Introduction In 2010, New United Motor Manufacturing, Inc., a unique and highly successful joint venture between



In 2010, New United Motor Manufacturing, Inc., a unique and highly successful joint venture between America’s General Motors and Japan’s Toyota, went out of business. NUMMI, as the company was commonly known, had been formed in 1984. It had required a special anti-trust exemption from the US government for the two competitors to form a joint venture. NUMMI demonstrated that unionized American labor could work cooperatively with management, quickly become highly productive and produced automobiles of top quality. It provided its workers with an unprecedented level of control over the production line, a high level of employment security, and created a level of mutual trust unknown in any other American- owned automobile plant. NUMMI enjoyed excellent management–labor relations with no strikes, except for a symbolic one-day protest, in its 26 years of operation. It produced both GM-branded and Toyota-branded cars on an assembly line designed so that it could make more than one model at a time without having to shut down for a change.
The announcement that the company was actually to close came as a shock to its workers, and the business community. The NUMMI plant was operating at full capacity. It was well known for its high productivity, the high quality of its vehicles, and its cooperative labor–management relations. There had been a celebration of NUMMI’s twentieth anniversary in San Francisco on February 12, 2004.

It included a by-invitation-only meeting, a dinner, and a press conference (Meetings, 2004). The CEOs of all three companies involved had participated, and emphasized the benefits of the joint venture to each company. Fujio Cho, President of Toyota Motor Corporation, stated ‘NUMMI was Toyota’s initiation into North American production.
We are very proud to build quality products with GM.
Without their partnership 20 years ago, Toyota would not be where it is today’ (Hokubei Mainichi, 2004). G. Richard Wagoner, Jr., Chairman and CEO of General Motors Corporation, said ‘From the start, NUMMI has succeeded in bringing jobs and economic development to California, in showing that global auto manufacturers can work together and learn from each other, and in demonstrating the value of global trade and cooperation.’ At the dinner, there were laudatory remarks by NUMMI President Yukio Azuma, Bruce Lee of the United Auto Workers, and various dignitaries (Meetings, 2004).
In spite of the value of NUMMI, there had been problems before the closure. General Motors Corporation had gone bankrupt during the recession beginning in 2007–08.
In June 2009, just before it emerged from bankruptcy in July with its new name of General Motors Company, it announced that it was abandoning the NUMMI joint venture.

It turned out that the joint venture was one of the ‘discarded assets’ of GM turned over to Motors’ liquidators in the reorganization. This left Toyota as the sole owner, and Toyota was having its own problems. After having been highly profitable for many years, the company projected an annual loss of $2.2 billion for its 2009 fiscal year (Ohnsman and Kitamura, 2009). While this loss amounted to very little compared to its accumulated earnings and liquid reserves, it caused great concern among the company’s leaders.
Toyota announced on August 27, 2009 that it would close the NUMMI plant at the end of March. It actually occurred at the end of the shift on April 1, 2010. This resulted in the direct loss of the jobs of the 4,700 workers at the plant, plus the loss of thousands more jobs at supply companies in the region (Abate, 2010). It also meant a serious loss to the economy of the region.
This case discusses the objectives of General Motors and Toyota in starting the joint venture, the reason that the United Automobile Workers agreed to cooperate, and the benefits that the participants gained from it. 


In the 1970s, Toyota and several other Japanese automobile manufacturers had established themselves as producers of high-quality, low-cost small cars. At the time, the large American manufacturers did not take the inroads seriously. They produced the large automobiles that most of the American public preferred. Though they had made attempts to produce small cars, in general they had not been able to make them cheaply enough and with high enough quality to compete in the small market for small vehicles. One exception was Studebaker that had developed a popular small automobile, but Studebaker had ceased to exist as a separate company shortly thereafter and the production was abandoned. In one other attempt to meet Japanese competition in compact car manufacturing, General Motors had built a highly automated plant, at a cost of billions of dollars, at Lordstown, OH. Labor strife had prevented the plant from reaching the level of labor productivity required to justify the investment.

