Toyota says to end production at California plant

TOKYO: Toyota Motor said Friday that it was abandoning a plant in California that it jointly owned with ailing US giant General Motors, marking the first time it has pulled the plug on a factory.

The move follows GM's decision in June to drop its ownership stake in the joint venture, New United Motor Manufacturing Inc. (NUMMI), as it restructured under bankruptcy protection.

While a final decision on the fate of the plant and its 4,700 workers will be left to the NUMMI management, its closure now looks almost certain.

Toyota has never been involved in shutting an assembly plant anywhere in the world, so it would be a first for the world's largest automaker.

The plant in Fremont, California will end production for Toyota in March and shift output of Tacoma pick-ups to a factory in Texas, while Corollas will be manufactured in Canada and Japan for the North American market.

"We have determined that over the mid- to long-term, it just would not be economically viable to continue the production contract with NUMMI," said Toyota's North American head, Atsushi Niimi.

"This is most unfortunate, and we deeply regret having to take this action," he added.

Toyota cannot promise the affected workers jobs at its own plants, Niimi said.

"They will not be prioritised over applicants from the local community" if they apply for new jobs with Toyota, he told reporters in a teleconference.

Toyota, which overtook US rival GM in 2008 as the world's largest automaker, is struggling to cut costs after falling into the red for the first time, with a 436.9 billion yen (4.7 billion dollar) loss in the year to March.

The Nikkei business daily reported on Wednesday that Toyota plans to cut its global production capacity by one million vehicles, or 10 percent.

Toyota actively expanded its global production facilities in recent years to meet brisk demand, particularly for its fuel-efficient cars, leaving it vulnerable to the current collapse in worldwide sales.

The Japanese company has idled plants and slashed thousands of temporary jobs in response to its biggest ever crisis.

"With the closure (of the California plant), Toyota is now seeing light at the end of the tunnel for its operational cuts," said Yasuaki Iwamoto, an auto analyst at Okasan Securities in Tokyo.

"The closure may not have a big impact on Toyota's profit," he added.

New United Motors Manufacturing Inc. is the only unionised Toyota plant in the United States, but Niimi said the presence of United Auto Workers had no "direct impact" on its decision.

"California is a very high cost location, mainly because our major supply bases are located in the Midwest region of the US," he said. "Also California's cost of living is rather high."

Toyota entered the joint venture in 1984 as an experiment to see if American workers could build cars according to their standards.

GM wanted to learn about Toyota's more efficient manufacturing methods and was able to save the flagging plant from closure by bringing Toyota in to operate the factory.

Since then, Toyota has pursued a policy of building the majority of the vehicles it sells in the United States in North America and has launched several advertising campaigns highlighting its contributions to the US economy.

"We remain strongly committed to maintaining a substantial production presence in the USA and North America," said Niimi.

"To that end, we will consider moving additional Corolla production back to North America over time."