March 22, 2010 by Colin Bird
2009 was a god awful year in the history of US auto manufacturing. From 2009 to the end of 2010, seven retail vehicle assembly plants are set to close. Each one of these closures represents thousands of highly-paid blue collar jobs lost, which – for the most part – are never coming back to American shores. In most circumstances, each plant represented not only the livelihood for individual families, but also for the townships themselves. The shuttered General Motors plant in Janesville, Wisconsin, for instance, accounted for nearly 10 percent of the jobs in the metropolitan area.
Every plant closure represents the end of a storied history in American manufacturing. Over the course of the past 12 months, 44,300 car assembly and auto parts workers have lost their jobs, a figure that will undoubtedly increase over the next year. This post will focus on the rare closure of a joint-venture facility, and the equally rare salvation of a doomed domestic plant.
New United Motor Manufacturing (NUMMI)
On March 31st, 2010, NUMMI will close up shop and, with it, so will the last vestige of automobile manufacturing on the West Coast. NUMMI is located within the San Francisco metropolitan area, in Fremont, CA. Ground broke on the original facility way back in 1962 as a General Motors assembly plant, building Chevrolet, Pontiac, Buick and Oldsmobile cars, along with Chevy and GMC pickups for sale at GM’s western dealers. Yes, GM was so big back in the 1960’s that it had region-oriented assembly plants.
Fremont Assembly (successor to Oakland Assembly) had worker relation issues almost from the beginning. It was so bad that Automotive News then called Fremont Assembly “arguably GM’s worst plant in America.” UAW workers were difficult to manage, and the products coming out of the factory were unreliable. So Roger Smith, in a major restructuring campaign, closed the troublesome factory in 1982, furloughing all 7,000 employees.
Two years later (1984), the plant was revived as a joint-venture between General Motors and Toyota. GM offered half-ownership in exchange for Toyota know-how and technology. The plant represented the first major investment in the US market for Toyota; the Japanese company put up $150 million to renovate the plant, while GM invested no dollar amount. The plant, while a joint-venture, was entirely operated by Toyota managers – GM had around 12 managers who reported back to Detroit with their findings. Because the plant was operated by Toyota, invariably every model produced at NUMMI was of Toyota design. The first car produced there was a Chevy Nova, aka Toyota Corolla. A Corolla variant has been built on the passenger line at NUMMI throughout the plant’s entire history, and the old GM truck line was filled in by the Toyota Hilux and its successor the Toyota Tacoma. GM received rebadged Toyotas that it channeled through Chevrolet, GEO and Pontiac dealerships.
Ultimately, the concept of the plant was overly ambitious and failed to live up to its ideals. General Motors did learn, and was cognizant of Toyota’s way of collaborating with its suppliers and its just-in-time supply system, but that form of organization proved difficult for GM to implement. Many of the GM managers that were sent to NUMMI were put back into low-level positions, where they had no influence, because GM didn’t want to hear that Japan was doing things better, according to U.C. Berkeley Business School Professor Robert Cole. Through 2001-2009, GM’s contract orders from NUMMI only amounted to 15% of yearly output – GM contracted a rebadged wagon variant of the Corolla called the Pontiac Vibe.
Efficiency and profitability was also an issue with NUMMI. According to many financial experts, the plant has never been profitable for either GM or Toyota. However, the plant did provide Toyota with invaluable information on how to operate in an American environment, and today the automaker has 5 fully-owned plants in operation in America, with a sixth coming online in Mississippi.
Toyota also claims that the plant is a logistical burden, as the core of its manufacturing operations are centered in the Heartland of America, with NUMMI on the west coast. According to Toyota’s vice president of communications, Irv Miller, “all of the engines that go into the Tacomas and the Corollas at NUMMI come from West Virginia.” According to Business Week, NUMMI’s UAW workforce were paid an average wage of $28 an hour, compared to $24 an hour for other Toyota plants. Miller also points out that NUMMI was Toyota’s oldest plant in operation in North America.
Ultimately, GM’s bankruptcy proved the perfect excuse to end the experiment. GM’s 50% ownership in NUMMI was lumped into Motors Liquidation Company (old GM), and Pontiac Vibe contracts ended in July, 2009. With 50% of the factory now owned by a company who was sure to sell off its stake to the highest bidder, it is my judgment that the plant proved an unacceptable risk to Toyota.
Thus, NUMMI becomes the first plant shutdown for Toyota in its 73 year history. Following the end of the contract, Tacoma production will move to San Antonio, Texas. Corollas will be sourced from Canada and Japan.
