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The end of the line for California automaking

Toyota will shut down the joint venture it operated with General Motors in Fremont in March, eliminating 4,700 jobs. Sagging sales and GM's bankruptcy are blamed.

August 28, 2009|Martin Zimmerman and Maura Dolan

LOS ANGELES AND FREMONT, CALIF. — Toyota Motor Corp.'s decision to abandon its assembly line in Fremont marks the end of large-scale auto manufacturing in California, which over the years boasted a dozen or more plants building vehicles ranging from Studebakers to Camaro muscle cars.

The Japanese automaker said Thursday that it would end production at the plant March 31, throwing 4,700 people out of work, and return some production to Japan.

It's another hard blow for California, a state already grappling with an 11.9% unemployment rate -- its highest since World War II and the fourth-worst in the nation.

In addition to wiping out the jobs directly tied to the plant, closing the facility will send ripples through the web of suppliers that make components for the factory and through nearby stores, restaurants and bars that depend on its workers for business.

Overall, closing the plant could cost more than 40,000 jobs, according to Sen. Dianne Feinstein (D-Calif.), who has worked with other public officials to try to keep the plant open. But communications with Toyota eventually broke down, she said.

Operated as a joint venture between Toyota and the former General Motors Corp. since 1984, the plant saw its future put in doubt last month when GM pulled out of the arrangement as part of its bankruptcy reorganization.

Executives of the venture, New United Motor Manufacturing Inc., told union members Thursday morning about Toyota's decision. It is the first time that Toyota has ever closed a major auto assembly plant.

Assembly line worker Jose Hernandez, 40, who commutes 75 miles to the plant from the Central Valley town of Ceres, said the news was a bit surprising because the plant had been busy since the government's "cash for clunkers" program jump-started auto sales this month.

"What can I do, look for a job, which is going to be very difficult right now?" he asked.

End of an era

Shutting down the plant will be another milepost in the long erosion of California's once-thriving auto industry -- a decline that is being only partly offset by the rise of a new breed of start-up car companies specializing in such advanced technology as all-electric drivetrains.

The old plants with their union payrolls provided a vital boost into the middle class for many Californians.

"The auto industry was very important in this state," said Jack Kyser, economist for the Los Angeles County Economic Development Corp. "You could be a less-than-stellar student in high school and go to work on an assembly line, and pretty soon you were making good wages with good benefits."

Many of the shuttered plants were either bulldozed or converted into shopping malls, where paychecks for retail clerks typically are much skimpier. The old GM plant in Van Nuys is now a shopping center anchored by Home Depot, for instance, and a Samson Tire & Rubber factory in City of Commerce was turned into the Citadel mall.

Analysts say those better-paying union jobs, along with other costs of doing business in California, are big reasons that California's auto production has fled overseas or to other, lower-cost states.

The Fremont plant, which makes Corolla compact cars and Tacoma pickups for Toyota and, until last week, Pontiac Vibe hatchbacks for GM, was the Japanese company's only U.S. auto plant with a union workforce. As Japanese and German automakers opened vehicle production to the U.S. beginning in the 1980s, they often have opted for states such as Kentucky, Texas and Alabama, where union shops are more rare.

"It just made sense for Toyota to pull the plug," said Dennis Virag, president of the Automotive Consulting Group in Ann Arbor, Mich. "When you look at states like Kentucky and Tennessee, California just isn't competitive in manufacturing with its taxes, regulations and overall cost of doing business."

The costs apparently outweighed a package of incentives put together by state and local officials in an effort to persuade Toyota to stay in Fremont. The incentives included tax breaks, lower utility rates and publicly funded road and rail improvements around the plant, according to Feinstein.

State Sen. Dave Cox (R-Fair Oaks) said an executive from the Fremont plant had expressed concern to lawmakers about the state's workers' compensation system, overtime laws and employee leave requirements.

Cutting production

On Thursday, Toyota blamed the end of the joint venture on GM's decision to pull out of the arrangement. It also said that producing cars at Fremont wasn't "economically viable" given the current auto market, the worst in decades. The automaker, which reported its largest-ever annual loss this year, has been cutting production in Japan and elsewhere amid falling sales.

Atsushi Niimi, a Toyota executive vice president, said the union presence didn't influence the decision to close the plant. But he acknowledged that "California's cost of living is relatively high, which leads to higher labor costs compared to other regions."

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