The U.S. market, especially in states such as California, has played a major role in Toyota’s ascent to the top of the global automobile industry. Now the company is showing its appreciation by announcing plans to put nearly 5,000 people out of work in the San Francisco Bay Area by closing its New United Motor Manufacturing Inc. (NUMMI) operation. The move came shortly after the new federally subsidized General Motors decided to exit what had been a 25-year joint venture between the two companies.
If Toyota ignores the pleas of California public officials and proceeds with the shutdown, the closing would represent a sharp break with the company’s paternalistic traditions. “It’s as if a long-held doctrine at Toyota – that it doesn’t shut down factories and it doesn’t fire workers – has crumbled,” a Japanese auto analyst told the New York Times. “Some would say this is a new era for Toyota.”
To be accurate, Toyota’s paternalism has not extended to the contingent workers it has employed at home and in the United States, and earlier this year it used voluntary buyouts to thin the ranks of regular workers at various U.S. plants.
Conditions are admittedly tough for Toyota. It posted its first annual loss in half a century for the fiscal year ending in March amid the sharp economic downturn. Yet it cannot be an accident that the only one of the company’s ten U.S. manufacturing plants to be put on the chopping block is the one where the workers are unionized.
Toyota, like other foreign automakers, has made sure to keep its U.S. operations non-union. NUMMI was a special case. It was created at a time when GM thought it needed to learn the secrets of Japanese auto production, Toyota was looking for ways to increase its U.S. market share without inflaming anti-import sentiments, and the United Auto Workers union was willing to experiment with new work rules that raised productivity amid rising industry layoffs.
The UAW took a lot of grief for its “jointness” arrangement at NUMMI, where the intensified pace of production was denounced by critics as “management by stress.” The contracts negotiated by the UAW have forced workers to earn a portion of their pay in the form of production bonuses. Earlier this year, the U.S. Labor Department ordered NUMMI to pay its workers an additional $862,000 because the company had miscalculated the bonuses for 2008 (Labor Relations Week, 6/25/09).
Despite the extent to which the UAW and NUMMI workers bowed to Toyota’s way of doing business, the company did not hesitate to shut down the operation once GM was out of the picture. Toyota has apparently given little thought to the impact of the closing on California’s economy amid the recession and the state’s fiscal crisis, which was resolved only by enacting cruel cuts in education and other public services. Instead, it is complaining about labor costs at NUMMI compared to its non-union plants in places such as Kentucky.
Not long ago Bloomberg reported that Toyota was considering using the NUMMI plant to produce its popular Prius. That would be appropriate, given the hybrid’s popularity in California. But the company quickly quashed that rumor and insisted that instead it would add Prius capacity at its planned plant in Mississippi once the market begins to recover. The Mississippi facility is slated to receive some $300 million in state economic development subsidies and, of course, will be run without a union.
Despite all that California has done for Toyota, the company’s message to the Golden State is: drop dead.