Toyota to close its only unionized plant in the United States

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Toyota (TM) workers at the Fremont, California, plant will be out of jobs by March when the company's only unionized plant shuts it doors. The plant known as NUMMI (New United Motors Manufacturing Inc.) was started as a joint venture between General Motors and Toyota in 1984. About 4,700 workers at the plant will be laid off and it is estimated that 18,800 jobs at the more than 1,100 supply firms could be lost as well.

GM discontinued production of the Pontiac Vibe at NUMMI last week. GM had announced in June that its half of NUMMI would not be part of the reorganized company. That left Toyota holding the bag and with the tough decision about whether to continue operations on its own.
Toyota built the popular Corolla model at the plant, as well as Tacoma trucks. The trucks will be built at Toyota's plant in Texas and Corollas will imported from Canada and Japan. Corolla was the most popular model in the recent cash-for-clunkers program. In fact Toyota had to increase its workforce at NUMMI to keep up with demand.

But the fact that the plant was unionized probably was a major factor in the decision, as Toyota looks to cut costs. Unionized workers at NUMMI earned more than Toyota workers at its other plants in Alabama, Indiana, Kentucky, Texas and West Virginia. The plant paid an average production wage of $65,000 and had a direct payroll of $512 million according to estimates from the East Bay Economic Alliance.

The Alliance also estimated that the additional 18,800 jobs at supply firms could be a loss of indirect payroll totaling $904 million. Some think the job loss impact could hit as high as 30,000 to 50,000 when one considers other businesses that service the families that work at the plant or for the supply firms.

David Cole of the Center for Automotive Research told the San Francisco Chronicle that Toyota had overbuilt its production capacity just before the recession started the dramatic drop in sales. The company has to shut down plants to cut costs.

We probably have not seen the last of automotive plant shut downs, as car manufacturers come down from their cash-for-clunkers highs. Many analysts expect that while the program was very successful, all it really did was move up the decision to buy a car a few months earlier. They expect sales to drop dramatically from levels seen during cash-for-clunkers through the end of 2009.

Lita Epstein has written more than 25 books including Trading for Dummies.
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