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AUTOS

Toyota considers halting operations at California's last car plant

The Japanese automaker plans to begin talks with GM that could end their 25-year-old joint venture, NUMMI, in Fremont.

July 24, 2009|Martin Zimmerman and Ken Bensinger

Toyota Motor Corp. appears to be moving closer to shuttering California's last auto plant.

The Japanese automaker plans to start talks next week that could dissolve New United Motor Manufacturing Inc., or NUMMI, which opened in Fremont in 1984 as a 50-50 joint venture of Toyota and then-General Motors Corp.

The plan appeared to take the Bay Area factory closer to an eventual shutdown, though Toyota said Thursday that "a number of difficult and complex issues" needed to be addressed before a final decision was made. As a result, "this process will take more time," Toyota said.

"When we talk about liquidating NUMMI, that's not saying we're closing the plant," said Mike Michels, a spokesman with Toyota Motor Sales USA in Torrance. "That's talking about liquidating the legal entity."

GM said last month that it would abandon the partnership as part of its bankruptcy proceedings.

It's possible that Toyota or another bidder could make an offer for GM's stake in the plant, now owned by Motors Liquidation Co. -- the entity charged with selling the assets shed by GM in its recent bankruptcy.

"It's possible that NUMMI has negligible or even negative market value," said Van Conway, a partner at restructuring firm Conway, MacKenzie & Dunleavy.

Regardless, Toyota may not be interested in making a bid for the plant, which produces Pontiac Vibe hatchbacks, Toyota Corolla sedans and Toyota Tacoma pickups. GM said in June that production of the Vibe would cease in August.

"There is a likelihood we would not buy the rest of it," Yoshimi Inaba, recently appointed chief executive of Toyota Motor North America, told the Detroit Free Press.

The plant's management issued a statement holding out hope the facility would survive.

"Toyota has taken a direction but has not made a final decision regarding NUMMI," the statement said.

Few auto industry experts would be surprised if Toyota pulled the plug. California is a high-cost manufacturing state. In addition, Toyota has plenty of unused production capacity in North America -- including factories in Mexico and Canada that make the Tacoma and the Corolla, said George Peterson, president of Tustin consulting firm AutoPacific.

He noted that Fremont is the only Toyota plant where workers are represented by the United Auto Workers union, which has a contract that's set to expire next month.

"The odds are against Toyota keeping the plant open," Peterson said.

The president of the UAW local that represents about three-quarters of the Fremont facility's workers didn't return calls seeking comment. Motors Liquidation Co. declined to comment.

The plant's closure could dent California's economy beyond the plant's 4,700 employees and their $500 million in annual pay and benefits. The East Bay Economic Development Alliance estimates that about 30,000 jobs that depend on the plant indirectly could be lost in the event of a closure.

Roughly 1,000 companies with operations in California supply parts and services to the factory, with the highest concentration of suppliers in Alameda, Santa Clara and Los Angeles counties, according to NUMMI.

Ontario-based Walker Corp., which specializes in stamped metal parts, counts Toyota, and specifically its Fremont factory, as its biggest customer by far.

"We're hoping it's not too late," said company President Bruce Walker. "Toyota is a wonderful customer and we'd hate to see that relationship change."

Last week legislators in Sacramento submitted two bills to provide tax breaks and other incentives to keep the plant open. Neither has been voted on yet.

State Sen. Roderick Wright (D-Inglewood), co-author of the Senate bill, said it has been a struggle to get lawmakers to focus on an auto factory at a time when the state's budget crisis has everyone's attention. But he's optimistic that he can find the votes for a bill that could persuade Toyota to keep the plant open.

"We want to assure the people at Toyota that maintaining their presence in California is something the Legislature cares about," Wright said.

The California congressional delegation sent a letter to Toyota's headquarters in Japan on Thursday expressing its concern for the plant's future. Gov. Arnold Schwarzenegger has been in discussions with Toyota executives and state and federal officials in an effort to keep the plant open, his office said.

Toyota's sales in the U.S. are down almost 38% this year as the auto industry suffers its worst slump in decades. As a result, the automaker has excess production capacity at its North American auto plants, which can produce more than 400,000 vehicles a year.

In the first six months of this year, the assembly line making the Vibe and the Corolla rolled out only 76,000 vehicles, a 25% decline from a year earlier, while the line making the Tacoma saw an 83% drop in production, according to the Automotive News Data Center. The plant was unprofitable last year, Michels said.

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martin.zimmerman@latimes.com

ken.bensinger@latimes.com

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