Oil crises in 1973 and 1978–79 greatly increased the cost of gasoline and led to increasing demands for compact and subcompact cars. The US manufacturers were not in a position to meet this increasing demand. Some European companies producing small vehicles increased their sales to the United States, but the Japanese had a comparative advantage with their high-quality, low-cost vehicles. Thus the Japanese captured a growing share of this growing market, and enjoyed a rapidly increasing share of the total US market for automobiles (Duerr et al., 2005). Employment in the US automobile industry fell by 33.6%, a loss of 347,000 jobs (Wong, 1989). The US companies tried to place the blame on unfair competition, the cheap and exploited or unreasonably hard working Japanese labor force and/or on American unionized labor that produced poor-quality products at high cost. Faced with lost jobs and lost profits, American industry and labor combined to lobby for a restriction on imports. The US government convinced the Japanese government to restrict automobile exports to the United States with a Voluntary Restraint Agreement (VRA).
From the standpoint of the Japanese government, imposing the VRA seemed preferable to the possibility that the US might impose even stricter quotas. The Japanese based the quotas for individual companies on their prior exports to the United States.

The Japanese companies did not lose profits under the VRA. They made even greater profits because they had been selling their cars at prices well below the competition in order to rapidly increase market share. Faced with an absolute limit on the number of cars they could sell, they raised prices and/or introduced more expensive models. It has been estimated that the profits of Japanese companies were increased by some $1 billion to $1.6 billion in 1983, and by some $1.6 billion to $2.6 billion in 1984 (Smith, 1989).
The Japanese manufacturers still wished to increase market share in the United States beyond what the VRA would permit. Honda thus started manufacturing automobiles in a plant in Marysville, Ohio in 1982 and Nissan began production in Smyrna, Tennessee in 1983 (Wong, 1989, p. 89). These factories produced automobiles of higher quality and at lower costs than American-owned plants did.
Given the Honda and Nissan examples, American automobile manufacturers began to realize that at least part of the Japanese success was due to management policies and production systems. Still, most of the Japanese plants used non-union labor while all of the major American automobile companies had workforces with strong unions and entrenched managements, both of which were resistant to change.

Objectives Toyota’s objectives 

Toyota’s primary objective in beginning manufacturing in the United States was to protect and increase its market share. It had a long-range goal of surpassing General Motors as the world’s leading manufacturer of automobiles (Armstrong, 1985). It had earlier overtaken Nissan to become Japan’s largest automobile manufacturer, and did not want to have its position in America eroded. Toyota preferred to manufacture only in Japan and export their cars to world markets (Duerr et al., 2005). However, with the VRA, and Honda and Nissan now producing cars in the United States, Toyota felt that it also had to establish manufacturing facilities there.
A US plant would be Toyota’s first overseas manufacturing facility, and the company had many concerns.
A joint venture was viewed as an approach that would lower the risk while providing help in overcoming difficult potential problems. Toyota stated that it wanted to 

(1) gain experience with American unionized labor, 

(2) gain experience with American suppliers, 

(3) help diffuse the trade issue between the United States and Japan (Community Relations Department, 1990).

Regarding the third objective, the job-creating effects of foreign direct investment were believed to defuse the protectionist sentiment caused by imports (Wong, 1989).
Douglas Fraser, then president of the United Automobile Workers union, had earlier gone to Japan to urge Toyota and Nissan to build factories in the United States, but had received little encouragement at the time (Gelsanliter, 1992, 10–11). When then GM Chairman Roger Smith approached Eiji Toyota, then Chairman of Toyota Motor Company, about the possibility of a joint venture, the idea for NUMMI was born. Mr Toyota said that they hoped NUMMI would be ‘a model of economic cooperation between Japan and the United States – one that contributes to the American economy’ (NUMMI, 2004a). With regard to the overall results to be achieved from NUMMI, Toyota placed gaining of market share above profits.

GM’s objectives 

General Motors had two major objectives in entering the joint venture: ‘to gain first-hand experience with the extremely efficient and cost-effective Toyota production system’ and to obtain high-quality automobiles for its Chevrolet division (Community Relations Department, 1990). GM hoped that it could apply what it learned at NUMMI in its other plants, and thus gain great benefits company-wide.
The car to be produced at NUMMI, the Nova, was one of a family of GM subcompacts. It was to be priced so as to enable GM to compete more effectively in that part of the US market.
Approaches taken 

The joint venture was located in Fremont, California in a facility that had been a General Motors plant. The GM plant had been closed in 1982 because of its history of low productivity, low quality, and very poor labor relations. In the original division of responsibilities for the joint venture, Toyota was to be responsible for manufacturing while General Motors was to market all of the output. The only car to be produced was the Chevrolet Nova, one of a family of GM subcompacts, most of which were imported.

