Bloomberg reports on Toyota’s pickle vis-à-vis Fremont, California-based NUMMI. New GM is leaving its NUMMI ownership share in the hands of Old GM. Thus, Old GM and Toyota together own NUMMI in a 50/50 joint venture. Old GM will be selling off its moribund assets over a period of a year or more as the long slow process of liquidating the discards and paying creditors pennies on the dollar plays out. (Old GM is looking like an economic stimulus program for a small band of lawyers, accountants and realtors.)
Back in 1984, Roger Smith’s GM provided the land and buildings as its contribution to NUMMI and Toyota pumped in at least $100M cash money, along with manufacturing know-how. According to Bloomberg’s reporting, NUMMI has only turned a profit in one year, 1992. But, Bloomberg fails to mention that the internal transfer pricing games are routinely played by large companies in order to recognize profits only in the most tax advantaged jurisdictions. So, outside of the bean counters at Toyota and GM, nobody really knows the profitability of NUMMI. However, everyone does know that Northern California is generally an expensive place to do business. Also, everyone also knows that the only UAW members building Toyotas are at NUMMI.
Toyota faces the question of whether to buy out GM’s share of the venture at auction, let a third party buy GM’s share, or simply wind the whole thing down. “Toyota officials in Japan and the U.S. have said GM’s decision to leave the shared plant makes its position ‘even more difficult,’ amid grim market circumstances.” Understated enough for you?