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The New United Motor Manufacturing Inc., also known as NUMMI, which employed about 4,700 workers in Fremont, CA in a 5.3 million square foot plant constructed by GM, closed for good this month.

The plant closing marks the end of an era in the history of automaking.

On the surface, it’s a familiar story about the fall of the American auto industry and California’s inhospitable business climate. But this is no ordinary plant.

NUMMI was a unique joint venture between Toyota and General Motors in Fremont, Calif., but the partnership ended when GM pulled out last year and Toyota decided to shut down the plant.

In the mid-1980s, Toyota took over the Fremont plant, one of GM’s worst: a factory known for sex, drugs, and defective vehicles. As part of an historic joint venture, Toyota turned the plant into one of GM’s best, practically overnight.

Along the way—remarkably—Toyota even shared its production secrets. But GM would take another decade and a half to begin seriously implementing those lessons in its own factories.

Some GM managers who worked at NUMMI see the joint venture as a lost opportunity and wonder what might have been.

Forging a Partnership
In 1985, after NUMMI opened, Car and Driver magazine ran the following headline: “Hell Freezes Over.”
Back then, GM and Toyota needed each other. GM had to build small cars, but they were lousy and lost money.
Toyota had its own problems. The company was facing import restrictions from the U.S. Congress. So, it had to start building cars in United States.

Toyota wanted a U.S. partner who would teach it how to deal with American workers. They settled on the rough bunch in Fremont.
“It was considered the worst workforce in the automobile industry in the United States,” said Bruce Lee, who ran the western region for the United Auto Workers and oversaw the Fremont plant. “And it was a reputation that was well earned. Everything was a fight. They had strikes all the time. It was just chaos constantly.”

Learning the Toyota Way
By 1982, GM had had enough and put the Fremont factory out of its misery, Two years later, GM and Toyota reopened the factory with, incredibly, most of the same workforce. Many were skeptical as to whether these unionized American workers could adapt to Japanese management practices.

So they sent some of them to Japan to learn the Toyota way.

The key to the Toyota Production System was a principle so basic, it sounds like an empty management slogan: Teamwork.
At Toyota, people were divided into teams of just four or five and they switched jobs every few hours to relieve the monotony. A team leader would step in to help when anything went wrong.

At the old GM plant in Fremont, Calif., the system had been totally different. There was one cardinal rule that everyone knew: the assembly line could never stop.

“You just didn’t see the line stop,” Madrid said. “I saw a guy fall in the pit and they didn’t stop the line. You saw a problem, you stopped that line: you were fired.”

Defects Along the Line
As a result, vehicles at the plant had lots of defects. Billy Haggerty, who worked in hood and fender assembly, saw all kinds of mistakes go right down the line. “We had Monte Carlos with Regal front ends and vice versa,” he recalled. There were cars with engines put in backwards, cars without steering wheels or brakes. Workers fixed them later in a yard outside—sometimes doing more damage to the vehicles.

At the NUMMI plant you can see Toyota’s solution to this: a thin nylon rope that hangs on hooks along the assembly line. It’s called the “andon cord,” and when pulled, it will stop the line.

‘One Bolt Changed My Attitude’
The first pull summons a team leader. Workers try to correct the problem on the line. If it takes too long to fix, the line stops. The andon cord also plays a surprisingly cheerful little song that workers can chose. For longtime GM workers who switched to the NUMMI system, all this was a revelation.

When Rick Madrid trained in Japan, he saw workers stop the line to fix a bolt.
“That impressed me,” he said. “I said, ‘Gee that makes sense.’ Fix it now so you don’t have to go through all this stuff. That’s when it dawned on me. We can do it. One bolt changed my attitude.”

In December 1984, the first car, a yellow Chevy Nova, rolled off the assembly line at the NUMMI joint venture. At the opening ceremony a union rep named Joel Smith vowed that the new plant would be a big success: “Mr. Toyota, if you would please deliver this challenge to our friends in Japan: We intend to build the best quality cars in the world.”

Early on the numbers coming out of the NUMMI plant were astonishing. The plant pumped out vehicles—6,000 a week, on average.
GM sent 16 rising stars to start the NUMMI plant. Two Wall Street reporters dubbed them the “NUMMI commandos.”
After the successful launch, these company commandos wanted to spread the lessons of NUMMI throughout GM. “We were ready, we were fired (up) and we had the mental condition that said: ‘we’re going to change the world,” said Steve Bera, one of the commandos. Bera said he and the other commandos were waiting to be deployed elsewhere, but the company didn’t seem to know what to do with them. “Instead of coming back to the 16 of us and saying, ‘There’s some secret sauce here, what is it? How can we use it to our advantage?’ No one ever asked us that question,” Bera said. Frustrated, he quit after putting in two decades at GM.

Attempts to Grow a Strategy
The next year GM did try to replicate NUMMI again at a plant in Van Nuys, 400 miles south of Fremont. But employees were skeptical from the outset. Unlike workers at NUMMI, they’d never lost their jobs and didn’t think they would.

“The lack of receptiveness to change was so deep,” said Larry Spiegel, one of the commandos who struggled to transform the Van Nuys plant. “There were too many people convinced they didn’t need to change.”

Spiegel said that even though GM had threatened to close the plant, workers believed it would never happen. And they stuck with their old ways.