The closure will idle 4,700 workers at the plant, the largest mass layoff in California since the recession began, and it will threaten 25,000 jobs across the state, according to the NUMMI Blue Ribbon Commission. Toyota directly employs 10,725 workers in California, or about 30% of its American workforce. The state represents Toyota’s biggest market – the company controls 25% of the California car market, more than the combined share of GM and Ford in 2009. California accounted for almost 18 percent of Toyota’s U.S. Sales, and 5 percent of the automaker’s global sales in 2007. The Tacoma and Corolla are big sellers in California; might Californians consider this move a betrayal and boycott Toyota purchases, or will they move on as business as usual?
Sterling Heights Assembly Plant (SHAP)
SHAP is a notable Chrysler assembly plant located in the Detroit metropolitan area. At 286 acres, the plant is huge, but only about half the size of NUMMI, yet it has as storied a history as NUMMI’s. SHAP started as a jet engine plant in 1953. Converted to an automobile plant in 1980 by Volkswagen, it was then purchased by Chrysler in 1983.
The plant has built the Chrysler LeBaron GTS, Dodge Lancer, Dodge Shadow, Plymouth Duster, Dodge Daytona, Dodge Stratus, Chrysler Sebring and Dodge Avenger. Since 1995, SHAP has been Chrysler’s only assembly plant building midsized sedans.
The plant has seen periodic updates to its manufacturing process, the latest including a flexible manufacturing setup by Daimler-Chrysler; the $278 million investment undertaken in 2006 allowed for a family of different vehicles to go through a single robotic welding process – most factories need different welding lines, depending on body design. This means that the current Sebring, Sebring Convertible and Dodge Avenger frames/ bodies go through the same 275 robotic spot welders. Chrysler also moved to a small work team setup at the plant, in many ways similar to the flexible work system used by Toyota at NUMMI; the same system was set up at Chrysler’s Belvidere assembly. Chrysler’s goal is to use the same processes throughout all its remaining plants. The plant also employees a just-in-time supply structure as of 2006.
All of these improvements made SHAP one of the most flexible and (potentially) efficient plants at Chrysler. In 2007, the plant employed 2,458 workers and churned out 238,107 Avengers and Sebrings. The plant has the capacity to build either 0% or 100% of any of the currently produced models – many factories have an inflexible required product mix. According to Allpar, the plant also has the capacity to pilot a fourth product, such as an Avenger coupe, or a labor intensive hand-built vehicle, such as a niche electric vehicle.
Despite all this, the factory was set to close. Unlike NUMMI, you can’t blame SHAP for the situation; the blame falls on Chrysler. Unlike NUMMI, SHAP is flexible and was profitable, despite being one of Chrysler’s oldest plants. The underlying issue was that the Sebring and Avenger had fallen so fast that it made the plant nearly useless. Last year, Chrysler only produced a total of nearly 65,000 units at a plant with the capacity of 300,000+. Its 2,458 (2007) employees has steadily declined to 1,119, or just one shift.
At first, Chrysler had decided to close the plant. Belvedere was more flexible, and could build the Dodge Avenger, Chrysler Sebring, Dodge Caliber, Jeep Compass and Patriot with just two-shifts, given the current demand for Chryslers.
When Chrysler declared bankruptcy, SHAP was lumped in with old Chrysler. New Fiat/Government-controlled Chrysler would buy contract-built Sebrings and Avengers from old Chrysler until the plant closed in December 2010. But those plans recently changed.
Fiat has placed new importance on SHAP, after a decision to significantly upgrade the current Sebring and Avenger. The new Sebring, which has been renamed the 200C, will feature a heavily restyled body, new powertrains and a brand new interior. The Avenger will get minor exterior upgrades, some new interior appointments, and the same powertrain and chassis developments as the 200C. Fiat believes that the refreshed products, along with new growth in the America car market, will necessitate the need for both Belvidere and SHAP.
With this decision, new Chrysler has purchased the assembly plant back from old Chrysler for an estimated $20 million. Chrysler officials say that they plan on producing vehicles at SHAP until 2012, and possible going further than that. This spares some 1,200 workers at SHAP from termination; Chrysler has also offered 400 laid-off workers at one of its Ohio plants jobs at SHAP.
SHAP’s continued operations are also a reprieve for the Sterling Heights township. The towns City Manager Mark D. Vanderpool estimates the regional impact of SHAP at $300 million annually. “The loss of the plant would have created a huge void in the middle of our industrial corridor, which would have been difficult and very costly to fill in these tough economic times,” says Vanderpool.
Filed under: Editorial
