakers wanted to learn new production techniques. Toyota believed that its agreement with General Motors could help it achieve several goals. The company wanted to learn how to do business in the United States, how to manage unions, and how to deal with U.S. workers. General Motors believed that collaboration with Toyota could help the company learn the more efficient Japanese production techniques and implement a just-in-time delivery system. According to Robert Cole of the University of California at Berkeley, Toyota more or less accomplished its goals, but General Motors was less successful at achieving its objectives. Cole claims that for at least a decade, managers at General Motors resisted input from Toyota, and so missed out on opportunities to improve.
Today, workers at the plant, many of whom have worked there for 10 or 20 years, are uncertain about their futures. NUMMI is California’s only auto assembly plant, and there are few other opportunities available in the state. California was among the most heavily affected areas in the country during the recent global recession, and the closing of the plant is yet another blow to the state. In addition, the companies that have supplied the plant may be forced to layoff an additional 40,000 people, making the business environment in the area even worse. NUMMI workers, who average about $28 per hour, are organizing protests against the plant closing, hoping to keep it open. However, their efforts are likely to do little. General Motors has already pulled out of the joint venture as part of its reorganization after its bankruptcy, and Toyota believes that it can produce its vehicles more efficiently at its newer plant in San Antonio, Texas. Still, according to Cole, the joint venture should be viewed as a success story. Thanks to the collaboration, Toyota recognized the value that U.S. workers had to offer, and General Motors learned to think of productivity and efficiency in a new way.
Read the above case and answer the following questions:
1. What prompted the decision to form NUMMI? How did the joint venture benefit Toyota? What did the arrangement mean to General Motors?
2. Reflect on the success of NUMMI. Did both partners benefit equally from the joint venture? Why or why not?
3. Why is the NUMMI venture ending? What does this imply about the nature of the auto industry, and indeed the global economy?
4. What does the closure of the NUMMI plant mean to the Freemont area? Reflect on the negative effects to the host country of foreign direct investment. In your opinion, would the plant have a better chance of remaining open if it involved another company from the U.S. rather than a company from Japan?