Toyota entered into the agreement with the full intention of using its own approaches to manufacturing (Meeting, 1984). While preserving the basic Japanese model, as discussed below, they wanted to learn everything they could about American labor relations and American values. Some modifications were made to the Japanese model as discussed below. 

A General Motors executive commented that:

The nature of Toyota is not to copy anyone. They are avid learners and carefully watch what others do, learning from the mistakes of others as well as from their own mistakes . . . They wanted a lot of counsel and advice – they knew nothing about (our) labor unions or the psyche of American workers . . . They wanted more information about US labor relations than GM felt comfortable in divulging. (Interview, 1990a) Some of the modifications to policies used in Japan that Toyota made at NUMMI were relatively minor, though quite effective. Suggestions from GM led them to take actions to appeal to the egalitarian nature of American workers. They provided only one cafeteria to serve both workers and managers, something that is not done in their Japanese plants (nor in typical American plants). The parking lot at NUMMI was on a first-come, first-served basis without reserved spaces for managers (though reserved spaces are provided for visitors). Again, this is not done in Japan. In a visit to the NUMMI plant in 2004, the authors noted that the employees waved to visitors going by in plant tour vehicles. This had not been done in earlier years, but the value of it was apparent.
Besides giving a good impression to visitors, the visitors tended to give friendly waves in return, creating a more friendly environment overall (Factory visit, 2004).
NUMMI stressed consensus decision-making and channels for staff feedback. A GM executive who worked at the plant indicated that this resulted in slow decision-
making, but that the managers never experienced surprise changes when they arrived in the morning (Interview, 1990a).
Key factors in Toyota’s approaches were:

1. developing cooperative management–labor relations;

2. carefully selecting workers;

3. providing extensive training to workers;

4. stressing teamwork and the responsibility of the individual to the work group;

5. putting safety and quality first, assigning the responsibility for safety and quality to each worker, and giving them the authority to assure it;

6. implementing Toyota’s ‘lean production system’ based upon the foundation of the first four key factors.

Developing cooperative management–labor relations (Duerr and Duerr, 1998) 

The NUMMI joint venture could not offer Japan’s traditional ‘lifetime employment’ in which an employee is expected to give total loyalty, dedication, and long working hours to the company in return for continuing to be employed even if the company no longer needs him. Even in Japan this system, though still used in many large companies, was on the decline.
However, the United Auto Workers union was invited to participate in the development of a Collective Bargaining Agreement along with Toyota and GM representatives, and including former US Secretary of Labor W.J. Usery.
The Letter of Intent stated: ‘Both parties are undertaking this new proposed relationship with the full intention of fostering an innovative labor relations structure, minimizing the traditional adversarial roles and emphasizing mutual trust and good faith’ (International Labor, 1990). The final result was a labor agreement offering the highest level of security in the US automobile industry.
It provided for advance consultation with the union on major business decisions, non-confrontational problem-resolution procedures based on discussion and consensus, and provisions giving team members (workers) the right to stop the line combined with a limited no-strike provision (Collective Bargaining Agreement, 1985).

A unique feature of the contract was that the company would not lay off employees unless compelled to do so by severe economic conditions threatening the company’s long-term financial viability. This commitment was put to the test in 1987 when reduced demand for the automobiles caused line slowdowns and an excess number of workers. The company did not lay off any workers. They reduced the number on the assembly line, but reassigned the excess workers to ‘continual improvement teams’
and to training to upgrade their skills. While the Company and UAW together applied for and received some training funds from the State of California, NUMMI lost $80 million in 1988 and additional money in 1989 (Hof and Treece, 1989).
Similarly in 2004 when the company shut down the truck line to set up for a new model, it did not furlough any workers. Instead, the time was spent in retraining team members to work more productively on the remodeled line (Wallack, 2005).
The General Manager of Human Resources at NUMMI indicated that the real key to labor–management relations was the way people dealt with each other on a day-to-day basis (Meeting, 1985). When a work dispute arose on the production line and could not be handled there, a call for assistance was sent to the personnel office. Union officers and company personnel people were stationed together in that office, and one of each would go together to attempt to solve the problem. Employees who were late or absent were counseled by their team leaders, and assistance offered to them to solve their problems (transportation, etc.) if possible. Disciplinary actions were taken only in chronic cases and only after consultation with union representatives (Duerr, 1992, 10).
Careful selection and training of workers 

