business

GM leaves NUMMI, Toyota is left holding the bag

The 25-year marriage between General Motors and Toyota is over. GM said today that it will pull out of New United Motor Manufacturing Inc., or NUMMI, the joint venture plant in Fremont, Calif. The plant’s 4,700 workers—-most of who are United Auto Workers union members—make the Toyota Tacoma pickup, Toyota Corolla compact and Pontiac Vibe.

Pontiac sold 46,000 Vibes last year and 17,000 of them through May of this year. That’s not massive production, but it helped keep NUMMI’s passenger car line running near full capacity in better times. Without it, NUMMI’s profitability will be under pressure.

That plant’s workforce will be feeling heat for other reasons. While it was founded to marry GM’s knowledge of the U.S. parts making network with Toyota’s factory smarts, now it has a nasty combination of GM and Toyota problems. It has UAW wages and Toyota’s cultural aversion to layoffs. Toyota is also wary of cutting jobs in the U.S. because it might hurt the company’s image as the kind of generous employer that doesn’t need a union in the shop to guarantee nice wages and job security.

So Toyota has a problem on its hands. The company went on an expansion binge when car sales were booming by building new plants in Texas, Canada and one in Mississippi that has not yet opened. But now many of its plants are underused and the company doesn’t know how much the U.S. market will really rebound. But the company has a lot of production, and GM’s latest move makes add to the excess. Without a sales rebound, Toyota will have to contemplate the politically stressful decision to cut workers at NUMMI or at its other plants.

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