LEAD: Toyota to end production at joint venture with GM in March+

TOKYO, Aug. 28 Kyodo -
(EDS: CLARIFYING LEAD GRAF)
Toyota Motor Corp. said Friday it will end vehicle production at its
25-year-old joint manufacturing plant in California with General Motors Co.
next March 31, a decision leading to the first-ever shutdown of a factory of
this scale by the world's biggest automaker.
Toyota's decision to end production at the plant, called New United Motor
Manufacturing Inc., was anticipated as GM said it will withdraw from the NUMMI
operation after it emerged from bankruptcy in June, but was nevertheless
attacked fiercely by U.S. unions as ''ill-timed.''
Atsushi Niimi, Toyota's executive vice president for North America, called the
decision ''most unfortunate,'' but it will mark one of Toyota's first steps in
departing from an expansionist policy that has led to overcapacity, especially
during a global auto sales slump.
''In view of the market downturn since last year and with the exit of GM's
production vehicles, it would not be economically viable over the mid- to
long-term to continue,'' Niimi said at a teleconference from Nagoya. ''We
deeply regret having to take this action.''
With the pullout from the factory in Fremont, California, Toyota will move the
manufacturing of the Tacoma pickup truck to a Texas factory while the Corolla
car will be temporarily produced in factories in Canada and Japan.
But Niimi emphasized that Toyota remained committed to maintaining production
in the United States and other parts of North America and wants to bring back
the Corolla production in Japan to North America ''as soon as possible'' in
line with market conditions.
Including GM's vehicle capacity at NUMMI, Toyota said the pullout will lead to
a loss of around 400,000 units out of the 2 million unit production capacity
the company has in North America.
The move is also part of Toyota's wider global plan to scale down production as
it scrambles to deal with two consecutive years of huge losses.
Officials said earlier that the company is considering cutting its annual group
global production capacity by around 700,000 units from the current 10 million
vehicles amid plummeting auto demand.
But the shutdown of NUMMI alone will not be enough to dissolve Toyota's
overcapacity problem while the automaker has been unable to effectively expand
market share in high-growth markets like China and India to fill in the gaps
left by a shattered U.S. market.
''The situation where we will need to compensate for the huge losses in the
European and U.S. markets with profits in Asia and other regions will likely
continue for some time,'' a senior Toyota official said, as Toyota seeks to
generate fresh demand in growing markets with the launch of family cars.
The joint venture plant, with about 4,700 workers, has been a major employer in
California, and California Gov. Arnold Schwarzenegger and other lawmakers had
made various offers to prevent Toyota from shutting the factory.
''Today is a sad day in the history of Fremont as California joins the ranks of
states adversely affected by the bankruptcy of General Motors and the worldwide
collapse in demand for automobiles,'' Schwarzenegger said in a statement
Thursday.
Toyota will likely hold negotiations with the GM side and other related parties
on liquidating the factory, but Niimi left open the possibility of hiring NUMMI
employees at Toyota's other factories in North America, adding they will not be
prioritized over other applicants.
While the Japanese automaker has rarely closed any large-scale plant in its
history, the decision was made also in view of aging facilities, and high
logistics and labor costs in California.
In a statement, Ron Gettelfinger, president of the United Auto Workers,
criticized Toyota's decision as ''devastating news for thousands of workers in
California.''
''It's unfortunate the company chose to close a U.S. facility after benefiting
so greatly from the federal 'cash-for-clunkers' program, which is funded by
U.S. taxpayers,'' he said.
Toyota's widely expected move came under fire particularly at a time when its
Corolla is the most popular vehicle bought under the U.S. government's auto
rebate program aimed at promoting sales of fuel-efficient cars, an area
Japanese automakers excel in.
Many analysts said the decision was unavoidable and economically rational,
though still a politically sensitive and drastic move on the part of Toyota in
view of the symbolic status of NUMMI.
''Toyota will continue to have very strong market competitiveness in terms of
the fuel efficiency of its cars,'' an auto analyst at a medium-sized Japanese
brokerage house said on condition of anonymity.
''But the reputation of cutting off a factory with a very strong union will
likely spread, so there are worries about the possible negative impact on
public sentiment as GM and Chrysler Group LLC begin to recover,'' he said.
NUMMI was founded in 1984 on a fifty-fifty investment basis between Toyota and
GM at the height of Japan-U.S. auto trade friction and marked a beachhead of
Toyota's entry into the U.S. market.
==Kyodo
2009-08-28 23:50:19