Cleantech Market Intelligence
GM Abandons NUMMI to Toyota
Let’s turn the clock back for a moment. The year is 1983 and General Motors is still the largest automaker in the world and has 43% of U.S. market share. Toyota is battling it out with Honda with about 7% of U.S. market share, but was starting to draw strong attention for its quality of manufacturing. So, in February of that year, an announcement from General Motors and Toyota came as somewhat of a surprise to many Americans: GM and Toyota were opening a joint venture plant in Fremont, California. This plant, New United Motor Manufacturing, Inc.(NUMMI), currently employs 5,440 people and builds three vehicles: Pontiac Vibe (based on Corolla platform), Toyota Tacoma, and Toyota Corolla.
Over the years, GM and Toyota combined have built a variety of small cars for both companies (Corolla, Voltz exported for Toyota, and Chevy Nova, Geo Prizm and Vibe for GM). For about the last year, there have even been rumors of Toyota moving production of the Prius to NUMMI and offering a version for GM. However, in June of 2009, GM’s bankruptcy handed NUMMI over to Toyota.
What’s that mean for Toyota? What’s that mean for production of small cars in America? With Prius being one of Toyota’s hottest vehicles, Toyota had indicated that they may move production to their currently empty, but brand new plant in Tupelo, Mississippi. However, in early June, that plan may have been scrapped as well. Does that mean the Prius is headed to NUMMI?
Toyota finds itself with the same problem that almost every other automaker has at the moment: overcapacity. The Corolla and Matrix are currently built at a plant in Ontario, Canada. The Vibe is going away, and with the new 5 door Yaris and the Scion xD here in the States, the Matrix starts to look a bit redundant and unlikely to have production moved (yeah, I get that the Yaris and xD are smaller than the Matrix, but the Matrix sales volume isn’t big enough to justify an entire plant for itself). The plant in Tupelo was originally tapped to build Highlanders, until the bottom dropped out. Add to all of this that the NUMMI plant is Toyota’s only plant with UAW workers (making it Toyota’s most expensive U.S. plant) and Toyota has never had to close a plant in North America.
There is much speculation that Toyota will move the Prius to NUMMI, instead of Tupelo, however, the plant is not set up for that, which would likely mean a delay in the start of production. Tupelo was set to produce the Prius before it was stopped, so production could still start as early as late 2010, so it’s likely to stay there. If Toyota can negotiate lower costs for the NUMMI plant with the UAW, it would not be surprising to see smaller vehicles or small SUV move there. However, on July 6th, Toyota announced that the Highlander will be built in the Indiana plant eliminating that vehicle for NUMMI.
Unfortunately, I suspect GM backing out is the death knell for NUMMI. Toyota may be very reluctant to close a plant in the U.S. (they never have), but their current production doesn’t really need the plant. Shifting production of Corolla from Ontario to NUMMI would likely increase costs and without new small cars coming, NUMMI production isn’t really needed. Unfortunately, plants that aren’t needed don’t tend to stick around for long.