Can this plant be saved?
State legislators are scrambling to save the last remaining car plant in California.
The Bay Area factory, which makes Toyota Corollas, Toyota Tundras and Pontiac Vibes, would receive sales tax benefits potentially worth millions of dollars under legislation introduced in the Assembly on Wednesday.
Another, more sweeping, bill, which would grant a host of tax and other incentives, is expected to be introduced in the state Senate today.
The moves were prompted by the increasing likelihood that the plant, New United Motor Manufacturing Inc., or NUMMI, based in Fremont, could close permanently.
The plant, which employs about 5,000 people, was opened as a joint venture between Toyota Motor Corp. and then-General Motors Corp. in 1984 and long praised as one of the nation’s most advanced car factories -- a successful experiment combining Japanese and U.S. manufacturing techniques.
But as part of its bankruptcy process, GM said in June that it would abandon the relationship, prompting Toyota to say last week that it “must also consider taking necessary steps to dissolve” NUMMI.
“We believe that plant is a public good,” said state Sen. Roderick Wright (D-Inglewood), who co-wrote the Senate bill. He added that his own Los Angeles County district is home to parts suppliers that would be affected should NUMMI close. “The fact that we could lose our last car manufacturing facility is unconscionable.”
But amid Sacramento’s grinding budget crisis, there is considerable doubt about how much money would be available to provide tax cuts to one of the world’s largest companies -- and whether any amount of taxpayer-funded goodies would be sufficient considering the depths of the auto industry’s woes.
“How many extra millions do taxpayers have to give Toyota to stay?” said Lenny Goldberg, executive director of the California Tax Reform Assn., who questions whether those kinds of incentives even work. “If you’re going to give it away, give it away right.”
Manufacturers have long complained about the cost of doing business in California. The legislation proposed this week would, in part, reduce that burden for the auto industry, sponsors said.
The bills, ABX4 31 and SB 830, would exempt NUMMI and other auto plants from sales tax on improvements and retooling of the plant, a process that can cost hundreds of millions of dollars. Toyota is not currently retooling NUMMI, but it could in the future to build fuel-efficient vehicles such as hybrids.
The Senate bill goes further. It would designate the plant and the area around it an enterprise zone, which provides a variety of other tax benefits. In addition, the bill would cut state fees that NUMMI pays for utilities, and it would encourage state and local agencies to buy vehicles made at the plant.
Legislators say they will urge Gov. Arnold Schwarzenegger to use the incentives as leverage with Toyota to keep the plant operating.
A spokeswoman for the governor, Camille Anderson, said he had already “reached out” to Toyota and was working to coordinate a variety of efforts to keep NUMMI open.
U.S. Sen. Dianne Feinstein (D-Calif.) is preparing a letter from the state’s congressional delegation to Toyota’s president, Akio Toyoda, that asks what California can do to preserve the factory, a spokesman for the senator said.
Toyota, however, has given no sign that any incentives of the kinds proposed would sway it. Mike Michels, a spokesman for the automaker’s U.S. operations, said the company was aware that legislation was in the works, but it had not requested any specific aid.
He said the decision on NUMMI’s future would be made in Japan, but he could not provide a timeline. “The economy remains a challenge, and we are still under capacity at most of our plants,” Michels said.
According to trade publication Automotive News, production at NUMMI is down 47% to date this year, compared with the same period a year ago, while Toyota’s overall U.S. sales are down 38%.
Unlike NUMMI, which is unionized, Toyota has nonunion plants in Mexico and Canada that also make the Corolla and the Tacoma, as well as a never-used new facility in Mississippi. GM said last month that production of the Vibe would cease in August.
The United Auto Workers union is negotiating a new contract with NUMMI. The current, four-year contract expires next month.
Assembly Majority Leader Alberto Torrico (D-Newark), who represents Fremont and is co-author of the Assembly bill, was among lawmakers who toured the plant last week.
“It’s not a stretch to say that we’re in very grave danger of losing the factory,” said Torrico, who has been talking with local officials and leadership at the UAW about NUMMI’s future. “We’re talking about 5,000 jobs and all the income and sales and property taxes those generate.”