Section 3. Local Production Starts in North America
Item 2. Joint Venture with GM
Shortly after the breakdown of talks with Ford in July 1981, a proposal for an alliance was received from General Motors Corporation (GM; now General Motors Company). Toyota Motor Sales Co., Ltd. Chairman Masayuki Kato met with GM Chairman Roger Smith in Detroit that December and proposed that talks be held with Toyota Motor Co., Ltd. President Eiji Toyoda. GM quickly took action and dispatched executives to Toyota Motor Co., Ltd. in January 1982.
President Toyoda and Chairman Smith also held talks in New York in March 1982. Chairman Smith made a highly specific proposal that 1) the two companies invest equally in a joint venture company to be operated by Toyota and 2) a GM plant on the West Coast produce 200,000 to 400,000 units of a new Corolla-based GM vehicle starting in the autumn of 1984. From this point on, the details of the joint venture were negotiated by personnel on the operational level.
At that time, GM, which had stumbled with the internal development of a compact car, was being supplied compact cars by Isuzu Motors Ltd. and Suzuki Motor Co., Ltd. (now Suzuki Motor Corporation), its business partners. Even so, the volume was inadequate, and GM sought to acquire a higher volume and gain compact car production expertise through joint production with Toyota.
Economic friction between Japan and the United States led to the imposition of voluntary import restraints on passenger cars manufactured in Japan in fiscal year 1981 (ended June 1982). Despite this, moves by the U.S. Congress to adopt a local content law were growing. Under such circumstances, joint production with GM as a new model for industrial cooperation between Japan and the United States was expected to contribute to reinvigorating employment and the parts industry in the United States and to have a beneficial effect on bilateral relations.
For TMC too, there was considerable significance in local production at a previously unseen scale in the world's largest automobile market. In addition, with the possibility that expanding production in North America would became unavoidable, the project offered the benefits of enabling Toyota to expand into North America through a joint venture that required relatively little investment and to learn about local production. Joint production with GM was the best possible response to TMC's issues as well as to the trade friction between Japan and the United States.
Internally, however, opinions counseling caution and raising concerns were also voiced. TMC's Production Related divisions felt uneasy about publicly disclosing production expertise in a joint venture plant, and the Sales and Marketing Divisions was worried about supplying a leading model to a competitor. In addition, cooperation with the United Auto Workers Union (UAW) was also a major issue. Despite these concerns, the negotiations on joint production between TMC and GM progressed, and in February 1983, a basic agreement was reached to use GM's Fremont plant in California, which GM had recently closed.The main content of the memorandum of understanding1signed at that time was as follows: 1) the ratio of investment in the new company would be 50:50, 2) production would start as soon as possible in the 1985 model year with a target annual production of approximately 200,000 units, and 3) the joint venture term would be no more than 12 years from the start of production.
The U.S. Fair Trade Commission granted provisional approval in December 1983, and the hurdle of U.S. antitrust laws, an area of concern, was cleared. In February 1984, TMC and GM each contributed one half of 200 million U.S. dollars in capital to establish New United Motor Manufacturing, Inc. (NUMMI), and TMC Managing Officer Tatsuro Toyoda was appointed as its president.
In April 1984, TMC and GM held a press conference in Nagoya2concerning the establishment of NUMMI. Chairman Toyoda stated his belief that "the spirit of competition and cooperation is the foundation that supports global economic development" and expressed TMC's determination for the joint venture product to serve as a "model of success for industrial cooperation between Japan and the United States."