Applicants for positions at NUMMI were carefully selected (Interview, 2004). They were told that all employees needed to be willing to contribute to an atmosphere of trust and cooperation. Potential production employees went through a three-day assessment that included production simulations, individual and group discussions, and written tests and interviews. Those hired went through a four-day orientation covering the team concept, production system, quality principles, attendance policies, safety policies, labor management philosophies, and the competitive position of the auto industry (NUMMI, 2004a).
In 1984, the first 26 production workers hired included most of the former officers of the UAW local union. This might seem like a strange choice, given the difficult labor problems GM had when it operated the Fremont plant.
However, the union had worked cooperatively in designing the new management–labor system. Furthermore, having been elected union officers in the past indicated that the individuals had leadership potential.
The former union officers, now NUMMI hourly workers, were invited to help in interviewing and evaluating additional applicants for jobs. They participated in orientation sessions, played an important role in training, and participated in discussions about the selection of supervisors. Approximately 85% of the initial total workforce comprised former GM Fremont plant UAW workers (Duerr, 1992, 5).
Though hiring began in May 1984, initial assembly did not start until December of that year and actual full production on the first shift wasn’t reached until 11 months later. The reason for the slow start was Toyota’s plan to provide a high level of training. Beginning in June 1984, several groups of 32 members each were sent to Toyota’s Takaoka plant in Japan for three weeks of classroom and on-the-job training. The membership typically included group leaders, team leaders, and union representatives.
Returnees became the trainers for newly hired workers.

Stressing teamwork and responsibility of the individual 

From the beginning of discussions with the union, there was an emphasis on a team approach. Each worker was assigned to a four- to eight-person team with a team leader who might also be a union coordinator. Above the team leaders were group leaders who coordinated three or four teams each (Holden, 1986).
Each team was responsible for doing the work assigned to it, and each team member was responsible for supporting their team. Individual members were responsible for improving their own productivity and efficiency, and teams were responsible for improving operations in their areas of responsibility. Teams were kept informed of company objectives in quality, cost, production, and safety, and the teams’ parts in meeting these objectives. There were periodic reviews and evaluations of performance.
Team members received training in problem-solving methods. In accordance with the Collective Bargaining Agreement they were responsible ‘for participation in Quality/Productivity improvement programs such as QC circles’ (Collective Bargaining Agreement, 1985). The company, teams, and individual employees took pride in the improvements made due to their suggestions, particularly the suggestions that were subsequently adopted in the similar Toyota plant in Japan (Factory visit 2004 and earlier visits).
In the production groups, each member was cross-trained to do every job. For production line workers, there were only two work classifications. Workers in the skilled trades were divided into three functional areas. Under GM, there had been over 100 different job classifications in the plant. The company did not employ so-called ‘relief workers,’
individuals who are multi-skilled and without permanent assignments who could fill in for absent employees.
Because each team member was cross-trained and there was a lack of restrictive job classifications, other members of the team could fill in for a member who was missing.
When a person was absent from his team, the other members were expected to do that job in addition to their own.
Thus if an employee was late or absent, it placed an additional burden on all of their teammates. This provided peer pressure to be on time and do a full share of the work (Meeting, 1985).

The company used a consensus-style decision-making process for major decisions, obtaining input from all areas concerned, and holding discussions until agreement was made. Where the union was concerned, for example when adding additional capacity for manufacturing compact trucks was proposed, they were consulted. In this case the company indicated that, in order to make such an expansion economically feasible, they would hire additional workers but would also need to be able to assign involuntary overtime. The union leaders objected to any mandatory overtime so the company said they would not make the trucks in Fremont. The union members, in turn, objected to what their leaders had decided and immediately recalled the existing leaders and elected new ones. The expansion then went ahead.

