Thomas Klipstine
In 1983, the announcement that GM and Toyota had reached an agreement in principle to produce a small car in Fremont was the proverbial shot heard round the automotive world.
GM and Toyota together? Throw in the UAW and the result was a unique but somewhat controversial company known as NUMMI.
I worked at NUMMI from 1984 to 1989. Back then, “experiment” was the word we used to describe the company. The joint venture was originally conceived to find if Toyota production methods could work using American labor and suppliers.
But it was so much more. The concept involved management, labor, government, suppliers and most importantly, two distinct cultures coming together in support of one specific goal: to produce a quality product at a reasonable cost.
The phrase “best of both worlds” was used many times to describe what was taking place in Fremont. It seemed like such a simple, reasonable concept at the time. A sure win-win situation.
For Toyota, which would manage the day-to-day operations, the joint venture was an opportunity to gain valuable experience working with American suppliers and labor. In addition, it gave Toyota a quick, low-risk presence in the United States, which defused some concern about the growing negative trade balance.
GM’s objectives were somewhat different in that GM would get the product, a small, high-quality car sold through Chevrolet that would compete directly with the imports. In addition, GM would gain experience with the production system, which could produce vehicles at a cost estimated to be $2,000 less than U.S. companies.
For the UAW the joint venture meant jobs, some 2,500 in the beginning. It also allowed the UAW to gain experience in working with Toyota and participation in what Fortune magazine called at the time the “most important labor relations experiment in the U.S. today.” It was not an easy startup by any means. Toyota’s commitment to quality was relentless. A Chrysler lawsuit threatened to halt production. Former GM workers were hired and many were trained in Japan and a new, unique labor contract, based on mutual trust and respect, was finalized and implemented.
Suppliers also needed to be selected and trained in specific quality requirements and the new just-in-time system. It was very obvious to everyone it was simply not going to be business as usual.
Now, some 26 years later, the “experiment” is over. And I guess the question is, “Did it work?”
For GM, which wanted the car and the opportunity to learn from Toyota, the answer I believe is very clear. GM had trouble selling the car from the very beginning, and Toyota products quickly took up the slack in production. While GM did try to implement various aspects of the system in its own facilities, the task proved to be nearly impossible. For obvious reasons, last summer GM had to abandon Fremont for the second time.
The UAW got its chance to work with a foreign manufacturer. While the jobs created in Fremont were the most important aspect for the UAW, it is worth noting that organized labor has not made many inroads with Toyota or any other foreign manufacturer.
Toyota, which I always felt had the most to gain in Fremont, used the plant as a major steppingstone in becoming basically the largest auto company in the world. As Toyota gained experience, it established its own facilities and its brand has simply flourished.
From the very beginning it was always said the future of the company was to be decided in the marketplace, meaning for the experiment to survive, the company had to continuously build a high-quality product at a reasonable cost.
I guess that is the key to the answer. While Fremont’s quality has never really been questioned, we must assume that cost is the main issue. In its announcement, Toyota noted that NUMMI was not financially viable, production costs in Fremont were too high and “overcapacity” was mentioned more than once.
For me, Toyota’s words in its news release and statements had a very familiar tone. Words such as “overcapacity” and “high production costs” were basically invented by American auto manufactures and have been used far too often. And Fremont has heard it all before.
So what was gained from the NUMMI experiment? GM and the UAW certainly did not benefit as much as planned, possibly due to inflated expectations.
Toyota got the American experience it wanted but may have sacrificed its heritage and fundamental philosophies and became too Americanized in its overall operations.
It was an experiment, but at some point the learning stopped and in the end NUMMI became less of an experiment and more just another American manufacturer focused on bottom-line results. NUMMI, unfortunately, then became a victim to those dreaded American words – “overcapacity” and “not financially viable.”