Quality at Van Nuys never did improve. And in 1992, GM closed the plant. With the market share collapsing at GM, executives did try to push the NUMMI concept across the company.

Geoff Weller’s job was to help convert GM, factory by factory. But GM was a sprawling, highly decentralized company and plant managers were king.

Weller said some managers were responsive. Others weren’t – like the one who asked him to leave his factory after Weller made his presentation about the NUMMI system.

When asked why the CEO wouldn’t fire a plant manager who resisted a system that was producing better cars at lower costs, Weller said: “It’s a big company … and it doesn’t work that way.”

Some at GM tried to spread the lessons of NUMMI, but it was slow and difficult. In some plants, the union saw its traditions threatened by Toyota’s team concept and refused to change. Back then, GM was a highly decentralized company where plant managers ran their factories like fiefdoms. In at least one case, a plant manager threw out a GM executive who preached the Toyota system.

Over the years, GM executives did learn from NUMMI and lessons finally caught on. By the early 2000s, the company had developed a production model based on Japanese principles that became standard at every plant. And although GM quality still lags behind the Japanese, it eventually improved a lot.

A Losing Battle
In the end, the Great Recession and inhospitable regulatory climate here sank GM. It destroyed the car market. And in 2009, General Motors became the largest industrial bankruptcy in U.S. history, costing taxpayers more than $50 billion. When GM went bankrupt, it pulled out of the joint venture. And more than two decades of building high-quality cars wasn’t enough to convince Toyota to keep the plant open without GM: Toyota said it didn’t want to go it alone.

At first, some at GM dismissed hybrids like the Prius as a publicity stunt. Today, the makers of the Prius have their own problems. And Toyota executives suggest it’s because they made one of GM’s old mistakes – stressing quantity over quality.

A Unionized Workforce
Of course, quality and reliability weren’t the reasons GM failed. Over the years GM negotiated such generous contracts with the UAW that they crippled the company.

In addition, although Toyota officials say the company is pulling out of NUMMI because it simply wasn’t economically viable, many workers suspect that it may have something to do with their union. This was Toyota’s only unionized workforce.
“Toyota has never shut a plant down in 73 years, and we were the only plant to get a zero-defect audit, ever, in the Toyota history,” said Ann Ezra, who worked for NUMMI for more than two decades. “Only another Lexus plant has ever done it, and they’re going to shut us down? Why? So yeah, it’s because of the union.” Ezra stopped there. Workers have agreed not to denigrate the company in exchange for a severance package averaging about $50,000, depending on years of service.

Possible Economic Ripple Effect
Harley Shaiken, a labor expert at the UC-Berkeley, says the NUMMI closure will have a spillover effect on scores of other businesses. “The 20,000 workers who will be impacted by the NUMMI closure work in direct suppliers, some of which will be totally closed,” he says. “They also are related workers – the people in the restaurants down the street, the schoolteachers and nurses in hospitals and schools where NUMMI workers live. The impact of this is going to be felt deeply.”

Some media reports settle on 1,000 “at risk” California companies that supply NUMMI, but estimate job losses elsewhere in the economy at 20,000 to 50,000. These numbers are all huge, but are they accurate? It is important to have a good number to assess damage and undertake remedial action.

Economic studies tell us that the auto industry is a powerful engine of growth. Its so-called job multiplier—the number of additional jobs in the economy that are associated with each auto assembly job, such as those at NUMMI—is often reported to be on the order of 10. These include “indirect” jobs in companies that supply the assembly operation, whether with parts, goods or services, as well as “induced” jobs, primarily in retail trade, that exist because of the autoworkers’ expenditures.

Researchers calculate the job multiplier in different ways. Some include dealership and related activities. Multipliers are different in different states and are difficult to estimate. California simply lacks the developed supplier infrastructure that Michigan and Ohio have, so NUMMI never has generated the statewide economic activity that plants in those states can and do. Finally, companies will have different multipliers, depending on how much of their supplier inputs come from overseas and how efficiently their supply chain operates. A recent study estimates that Toyota’s multiplier had fallen from 7.2 to 6.0 from 2003 to 2006.

This study found that Toyota’s U.S. activity accounted for some 2,700 additional manufacturing jobs in California; most of these will probably disappear, along with even more in other states. Toyota also generates nearly 29,000 jobs in other sectors of California’s economy. Because NUMMI accounts for less than 50 percent of Toyota California employment, and Toyota employment elsewhere contributes to these California jobs, it seems reasonable to assume that some 40 percent of these jobs could also be lost: that is, an additional 11,600 jobs. If you add the other job losses to the 4,700 estimated jobs lost at NUMMI, then there’s a total job loss estimate of 19,000, a probable maximum.

Outside the manufacturing sector, few employers will close their doors. Rather, those 11,600 jobs, more than 60 percent of the 19,000 jobs potentially lost with NUMMI’s closing, will be spread around the state and across its economic sectors.

Some local leaders hope to recruit another carmaker to Fremont, but Mayor Bob Wasserman said, “If Toyota, the biggest and best automaker in the world, if they can’t make a profit there, who in the world can? So its future as being as it was in the past is not likely.” Others foresee housing and retail development, perhaps even a ballpark, on the 380-acre site.

In early April, 2010, NUMMI produced its very last car, a Corolla, and 4,500 people will lose their jobs.