Read the case given below and answer the questions given at the end.
CASE STUDY – I
New United Motor Manufacturing, Inc. (NUMMI) is an automobile manufacturing plant in Fremont, California, opened in 1984 and closed in 2010. NUMMI was established at the site of a former GM site that had been closed two years earlier. The factory which NUMMI took over was built by General Motors (GM) and operated by them from 1962 to 1982. GM and Toyota reopened the factory as a joint venture in 1984 to manufacture vehicles to be sold under both brands.The idea of reopening the plant emerged out of the need that GM had to build high-quality and profitable small cars and the need Toyota had to start building cars in the United States, a requirement due to the possibility of import restrictions by the U.S. Congress. GM saw the joint venture as an opportunity to learn about lean manufacturing from the Japanese company, while Toyota gained its first manufacturing base in North America and a chance to implement its production system in an American labor environmen.The choice of the Fremont plant and its workers was unusual. At the time of its closure, the Fremont employees were "considered the worst workforce in the automobile industry in the United States", according to the United Auto Workers. Employees drank alcohol on the job, were frequently absent (enough so that the production line couldn't be started), and even committed petty acts of sabotage such as putting "Coke bottles inside the door panels, so they'd rattle and annoy the customer." In spite of the history and reputation, when NUMMI reopened the factory for production in 1984, most of the troublesome GM workforce was rehired, with some sent to Japan to learn the Toyota Production System.By December 1984, the first car, a yellow Chevrolet Nova rolled off the assembly line. And almost right away, the NUMMI factory was producing cars with as few defects per 100 vehicles as those produced in Japan. But 15 years later, GM had still not been able to implement lean manufacturing in the rest of the United States, though GM managers trained at NUMMI were successful in introducing the approach to its unionized factories in Brazil. Up to May 2010, NUMMI built an average of 6000 vehicles a week, or nearly eight million cars and truck.The first model NUMMI produced was the Chevrolet Nova (1984–1988). This was followed by the Geo Prizm (1989–1997), the Chevrolet Prizm (1998–2002) and the Hilux (1991–1995, predecessor of the Tacoma), as well as the Toyota Voltz, the Japanese right-hand drive version of the Pontiac Vibe. Both of the latter are based on the Toyota Matrix. Production of the Pontiac Vibe hatchback was discontinued in August 2009 as GM phased out the Pontiac brand. Beginning in September 1988, the NUMMI plant produced the Toyota Corolla compact car. In 1995, it began producing the Toyota Tacoma pickup truck.On June 29, 2009, General Motors announced that they would discontinue the joint venture with Toyota. The announcement was made following GM CEO Fritz Henderson announcing in April that General Motors would discontinue the Pontiac Vibe production at NUMMI. The two automakers were in discussions but could not find a suitable product to be produced at the factory. ―After extensive analysis, GM and Toyota could not reach an agreement on a future product plan that made sense for all parties,‖ GM North America President Troy Clarke said in a statement. "Toyota‘s hope was to continue the venture and we haven‘t yet decided any plans at the factory,‖ said Hideaki Homma, Toyota‘s Tokyo-based spokesman. ―While we respect this decision by GM, the economic and business environment surrounding Toyota is also extremely severe, and so this decision by GM makes the situation even more difficult for Toyota.‖ Before GM decided to sever its stake in the NUMMI joint venture, Toyota was considering offering a version of its Prius hybrid to GM that would be built at the factory and sold as a GM model but Toyota indicated that it was seriously considerin exiting the venture also. On August 27, 2009, Toyota announced that it would discontinue its production contract with NUMMI, shifting Tacoma production to its San Antonio, Texas pickup plant and Corolla assembly to Cambridge, Ontario. A total of 5,400 employees will be affected, including 4,550 UAW hourly workersGM pulled out of the venture in June 2009, and several months later Toyota announced plans to pull out by March 2010. At 9.40am on April 1, 2010, the plant produced its last car, a red Toyota Corolla S believed to be destined for a museum in Japan. On May 20, 2010, it was announced that Tesla Motors purchased a part in the NUMMI plant and will be collaborating with Toyota on the "development of electric vehicles, parts, and production system and engineering support". The plant International will first be used to produce the Tesla Model S sedan with "future vehicles" following in the coming years. The plant will be producing 20,000 vehicles a year and employ 1000 workers to start.
Questions
1. Why did Toyota prefer joint venture rather than exporting, to enter US market? What were the reasons for GM to enter into the
joint venture and finally to discontinue it?
2. Why did GM select Fremont, California, automobile manufacturing plant for NUMMI?
3. What are the other modes of entry that Toyota could have selected to enter US market?
