Toyota May Abandon the Last Auto Plant in California

Toyota is considering a plan to dissolve its stake in the Nummi plant after General Motors pulled out of the joint venture last month. Nearly 4,500 workers may lose their jobs. (Justin Sullivan/Getty Images)

SAN FRANCISCO—Seeking to achieve more efficiency from its U.S. operations, Japanese automaker Toyota Motor Co. is likely to close its last remaining auto plant in California.

The world’s leading automaker’s decision, which is set to be released by the end of this month, may completely shatter the 25-year-old joint venture with General Motors, commonly known by its acronym NUMMI (New United Motor Manufacturing Inc.), which GM backed out from following its recent bankruptcy.

The reconstructed GM decided to abandon the California plant reportedly due to an excess capacity problem and unprofitability. Toyota and GM established the joint venture in 1984. Currently, NUMMI produces about 400,000 vehicles per year.

The NUMMI plant mostly produces Toyota Tacoma pick up trucks and Toyota Corolla sedans. Production of GM’s Pontiac Vibe crossover vehicle is due to stop later this month.

A source cited in a Japanese newspaper earlier this week said that production of Corolla sedans could shift to a plant in Canada while a Japanese plant or a plant in Mexico would temporarily produce the Tacoma.

California Gov. Arnold Schwarzenegger and state lawmakers appealed to Toyota to save the San Francisco Bay Area plant and its 4,500 unionized jobs represented by the United Auto Workers (UAW) union.

Most auto industry analysts believe that Toyota will eventually pull the plug on the loss-making plant, which would be a positive step for its bottom line. According to the paper, Toyota executives are considering to permanently end production sometime in early 2010.

If Toyota decides to close the plant, it means more painful layoffs in the region and would spell the end of the last auto plant in California.

“The closure of NUMMI would have a devastating impact on all California. At stake are the jobs of 4,500 UAW Local 2244 members and tens of thousands of supplier and support workers throughout California,” said Jim Wells, Director of UAW Region Five in a statement.

The joint venture between GM and Toyota was the first and only of its kind. It appeared back in the early 80s as an experiment that would implement Japanese manufacturing processes with American workers, mostly former GM employees. At the time, the factory was seen as a model for the future of the American auto industry.

The success of the venture prompted Toyota to open more factories in the United States, but unlike the NUMMI plant, unions were disallowed. Toyota reportedly has worked hard to keep UAW out of those plants by attempting to offer similar wages and benefits. But UAW representatives say that pay disparity is high between union and non-union plants.

A potential closure could also raise questions about Toyota’s commitment to stable employment as the company pledged in the past not to close any plants during the global economic downturn.