Put the brakes on Toyota’s plant closure
President Obama mentioned “jobs” 23 times in his State of the Union address, underscoring the fact that the fragile recovery is bypassing millions of Americans.
About the last thing the economy needs is a major plant closing. Nonetheless, Toyota is going ahead with plans to close the New United Motor Manufacturing Inc. assembly plant -- a joint venture started in 1984 with General Motors -- in Fremont, Calif., on April 1. Nearly 5,000 NUMMI jobs will evaporate and up to 50,000 jobs are at risk, including those at 1,000 suppliers throughout the state, according to the company’s own numbers. At stake for thousands are homes, college educations and a middle-class lifestyle that came out of decades of hard work.
The closure would clearly be a disaster for California, but it is not quite a done deal. Mounting public concern and political leadership could yet turn things around.
In the meantime, Toyota has become totally distracted by problems with sudden acceleration in eight models, including its top-selling Camry and Corolla. Last week, the company halted production and sales of these vehicles -- which account for almost 60% of all Toyota sales -- and Congress is holding hearings this month.
Keeping NUMMI open could prove crucial. Toyota would retain a skilled, proven workforce and would underscore its commitment to workers and consumers. After all, the automaker is in the midst of an ad campaign emphasizing that “we value being a part of the places where we work and live” -- not exactly the message that would be sent by the first plant closure in Toyota’s 73-year history.
These NUMMI jobs are among the top blue-collar positions in the country. They pump more than $500 million in wages and benefits into the California economy annually, according to NUMMI. It isn’t just autoworkers, however, who will be affected. Teachers, nurses, restaurant owners and others will also feel the pain. Proposals for the site, such as a baseball stadium, won’t remotely create the number of jobs or paychecks that NUMMI provides.
Yes, these are tough economic times, and abandoned auto plants are hardly a new story. Look at Detroit. Yet there is something profoundly different about shutting down NUMMI. Its models are top sellers, the plant is highly competitive, and Toyota, despite a rough year, remains one of the most successful auto companies in the world.
Toyota led the U.S. market in retail sales last year, and the NUMMI-built Corolla was the second-best-selling car in the country. Toyota sold one out of every four vehicles in California through the third quarter of 2009, more than the combined market share of General Motors and Ford, according to the California New Car Dealers Assn.
The company also benefited from “cash for clunkers,” the federal program to trade in old vehicles for more fuel-efficient new ones, capturing first place with nearly 20% of sales. California was the leading state and Corolla was the top-selling model. In contrast, U.S. automakers were excluded from a similar program in Japan.
The plant itself has been a global star. After the economic traumas in the early 1980s, Toyota wanted to test its much-heralded production system with U.S. workers -- seasoned union members -- and GM wanted to observe the Toyota approach up close.
The result has been a sustained success over the last quarter of a century. Commitment has been key: The company promised job security, and the UAW pledged world-class performance. Quality and productivity at the plant consistently have ranked at the top of the industry.
Why, then, does Toyota want to close NUMMI? The recession may have played a role. But the company also expanded its global capacity at hyper-speed on the eve of auto sales collapsing. In the U.S., Toyota invested $1.3 billion in a new plant in San Antonio, Texas, to build full-sized pickups and plunked another $1.3 billion into a still-uncompleted assembly plant near Tupelo, Miss.
Toyota may be down, but it is hardly out. Before the current meltdown, Toyota spokesman Mike Goss said: “We need to start building more to match the current pace of sales.” Ironically, when sales resume, the company plans to shift Corolla production to Canada and to plants in Japan. The manufacturing of the Tacoma pickup, also currently built at NUMMI, will move to the Texas plant. But California workers will be out in the cold, paying the price for overexpansion. The decision to close the plant could add more than $2 billion to the U.S. trade deficit and add to the carbon footprint as more cars are shipped across the Pacific.
Toyota has argued that GM is the culprit because it pulled out of NUMMI following the corporation’s bankruptcy in mid-2009. GM, however, accounted for only 10% of production there last year, according to Automotive News. Toyota could easily pick up the slack as sales increase or with a new model, say the plug-in Prius.
It’s not too late to try to keep NUMMI open. The United Auto Workers has indicated a willingness to help ensure the factory’s survival, and California has offered significant incentives. Now, Obama has an opportunity to step up to the plate. He should ask Toyota to put the decision on the plant’s future on hold for at least two years as the recovery gains traction and both California and auto markets regain their footing. This alternative would jump-start the stimulus, it would help repair the company’s tattered image, and it’s the right thing to do. The automaker might learn that what’s good for California is good for Toyota.
Harley Shaiken is a professor at UC Berkeley specializing in labor and the global economy.