For decisions affecting only their own team or area, team members were encouraged to make their own decisions. Obviously, all considerations of consultation were ignored when the most important decision was made. The closure of the plant, and the loss of all jobs, was done unilaterally by Toyota’s upper management in Japan. 

Putting safety and quality first 

From the beginning, NUMMI recognized that for safety and quality to be given primary emphasis, the workers had to be able to have some control over the process and operations. This was accomplished in two ways. First, any assembly line worker could stop the line in the event of safety or quality problems simply by pulling an overhead cord. No prior consultation with a supervisor was required.

Secondly, there were electric signboards located throughout the plant that were controlled by the workers. Each board had three lights: green, yellow, and red. Green indicated that everything was okay, yellow indicated there was a problem that required assistance but did not require shutdown of the line, and red indicated line shutdown.
Yellow or red lights could be triggered by sensors on the machines themselves or by the workers pushing a button. The yellow light typically resulted in assistance being provided by the team leader or group leader.

Each worker and each team was responsible for ensuring that the materials, parts and components coming to them did not have identifiable defects and fitted properly into the assembly they were making. They were also responsible for ensuring that their work was done properly.

The company’s commitment to quality was clearly illustrated in August 1990. It was discovered that parts arriving from a new supplier were defective. Rather than continue production with parts that might later require replacement, the plant was shut down for three days until new parts could be obtained. Cars that had already been produced were not shipped to dealers but were held for part replacements. Since it was not the workers’ fault that the parts were defective, and NUMMI wanted to encourage them to report defects, the company offered the workers full pay for the period the plant was shut down (San Francisco Chronicle, 1990, B1).

Implementing the Toyota Production System 

The successful implementation of the Toyota Production System at NUMMI required and was based upon the development of cooperative labor–management relations, careful selection and training of workers, development of teamwork, and giving workers the authority to assure safety and quality as outlined above. The elements of the lean production system used by Toyota included a just-intime inventory system; a quality assurance system under which workers do not allow defective parts to pass from one workstation to the next; continuous improvement to eliminate waste in machinery, material, labor, and production methods; and standardizing of improved procedures (NUMMI, 2004b).
The just-in-time (JIT) inventory system is designed to produce only what is being ordered or sold rather than to produce for inventory that will be used to absorb ups and downs in demand. Lowered (or eliminated) inventories of incoming, in-process, and finished goods saves space and costs of money tied up. It also:
● results in quicker identification of problems arising due to defective inputs or processing problems;
● results in increased emphasis on avoiding breakdowns (and thus on preventive maintenance); 

● provides additional pressure to make production processes more flexible (such as being able to produce more types and styles of vehicles on one assembly line, as is done at NUMMI).
The JIT system was modified at NUMMI to account for the fact that that some parts were obtained from suppliers located at a distance from the plant, may be subject to delays, and need to be purchased in quantities that may be shipped economically. Modification was also required by the need to run assembly lines at constant speeds in order to maximize productivity. Therefore some inventories of incoming materials and finished goods did occur, but were kept at a minimum. Finished parts were kept on the premises for 48 hours or less (Factory visit, 2004).

Worker responsibility for ensuring that defective parts did not move from one station to the next, coupled with the ability of the worker to shut down the line, supported an emphasis on quality.
Continuous improvement and standardization of improved processes resulted from suggestions made by teams and individual team members. Adopted by the company and made into standard practices, these resulted in making work safer, easier, and/or more productive (Factory visit, 2004 and earlier visits).
A continuing pressure for improvement came from the electric signboards indicating the status of each process step at all times. A team leader who met with the authors away from the plant, and requested anonymity, indicated that some of the workers believe management wants all of the green lights to be on most of the time, but not all of the time. If the line is on green all of the time, except for unanticipated breakdowns (which should be virtually eliminated by preventive maintenance), it means things are too easy. Then the line speed should be increased until yellows and/or reds appear occasionally. These distress signs will point up the weakest parts of the system, which can then be studied to find ways of improvement. When the line is back to all green again, another speed increase can be used to identify the next bottleneck (Duerr, 1992).
(The speeding up of a production system to identify and fix weak points was observed by the authors during consulting work for other companies, but none used the electric signboard system that results in workers directing attention to weak points.)
A question arose over the effect that the continued increases in line speeds had on worker support of NUMMI’s overall approach. Ken Higashi, when president of NUMMI, indicated that the workers went through several stages after the beginning of production at the plant.
First, they were very happy just to have jobs with good pay and benefits, and did not complain. Then they began to feel that they were being pushed too hard. However, in 1987 when there were no layoffs in spite of low demand and cutbacks in production, ‘the workers realized that they were greatly appreciated’ and ‘began to fully realize that we really do value them as an important part of the company’ (Interview, 1990b). Since then, the company has continued to add more workers as production has increased, and it appears that the workers do realize that their hard work is giving them secure employment.

