Nummi Case Study Ppt Templates

New United Motor Manufacturing Inc., in Fremont, Calif., is scheduled to close on April 1. Frank Langfitt/NPR hide caption

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Frank Langfitt/NPR

New United Motor Manufacturing Inc., in Fremont, Calif., is scheduled to close on April 1.

Frank Langfitt/NPR

Next week, New United Motor Manufacturing Inc., a factory once run by both General Motors and Toyota, will close in Fremont, Calif.

The factory is called NUMMI for short and — on the surface — it's a familiar story about the fall of the American auto industry. But this is no ordinary plant.

In the mid-1980s, Toyota took over the Fremont plant, one of GM's worst, a factory known for sex, drugs and defective vehicles. And as part of an historic joint venture, Toyota turned the plant into one of GM's best, practically overnight.

Along the way — remarkably — Toyota even shared its production secrets.

But GM would take another decade and a half to begin seriously implementing those lessons in its own factories. That was too long and explains a lot about why it took GM and other Detroit companies so many years to improve the quality of their vehicles.

Some GM managers who worked at NUMMI see the joint venture as a lost opportunity and wonder what might have been.

Forging A Partnership

In 1985, after NUMMI opened, Car and Driver magazine ran the following headline: "Hell Freezes Over."

Back then, GM and Toyota needed each other. GM had to build small cars, but they were lousy and lost money.

Toyota had its own problems. The company was facing import restrictions from the U.S. Congress. So, it had to start building cars in United States.

It wanted a U.S. partner who would teach it how to deal with American workers. Toyota settled on the rough bunch in Fremont.

"It was considered the worst workforce in the automobile industry in the United States," said Bruce Lee, who ran the western region for the United Auto

Workers and oversaw the Fremont plant. "And it was a reputation that was well earned. Everything was a fight. They had strikes all the time. It was just chaos constantly."

Sex, Drugs And The Assembly Line

How bad was it? Rick Madrid built Chevy trucks at the plant. "There was a lot of booze on the line," he said. "And as long you did your job they really didn't care."

A car moves down the auto assembly line at New United Motor Manufacturing Inc., a joint venture between General Motors and Toyota that produces Toyota and Pontiac vehicles. Courtesy of NUMMI hide caption

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Courtesy of NUMMI

Madrid said he drank when he was mounting tires. "I'd bring a thermos of screwdrivers with me."

And it wasn't just drinking and drugs, Madrid said. People would have sex at the plant, too. If you're wondering how people kept their jobs, here's why: Under the union contract workers practically had to commit fraud to get fired.

Some workers hated management so much, they sabotaged the vehicles.

They put Coke bottles inside the door panels so they would rattle and annoy customers. Absenteeism was rampant.

Billy Haggerty worked in hood and fender assembly. He said so few workers showed up some mornings, managers didn't have enough able bodies to start the line: They would " go right across the street to the bar, grab people out of there and bring them in," Haggerty recalled.

Learning The Toyota Way

By 1982, GM had had enough and put the Fremont factory out of its misery, Two years later, GM and Toyota reopened the factory with — incredibly — most of the same workforce.

The United Auto Workers' Bruce Lee helped oversee the transformation of the plant from one of the worst under General Motors to one of the best in America. Frank Langfitt/NPR hide caption

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Frank Langfitt/NPR

The United Auto Workers' Bruce Lee helped oversee the transformation of the plant from one of the worst under General Motors to one of the best in America.

Frank Langfitt/NPR

But first, they sent some of them to Japan to learn the Toyota way.

The key to the Toyota Production System was a principle so basic, it sounds like an empty management slogan: Teamwork.

At Toyota, people were divided into teams of just four or five and they switched jobs every few hours to relieve the monotony. A team leader would step in to help when anything went wrong.

At the old GM plant in Fremont, Calif., the system had been totally different and there was one cardinal rule that everyone knew: the assembly line could never stop.

"You just didn't see the line stop," Madrid said. "I saw a guy fall in the pit and they didn't stop the line."

Lee, the supervisor who oversaw the plant summed it up this way: "You saw a problem, you stopped that line: you were fired."

Defects Along The Line

As a result, vehicles at the plant had lots of defects. Haggerty saw all kinds of mistakes go right down the line.

"So we had Monte Carlos with Regal front ends and vice versa," he recalled. There were cars with engines put in backwards, cars without steering wheels or brakes. Workers fixed them later in a yard outside — sometimes doing more damage to the vehicles.

