NUMMI Not So Nice for Toyota
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?
More by John Horner
Comments
Join the conversation
What few on the blog seem to know is that NUMMI quality is very high. It is also the oldest Assy. plant Toyota has in the USA. Last Toyota audit NUMMI scored 0 defects something that no other NA Toyota plant has done. Also most of the Corolla's build at NUMMI are sold in Ca. or the west coast. Why should they be built by another country__Canada? Anyone who understands the automotive business and tooling required, knows that if Toyota moves the current models from NUMMI before their model life is up they will really lose money!
So what value does the NUMMI partnership bring to Toyota these days (even if GM was still viable)? Toyota knows how to do business here. They have other factories. They know how the UAW does business. They know how GM does business. What is in it for them?
It seems to me that the Cambridge Factory workers in Ontario have been trying to get the UAW in there for a number of years. It's also a good thing that the GM, Ford, and Chrysler are here in the USA for Canada otherwise they would have had to get their cars from England the last 90 years. That's right Canada has not designed a car nor much else on thier own.
More than you could possibly understand.