Results achieved 

Manufacturing at NUMMI, under the exclusive control of Toyota, has been a success since the beginning of operations. Marketing, with only GM-branded vehicles being produced, was a problem from the start. It was solved only by changes in strategy, with NUMMI beginning to also produce Toyota-branded cars and Toyota taking over the responsibility for marketing them.
Operating results The NUMMI plant quickly became 40% more productive than the average US American-operated automobile manufacturing facility (AJBS Meeting, 1988). Researchers at the Massachusetts Institute of Technology estimated in 1988 that productivity at the NUMMI plant exceeded that of all American-owned US automobile plants, except for Ford’s Taurus facility with which it was approximately equal.
Labor relations improved dramatically. At the end of the time when GM had been running the Fremont plant there was a backlog of over 1,000 grievances and 60 disputed firings. Absenteeism was over 20%, and there were many days on which the plant could not start on time because not enough workers had showed up (International Labor, 1986, p. 15).
In the first two years under NUMMI management, attendance was at 98% with most of the absences occurring for excusable reasons. Only one grievance was not solved informally (International Labor, 1986, p. 16).
Absentee rates are still low by US standards, though higher than at Toyota plants in Japan. Labor relations remain very good.

Marketing results 

There were serious problems in marketing. Falling sales of the Chevrolet Nova resulted in a need to cut back production at NUMMI in the 1980s. Four problems have been suggested as accounting for Nova’s poor sales: ineffective advertising (Treece et al., 1989, p. 126); ‘experience with small Chevrolets had imbued customers with brand disloyalty that’s hard to overcome’ (Consumer Reports, 1986, p. 81); somewhat dull styling; and the fact that the Nova seemed expensive when compared with other small Chevrolet cars.
The first attempt made to alleviate the problem was Toyota’s authorizing the production of some Toyota Corolla FX automobiles at the Fremont plant. This meant that the original division, with Toyota simply handling production and GM doing all of the marketing, was no longer valid. Unfortunately, the Corolla FX was nearing the end of its life cycle and its sales were not enough to maintain full production at NUMMI, leading to diminished output and financial losses.
Introduction of a new Geo Prizm (for General Motors)
and a new model of Toyota Corolla brought production the Fremont plant back up. The new Geo Prizm, with similar styling to the new Toyota Corolla and of identical quality, did not sell as well as expected while the new Corolla sold better than expected. Consumers simply believed that Toyotas were better cars. An article in Fortune in 1988 stated that ‘It may take years to turn around GM’s reputation for bad quality and uninspired design’ (Moore, 1988, p. 35). It did.
With General Motor’s agreement, Toyota built its own separate and wholly owned facility for manufacturing trucks at the NUMMI site. Production of Toyota compact pick-up trucks began in 1991 and redesigned models of the Tacoma were introduced in 1995 and 2004. The last Geo Prizm was built in 2001, and production of the Pontiac Vibe started in 2002. A right-hand drive model of the Vibe named the Voltz, built for Toyota to export to Japan, also went into production in 2002 (Armstrong, 2002, B1).
Sales in Japan were disappointing and the model was discontinued.
The marketing situation for General Motors automobiles produced at NUMMI remained cloudy as the company continued to lose market share. At NUMMI in 2004, only 20% of current production was for the Pontiac Vibe, with the other 80% taken up by Toyota Corolla and Toyota Tacoma light truck (Factory visit, 2004). In 2010, only 10% of the NUMMI output was GM-branded cars.
Customer perceptions proved to be difficult to change and long-lived. When NUMMI started making GM-branded cars along with the Toyota-branded cars, they were made on the same assembly line by the same workers with the same attention to quality. The independent and highly respected US magazine Consumer Reports evaluated them as of the same quality based on tests made by Consumer Reports. However, buyers still preferred the Toyota-branded versions to the GM-branded ones. Of even greater interest, surveys by J. D. Powers indicated that owners of the Toyota-branded vehicles reported fewer problems and were more satisfied with their vehicles than did the owners of the GM-branded vehicles.

