NUMMI, GM & Toyota: The Staying-Power of Cooperative Innovation
General Motors is in bankruptcy and planning to close fourteen more plants, six of them in Michigan near its headquarters. But sitting clear across America in an expensive and complicated State to do business, one of its plants is slated to remain open.
California’s New United Motor Manufacturing (NUMMI) plant is not only planned to stay open but is also expected to return to a five day work week this summer. (Many plants across America have been operating on reduced work weeks to respond to slumping orders.) Here’s yesterday’s report from KQED’s California Money.
NUMMI is a joint venture of GM and Toyota. It makes both the Toyota Corolla and the Pontiac Vibe. (Yeah, NUMMI stays open even though the entire Pontiac line is slated to go away.)
The 88-football-field-sized plant opened in 1984 as the first automotive joint venture in the US. GM got into the partnership to learn lean manufacturing techniques from Toyota. (Ironically, Japanese auto makers learned many of these techniques from American, Edwards Demming decades before while Detroit ignored him.) There have been many reports of NUMMI’s positive influence on overall GM quality.
But yesterday’s news about NUMMI staying open was not about the power of quality. It was about the power of open innovation.
As regular 3% readers know, I observe a general trend where corporate operations that are able to “cross the border” of the firm and work deeply and directly with external sources of insight, resource, and capability tend to have enormous staying power. There is no way to know what reasons internally GM uses to justify continued support of NUMMI, but we do know that other plants which now have equal-or-better quality scores are still closing. And many of these are much closer to home in areas with much cheaper labor rates.
Even as it sheds billions in assets, GM can not shed NUMMI’s source of external innovation with Toyota. In contrast, many of GM’s internal “innovation programs” are falling prey to the restructuring axe, as innovation programs nearly always do in times of austerity.
GM’s decision is further evidence that cooperative innovation – specifically operations that directly connect teams in multiple companies – tend to survive and thrive much better than innovation programs trapped inside a single firm.
Excellent articlce. I do not think that General Motors would want to leave this partnership with innovative Toyota. At one point they made the Geo Prism, then the Chevy Prism, and most recently the Ponitiac Vibe at this plant. I would guess that Chevrolet is going to pick up a compact sedan or hatchback when the dust settles.
Adam Luneau
Handy Family Dealerships
Chevrolet & Toyota
http://www.handycars.com
Automotive News reports that Toyota’s President, Katsuaki Watanabe, has indicated that they hope to continue the NUMMI relationship with GM. This will be hard for GM to walk away from. We will see. Here’s the article: http://www.autonews.com/article/20090601/ANA02/906019944
I really hope the rumor mill with NUMMI ends soon. There is article after article stating the opposite everyday. Really does any one person commenting understand all the factors that go into running a multi-billion dollar joint venture? Please don’t speculate on every column you have read. This is a very intricate industry in a hostile time. I wish the best for all in the industry (America) and EVERY NUMMI worker.
Third Generation Auto Worker
Local 2244
No doubt, the rumor mill will churn, and who knows what will happen with NUMMI and GM in the end. But it was notably absent from the most recent closure list, and one can only speculate on all the reasons for it. I speculate that the connection with Toyota has something to do with it, and comments made by Toyota’s CEO lend credence to that. Clearly a point of resistance to simply closing down the plant – like so many others – is the impact on the GM/Toyota relationship. That doesn’t mean NUMMI won’t suffer a closing (or a GM withdrawal) in the end, but many were surprised to see it not show up in the last round.
The comment you made that really resonates with me is “Does any one person commenting understand all the factors that go into running a multi-billion dollar joint venture?” I’m very interested in that question. I’ve studied and been a part of many cross-company organizations. It is an unbelievably complex thing. After writing this article, I began to think, “What are the reasons for joint ventures getting shut down in spite of the cross-company benefits?” So I’ll be thinking about that going forward. For example, there was a joint venture with Apple, IBM (and nominally HP) called Taligent in the 1990′s which did not stand the test of time.
Nevertheless, all things being equal, there is good evidence that programs that are able to deeply interface with external organizations have better staying-power than programs that are wholly internal. I think, in the case of Taligent, it would be a reasonable hypothesis to say that, while the separate joint venture was deeply integrated, the ties back to each parent company (Apple and IBM) were allowed to become weak.
So, my assertion: External programs with poor internal links = weakest. Internal programs with poor external links = weak (but sometimes politically strong internally even when delivering poor value). Cooperative programs with deep and strong internal and cross-company links = stronger.
So it appears GM has made the move. Finally ending the speculation that has filled the web and sites as this of the with uncertainty. The question now is not “IF” rather when will NUMMI be no longer? I am hopeful Toyota will decide to stay in Fremont and continue to build vehicles. If it is under the name Toyota so be it. Nummi (Toyota) can and will produce the highest quality vehicle at the lowest possible price. AKA the NUMMI way.
God Bless those with the power to make the choices for thousand of families. And for those at NUMMI with no power in the decision “PRAY”.
Third Generation Auto Worker
Local 2244
Yep. No question – in this case not even partnership can stop the contraction. Not for nothing – if this were a pure GM plant, it would now be certain to close. With two companies, one being Toyota, supporting it, there is a chance that it will keep going.
What would be terrific is if, after the dust settles, NUMMI became a collaborative shop again – maybe with Toyota and a more fortunate automaker.
Have you seen any indication at work that Toyota is going to stop production at NUMMI? What is the UAW’s views on everything? Is the membership willing to offer concessions? Most plants are constantly trying to make cuts at the bottom. I will also be affected by Toyota ceasing production at NUMMI, so I was just interested in what’s going on there. Thanks
Hi John,
Interesting take on the situation and I think you’re right on. I’ve been very aware of Nummi. I might be able to add a little to the argument on My blog at; http://www.efficientfactory.com
The partnership issues notwithstanding, in the future, manufacturing companies need to figure out how to apply hyper-flexibility into their systems, processes, and tooling. The product lifecycle is getting shorter as consumers demand more options and choice. Complicated products have complicated processes and supply chains. Information about the products and process are becoming as important or even more important than the product. The problem they face is the immense amount of capital and sunk costs representing the investment they have in existing tooling.