California has been very, very good to Toyota. But the world’s biggest automaker is about to kick the state when it’s down.
Come April 1, Toyota plans to abandon the Fremont factory that once was the shining example of the “Toyota way” and labor-management cooperation.
After 25 years, the demise of New United Motor Manufacturing Inc., California’s last auto plant, is a symbolic blow.
But it is more than that. It will also cost about 4,700 jobs at the plant and threaten perhaps 20,000 more at suppliers and other related businesses – a punch to the gut for a state already reeling with more than 2 million people out of work. It will be the single biggest layoff in California since the recession began in December 2007.
In these tough times, this is not how a company that cares so much about its image should treat a state to which it owes much of its success.
Nearly 25 percent of all new cars sold in California last year were Toyota brands, and the state accounts for about 20 percent of Toyota’s U.S. sales. The roaring success of its Prius hybrid is based largely on early enthusiasm by Californians.
Toyota says NUMMI is no longer economically viable, and it is entitled to make hard-eyed decisions, just like any other business. Still, the move seems particularly shortsighted when it is being flogged daily over accelerator and other safety problems.
To ease the pain and not coincidentally help on the public relations side, Toyota announced Wednesday it will give $250 million to workers who stay until the bitter end. That may seem generous. But those bonuses averaging $50,000 will quickly run out if the workers – on average 45 years old with 13 years at the plant – can’t find new jobs. And the largess is a tiny percentage of Toyota’s profits, $1.7 billion just for the last three months of 2009 and about $65 billion between 2004 and 2008.
Toyota’s announcement countered the release of a report by a “blue ribbon commission” led by state Treasurer Bill Lockyer that sought to rebut the company’s case for pulling out. The report argues that the vehicles made at NUMMI, particularly the Corolla, are still selling well; that the factory is operating well; and that Toyota is not in dire financial trouble. The plant could be even more competitive by producing more hybrid and plug-in vehicles.
Lockyer, himself a Prius owner, notes that the state has made an extra effort to help the plant, spending millions on worker training and dredging at the Port of Oakland.
By contrast, the federal government hasn’t done California any favors. General Motors, Toyota’s partner in NUMMI, withdrew from the joint venture last August, after the government took control as part of GM’s bankruptcy. President Barack Obama, who keeps saying he’s focused on creating jobs, hasn’t stepped up to save the plant. Gov. Arnold Schwarzenegger has been rather silent, as well.
It’s not too late for Toyota to change its mind. If it did so, it could help rebuild loyalty among California customers that has been shaken in recent weeks.
If, however, Toyota closes NUMMI, it shouldn’t be shocked if fewer Californians show up in its showrooms.