NUMMI RIP? Toyota Considers Dumping UAW Plant

Frank Williams
by Frank Williams
nummi rip toyota considers dumping uaw plant

According to the now-infamous Georgetown, Kentucky memo, ToMoCo’s brass are concerned that their workers’ wages are growing faster than the company's profits. To rectify this situation, Toyota’s newest plants will pay workers based on local manufacturing wages– not United Auto Workers (UAW) scale. Naturally, the UAW is using this as flamebait to organize Toyota’s stateside operations, starting with Georgetown. Toyota’s launched its next salvo in this ongoing war of wages: they’re contemplating pulling Tacoma production from NUMMI.

GM and Toyota formed NUMMI (New United Motor Manufacturing Inc.) in 1984. The Fremont, California facility was Toyota’s first foray into American manufacturing and GM’s chance to learn about Toyota’s take on lean manufacturing. The 380-acre NUMMI facility currently cranks-out approximately 250k cars (Toyota Corolla, Pontiac Vibe) and 170k trucks (Toyota Tacoma) per year.

The NUMMI plant employs around 5440 “team members.” Some 4550 of these employees also play for the UAW. This makes NUMMI the only Toyota plant using UAW labor and one of the highest-labor-cost manufacturing facilities in the entire American automotive industry.

Some NUMMI workers earn more than $32 per hour, plus benefits. Combine this compensation with the joint venture's location– a high-cost area away from Toyota’s major suppliers– and it’s no wonder the factory’s drawn negative attention from its Tokyo taskmasters.

In a prepared statement, NUMMI officials recently declared that the plant must do more to improve its “competitiveness” and stated it would only stay in business “only if it is able to do so.” That’s management-speak for “if we can’t get labor costs under control we’re abandoning this turkey.”

Moving Tacoma production from Freemont to a lower-cost production facility does not pose insurmountable difficulties. Toyota’s Tijuana plant already makes the beds for all Tacomas, along with small quantities of complete trucks (34K in ’06). For the money saved in labor costs, the world’s largest automobile manufacturer could expand their Mexican production facility to accommodate increased Tacoma production.

Toyota also has excess capacity at their new Tundra plant in San Antonio. As the automaker builds Tundras in both Texas and Indiana, they could shift production around to open up some spare capacity for the Tacoma, at either location. And Toyota could also modify plans for their new plant in Elvis' birthplace (Tupelo, Mississippi) to build Tacomas as well as Highlanders.

The UAW knows Toyota’s serious about walking away from NUMMI. Last week, leaders from Local 2244 and 890 told their members that they stand a good chance of losing Tacoma production and warned “we are now fighting to exist.”

There are still a couple of years before the axe falls; the current UAW contract at NUMMI expires in August 2009. In the meantime, a “no layoff” clause means Toyota can’t trim costs by jettisoning employees. So the union must devise other alternatives to entice Toyota to change their mind.

The UAW’s already started making nice with management, offering proposals for the increased use of temporary employees and other cost-cutting measures. These stopgap measures may or may not satisfy Toyota. The Wall Street Journal recently reported that high level Toyota executives are actively contemplating cutting back North American production.

According to the report, Toyota’s U.S. production capacity is growing faster than sales, and a cheap yen makes importing cars from Japan a cost-efficient proposition. Toyota’s pulling back on plans for new plants and revamping pay policies. They’re on a cost-cutting spree, and anything between the Pacific and the Atlantic is fair game.

NUMMI's Toyota bosses will be watching the outcome of this summer’s UAW negotiations with The Big 2.8 with considerable interest. As Toyota products account for the vast majority of NUMMI production, when it comes to any decisions regarding the facility's operating costs or, indeed, its future, Toyota calls the shots.

Toyota is sure to use the upcoming negotiations as a barometer of the local UAW’s willingness to accept wage or benefits cuts and/or changes to work rules. These concessions will be the deciding factor when Toyota makes their final decision on whether or not to maintain California production.

But two years is a long time to wait if you’re trying to cut costs. And there’s just so much you can do with suppliers, utilities, work rules and other expenses. Short term, Toyota has two choices: coerce the UAW into giving back some of what they gained in the last contract or move production elsewhere. Look for the Japanese automaker to take the path of least resistance.

The uncertainty surrounding NUMMI reflects the fact that the union’s future isn’t looking too rosy right now. Delphi’s UAW workers just took a massive cut in potential earnings and other benefits. The upcoming negotiations with The Big 2.8 seem to have the deck stacked in Detroit’s favor. And in spite of the UAW’s attempts to gain ground in Toyota’s plants, Toyota still holds the trump card.

Join the conversation
2 of 40 comments
  • Jruhi4 Jruhi4 on Jul 16, 2007

    I think that much of the key to NUMMI's survival is whether or not Pontiac gets to create a 2nd-generation Pontiac Vibe off of the upcoming 2nd-generation Toyota Matrix which should debut in the late 2007/early 2008 time frame. If GM and Toyota share this model once again, it improves the odds for NUMMI's survival. If, on the other hand, GM/Pontiac pass on a 2nd-generation Vibe, then I'd say NUMMI is seriously endangered.

  • Hotrod Hotrod on Jun 30, 2009

    The problem is not the $32 per hour it is the fact that there is 5 people doing 1 persons job and that is what the UAW has done for all the of the big 3. It is hard for me to understand why the big 3 employees can't see that and that this problem is costing thousands their jobs.

  • Luke42 I see a lot of EVs on the road in my small city in Central Illinois.What most observers who don't live here don't realize is that "blue states" and "red states" still have a highly polarized urban/rural divide. I live in a small city, and we have a globally connected tech economy here.If I drive ten miles out of town, though, the necks are just as red as they are in Texas. Those folks do things the country way.American-city-culture loves EVs. The cars are an improvement in every way over, say, a Honda Civic used for commuting.Many American-country-culture icons assert that EVs must be the worst thing ever because city-people like them. It's self defeating for the country-people to think that way, of course, because the cars are good and electricity is cheaper (and, therefore, more plentiful) than gasoline. But there is a kernel of truth to their skepticism in that some use-cases aren't easily filled by EVs just yet -- but they would rather complain about the fact that EVs exist than to objectively pick the right tool for the right job.Long distance commuters (usually rural people who work in the city) have the most to gain from commuting via EV.EVs are pretty popular in small cities in flyover country, assuming the city is prosperous enough for its residents to afford new cars at all.
  • FreedMike The FJ Kult is even cultier than the Tacoma Kult…and that’s saying something.
  • FreedMike I want the RS6 BAD but I’m a touch short on dough. Anyone know what a kidney goes for on the black market these days?
  • Bullnuke Another item on the list of "benefits" for privately owned vehicles being wirelessly connected to the motherships...
  • SCE to AUX "I spent a good chunk of my 20s wanting one"I spent a good chunk of my 40s wanting one, especially in the blue color they used at launch. But the interior is too butch for me, and boy do they drink gas.