Applying lessons learned and evaluating the benefits 

There appear to have been substantial differences in what Toyota and GM were able to learn and apply from the joint venture. The authors’ evaluations of what each achieved compared to its original objectives is as follows:


The experience of Toyota at NUMMI helped the company to realize its primary objectives. It successfully applied what it learned in the joint venture, and increased its confidence in its ability to successfully manufacture in other countries. It quickly moved ahead internationally in building new wholly owned factories in the United States, Canada, Europe, and Asia (in countries where it was not required to have a partner).
At NUMMI, Toyota learned that it could work effectively with American unionized labor. It has made some adjustments to the approaches it used in Fremont while keeping others the same:
● Its next factory was established as a wholly owned subsidiary, and located it in Georgetown, Kentucky where it could hire a non-union workforce.
● Having found that it could achieve high productivity and quality with a moderate level of automation, it decided that it could do even better by investing in a higher level of automation for its new plant.
● Its favorable experience in Fremont has been followed by the implementation of similar policies in selection, training, sharing of information, and the use of the team approach in Georgetown and elsewhere (Duerr, 1991).
Toyota made the greatest possible use of the experiences gained by the executives and managers initially assigned to NUMMI. Most of them were transferred as a group to the Georgetown factory. The personnel manager was later transferred from Kentucky back to Japan, where he was eventually put in charge of worldwide personnel relations for Toyota.
The company did learn to work effectively with American suppliers or, to put it another way, American suppliers learned to work with Toyota.
Toyota’s share of the American market has been increasing steadily since it began manufacturing in the United States. In 2003 its worldwide vehicle sales passed those of Ford Motor Company to make it the world’s second largest automobile manufacturer (Zahn, 2005). Toyota began producing large trucks in the United States in 2006 (The Nikkei Weekly, 2006). By 2004, Toyota was producing, in North America, 60% of the cars it sells there.
It was also earning more than 70% of its profits in the United States (Financial Times, 2004). In 2004, it became the world’s most profitable automotive company and its market capitalization was greater than that of GM, Ford, and DaimlerChrysler combined (Ibison, 2004). Toyota continued to be the world’s most profitable automobile company until 2009 when the recession, declining sales, and the high value of the yen meant that earnings overseas did not translate into enough yen to offset losses in Japan. (Where $100 once provided ¥110 or more to in Japan, the exchange rate in mid-July 2010 translated $100 into only about ¥84.5, a drop of over 23%
in receipts for Toyota for profits on US sales. Earnings in euros and British pounds also dropped when converted into yen. General Motors General Motors only partially achieved its two objectives of learning the Toyota production system and producing higher-quality vehicles. General Motors did gain valuable experience with the New United Motor Manufacturing, Inc. joint venture, but found it difficult to apply what it had learned to other GM plants. They were able to obtain high-quality small cars from NUMMI, but had difficulty selling them.
General Motors provided a number of managers with experience in working at NUMMI, and thousands of workers and managers with visits to the Fremont facility.
Several factors prevented this experience from being as valuable as GM had hoped. One reason was that in their assignments following work at NUMMI, the GM managers were not kept together, but rather distributed to various positions around the company. In their individual post-NUMMI positions they were surrounded by workers and managers whose traditional adversarial relationships were so entrenched that they simply could not be changed by one individual, or even a small group of people (Interview, 1990a).
In more recent years, teams of managers with experience at NUMMI have been sent as a group to some GM plants. This appears to have helped General Motors in making substantial improvements in productivity and quality.
Experience with NUMMI was also applied by GM in an innovative small-car project named Saturn, originally conceived by GM CEO Roger Smith in 1983. It was designed to ‘make superb little cars to beat the Japanese at their own game’ (Taylor, 2004, p. 119). In order to free the project from the bureaucratic constraints of GM, allow the development of cooperative labor–management relations, and to provide it with its own identity, it was set up as a separate company. Any GM employees desiring to work for Saturn had to give up their positions and seniority with GM. After seeing the results achieved at NUMMI with just an average level of automation, GM scaled back the level of automation to be used at Saturn – the opposite approach Toyota took at its next US facility in Kentucky.
Saturn was a success in achieving a high level of labor–management cooperation, and gaining sales to people who had previously purchased Japanese or European cars: 70% of first-time Saturn buyers had previously owned foreign-nameplate cars. It also achieved high customer loyalty.

