July 24 (Bloomberg) -- Toyota Motor Corp. will shut a California auto-assembly plant that operated as a joint venture with General Motors Corp. for 25 years, the first time Japan’s largest carmaker has closed a factory at home or abroad, according to two people familiar with its plan.

The company will negotiate the timing of the closing with Motors Liquidation Co., an entity responsible for the disposal of the assets GM shed in bankruptcy, said the people yesterday. They declined to be identified because the information wasn’t public.

A collapse in U.S. auto sales to their lowest since 1976 has left Toyota, the world’s largest automaker, struggling to keep North American plants running at capacity and avoid factory closings and job cuts. GM in June said it would end assembly of Pontiac Vibes at New United Motor Manufacturing Inc., known as Nummi, and quit the venture as part of its reorganization.

“Without GM’s volume the plant is simply not cost effective,” said Aaron Bragman, an analyst at IHS Global Insight Inc. in Troy, Michigan. “They have other facilities that could easily accommodate the production that’s there.”

Bragman said that should the plant close, it would mark a shift for Toyota because the automaker typically doesn’t “respond to changes in the market on a short term.”

California Governor Arnold Schwarzenegger has asked Toyota to continue operations at the plant and has spoken to Akio Toyoda, the carmaker’s president, according to the state government’s Web site.

Extensive Review

“We’re conducting an extensive review,” Paul Nolasco, a Toyota spokesman, said yesterday. “There are a number of difficult and complex issues we need to address with regard to a final decision.”

Yoshimi Inaba, Toyota’s North American chief executive, said July 20 its decision depended on possible aid from California lawmakers, labor contracts for the factory’s union workers that expire in August and Nummi’s financial viability. It’s the only large auto-assembly plant on the U.S. West Coast.

Toyota gained 2.5 percent to 3,750 yen at the close of trading in Tokyo.

In the U.S., the carmaker’s largest source of revenue, the Toyota City, Japan-based company’s sales fell 38 percent in the first half, following a 15 percent decline last year. Toyota had a record 436.9 billion yen ($4.6 billion) loss in the fiscal year that ended in March, its first in six decades, and forecasts an even bigger 550 billion yen loss in the current business year.

Nummi’s Capacity

Nummi has the capacity to make 420,000 cars and pickups each year. It only made money in 1992, the result of California’s taxes and labor and pollution rules, as well as the plant’s UAW contracts, according to an estimate by Tokyo-based Credit Suisse Group AG analyst Koji Endo.

Shared by GM and Toyota since 1984, Nummi was Toyota’s first U.S. auto-assembly factory. Shutting the San Francisco Bay area plant, where Toyota President Akio Toyoda spent two years, compounds economic woes in California, which struggled this month to close a $26 billion budget deficit.

GM was the factory’s sole owner from 1963 until 1982, when it closed the Fremont Assembly plant owing to escalating costs and labor conflicts with union workers. Toyota initially invested about $150 million to renovate the plant and GM contributed the property and original factory building to create the joint venture.

Nummi employs 5,400 people, including 4,550 United Auto Workers union positions. More than 1,000 suppliers work with the factory, which has annual payroll and benefits of $523 million, according to a plant publication.

To contact the reporters on this story: Kae Inoue at kinoue@bloomberg.net; Alan Ohnsman in Tokyo at aohnsman@bloomberg.net

Last Updated: July 24, 2009 02:33 EDT