At the NUMMI plant you can see Toyota's solution to this — a thin nylon rope that hangs on hooks along the assembly line. It's called the andon cord and when pulled, it will stop the line.

'One Bolt Changed My Attitude'

The first pull summons a team leader. Workers try to correct the problem on the line. If it takes too long to fix, the line stops. The andon cord also plays a surprisingly cheerful little song that workers can chose. For longtime GM workers who switched to the NUMMI system, all this was a revelation.

After two decades at the GM Fremont plant, Earl Ferguson flew to Japan to learn a whole new way of making cars. Frank Langfitt/NPR hide caption

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Frank Langfitt/NPR

After two decades at the GM Fremont plant, Earl Ferguson flew to Japan to learn a whole new way of making cars.

Frank Langfitt/NPR

When Madrid trained in Japan, he saw workers stop the line to fix a bolt.

"That impressed me," he said. "I said, 'Gee that makes sense.' Fix it now so you don't have to go through all this stuff. That's when it dawned on me. We can do it. One bolt. One bolt changed my attitude."

In December 1984, the first car, a yellow Chevy Nova, rolled off the assembly line at the NUMMI joint venture. At the opening ceremony a union rep named Joel Smith vowed that the new plant would be a big success: "Mr. Toyota, if you would please deliver this challenge to our friends in Japan: We intend to build the best quality cars in the world."

Early on the numbers coming out of the NUMMI plant were astonishing.

"The best measure they use is how many defects are there per 100 vehicles and it was one of the best in America," said Jeffrey Liker, author of The Toyota Way. "The same for Toyota cars made in California as the Corollas coming from Japan — right in the beginning."

General Motors sent 16 rising stars to start the NUMMI plant. TwoWall Street reporters dubbed them the "NUMMI commandos."

After the successful launch, these company the commandos wanted to spread the lessons of NUMMI throughout GM.

"We were ready, we were fired (up) and we had the mental condition that said: 'we're going to change the world,'" said Steve Bera, one of the commandos.

Bera said he and the other commandos were waiting to be deployed elsewhere, but the company didn't seem to know what to do with them.

"Instead of coming back to the 16 of us and saying, 'There's some secret sauce here, what is it? How can we use it to our advantage?' No one ever asked us that question," Bera said. Frustrated, he quit after putting in two decades at GM.

More than 200 workers and family members turned out for a rally recently to try to persuade Toyota not to close the plant. Frank Langfitt/NPR hide caption

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Frank Langfitt/NPR

More than 200 workers and family members turned out for a rally recently to try to persuade Toyota not to close the plant.

Frank Langfitt/NPR

Attempts To Grow A Strategy

The next year GM did try to replicate NUMMI again at a plant in Van Nuys, 400 miles south of Fremont. But employees were skeptical from the outset. Unlike workers at NUMMI, they'd never lost their jobs and didn't think they would.

"The lack of receptiveness to change was so deep," said Larry Spiegel, one of the commandos who struggled to transform the Van Nuys plant. "There were too many people convinced they didn't need to change."

Spiegel said that even though GM had threatened to close the plant, workers believed it would never happen. And they stuck with their old ways.

Quality at Van Nuys never did improve. And in 1992, GM closed the plant. With the market share collapsing at GM, executives did try to push the NUMMI concept across the company.

Geoff Weller's job was to help convert GM, factory by factory. But GM was a sprawling, highly decentralized company and plant managers were king.

Weller said some managers were responsive. Others weren't — like the one who asked him to leave his factory after Weller made his presentation about the NUMMI system.

When asked why the CEO wouldn't fire a plant manager who resisted a system that was producing better cars at lower costs, Weller said: "It's a big company ... and it doesn't work that way."

Some at GM tried to spread the lessons of NUMMI, but it was slow and difficult. In some plants, the union saw its traditions threatened by Toyota's team concept and refused to change. Back then, GM was a highly decentralized company where plant managers ran their factories like fiefdoms. In at least one case, a plant manager threw out a GM executives who preached the Toyota system.

Over the years, GM executives did learn from NUMMI and lessons finally caught on. By the early 2000s, the company had developed a production model based on Japanese principles that became standard at every plant. And although GM quality still lags behind the Japanese, it eventually improved a lot.