However, until recently, Saturn produced only small cars. Thus Saturn buyers did not have any larger Saturn cars to trade up to, and often switched to European or Japanese cars. The company also suffered periodically, depending partly upon who was in top management at GM, from lack of advertising, lack of new models, poorly designed models, lack of adequate funding for advertising and other activities and/or lack of updates to its vehicles. When GM did decide to make other ‘Saturn’ models, it decided to produce most of them at existing GM plants. It also intended to have Saturn work closely with other divisions on engineering, designs, sharing of platforms, parts, and production facilities. Saturn would thus have had a wider range of vehicles, but possibly at the cost of losing its unique identity.
Some Saturn-branded cars were produced, but further development ceased when GM decided to close the Saturn subsidiary. Saturn had attained high quality, high productivity, and good employee relations. However, because of the problems noted above, the company was never able to have the production level and variety of cars required to support a separate company/division. Saturn never made money in the 26 years it was in operation.
While what General Motors learned at NUMMI did help them to make substantial improvements in productivity, they still lag behind Toyota. They have also made great strides in improving quality, surpassing some overseas manufacturers but still lagging behind the major Japanese companies. At the same time, Ford made major productivity and quality improvements based on its longterm partnership with Mazda, its learning from Japanese companies, and its own leadership. It was the only major US manufacturer that did not require a substantial loan from the US government to survive the recession.
All three of the major US manufacturers have increased the use of shared platforms and parts (Welch and Kerwin, 2004), developed faster and cheaper methods of designing new vehicles, and adopted aspects of lean production.
General Motors does recognize the need to improve its quality image. In July 2005, it took out full-page advertisements in some leading US newspapers showing recent favorable ratings by J. D. Power and Associates. They still have a long way to go. ‘Toyota’s appeal to the American driver is built on decades of high quality standards – something Detroit manufacturers are only just starting to rival’ (Mackintosh, 2004). Toyota continues to have a better global reputation for ‘good mileage, ecological features and reliability’ (Kagemaya, 2005), or at least it did until the recalls in 2009–10 (see the Toyota Case in Chapter 2).


Toyota appears to have benefited more than General Motors from the New United Motors Manufacturing joint venture. Toyota learned how to work effectively with the American workforce and suppliers. It used this knowledge, and the confidence it gained, in its subsequent worldwide expansion of manufacturing facilities. It has greatly increased both worldwide market share and profits, becoming the world’s second-largest automobile producer and, until 2009, the most profitable. It did substantially reduce trade friction resulting from automobile imports by the US, though some concerns remain regarding international trade in parts.
General Motors did gain from the joint venture, but because of both past policies and current problems largely beyond its control, has not been able to gain as much from the joint venture. Image and marketing problems resulted in its not being able to sell the expected number of small cars produced by NUMMI. Though it did learn and apply much from the Toyota production system, it was unable to fully replicate the system in any existing plant. Workers and managers at existing GM plants have such a long history of confrontational relations, and such a distrust of each other, that a system based on mutual trust and cooperation apparently could not be implemented in existing factories.


1. Why did Toyota want to enter a joint venture with GM?

2. Why did GM want to enter a joint venture with Toyota?

3. Does the willingness of Japanese workers to devote their working lives to a company make it impossible for American companies to achieve similar levels of productivity and quality?

4. Why did Toyota use a higher level of automation in their Kentucky plant than NUMMI had?

5. Why did GM use a lower level of automation in their Saturn plant than NUMMI had?

6. Briefly, what was the value to Toyota of what they learned from NUMMI?
7. What basic factors kept Saturn from becoming profitable?

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International Marketing And Export Management

ISBN: 9781292016924

8th Edition

Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr

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