"One of the ironies of GM was that at the moment it went bankrupt, it was probably a better company than it had ever been," said James Womack, co-author of The Machine that Changed the World, a book that compares the GM and Toyota production systems. "But it was too late. And that's really sort of hard to forgive. It you take 30 years to figure it, chances are you're going to get run over. And they got run over."

A Losing Battle

In the end, the Great Recession sank GM. It destroyed the car market. And in 2009, General Motors became the largest industrial bankruptcy in U.S. history — costing taxpayers more than $50 billion.

Mark Hogan was one of the NUMMI commandos who rose to run GM's small car division in the U.S. He said GM might have avoided bankruptcy if it had moved in the late 1980s to implement the NUMMI system: "The productivity and quality changes that come with that would have been so profound, that this ever increasing loss in market share would have been stopped."

General Motors declined to be interviewed for this story.

Of course, quality and reliability weren't the reasons GM failed. Over the years, GM negotiated such generous contracts with the UAW that they crippled the company.

And, at first, some at GM dismissed hybrids like the Prius as a publicity stunt. Today, the makers of the Prius have their own problems. And Toyota executives suggest it's because they made one of GM's old mistakes — stressing quantity over quality.

A Production Legacy

For the last quarter century, the NUMMI plant has pumped out vehicles — 6,000 a week, on average. When GM went bankrupt, it pulled out of the joint venture. And Toyota says it didn't want to go it alone.

Next Thursday, Nummi will produce its very last car — a Corolla — and 4,500 people will lose their jobs.

Haggerty, the longtime NUMMI worker, remains proud of the vehicles that he built at the plant. Just the other day, he said he saw one: "And I just looked at it and said, 'Boy that one's old.' And I looked down and it was a Corolla. I know we built it right there. So it's still running. It's still kicking. It feels good."

This is also NUMMI's legacy.

In the end, it's not just a symbol for so many things that went wrong with GM and Detroit. It's also a really good car plant: One that turned out nearly 8 million high-quality cars and trucks.

By now you know that Toyota made its much-anticipated decision to close NUMMI. Many of my friends are saddened by the turn of events. While I am also sad, I’m also okay with the decision. All good things come to an end, and if NUMMI was to ever cease operations, now is a good time.


My work with NUMMI was the greatest experience of my professional career. My learning curve was so steep I couldn't see to the next step, let alone the top of the stairs. I remember thinking, literally, "If someone came along and made me rich with a big, fat check, I would still do exactly what I’m doing now." And what I was doing then was working incredible hours and, if not loving every minute of it (it had its less than pleasant aspects as well), appreciating every moment.


So, a question I've heard a lot recently: was NUMMI a success? Rather than simply reply with a simple yes or no, let me share my own experience there.


Toyota hired me in late 1983 to work on the Toyota side of its new venture with GM. I was assigned to a newly formed group at the company's Toyota City headquarters to develop and deliver training programs to support its looming overseas expansion.


All this was just happening. NUMMI didn't even have a name yet. The agreement with the UAW was yet to be signed. (One of the first meetings I attended was an explanation of the just-signed Letter of Intent. I was relieved they didn't ask me to translate - the content of the presentation by the US attorney was far too technical for the level of my Japanese language at the time. The final agreement wasn't ratified until summer of 1985.) There weren't yet any employees of NUMMI, not even management. NUMMI wasn’t successful, it wasn't famous - it was just a dream.


Partner GM

GM had several very clear business objectives. They had an idle plant (the Fremont plant had made several products over the years, Chevy Camaro, Olds Ciera, GMC trucks. But, no matter the product, quality was consistently GM's worst. Worst of the worst.) Not to mention an idle workforce, the fact of which was never helpful to the company's overall relations with the UAW.



More to the point of a venture with Toyota, GM didn't know how to make a small car profitably and partnering would give them a chance to see how Toyota does it. And it would give them a chance to see Toyota's production system. The Toyota Production System wasn’t famous yet, but there were people in GM who knew a little about it and wanted to know more.


What did Toyota want?

The specific objectives for Toyota were less tangible. But it was crystal clear that Toyota needed to manufacture cars in North America. Political pressure made it no longer tenable to simply ship cars around the world from the comfortable confines of Toyota City. And Toyota was trailing Honda and Nissan, each of who had already established operations in Ohio and Tennessee.


So Toyota needed to produce in the U.S. But why California, the most expensive place in the U.S. to manufacture (NUMMI paid about $13 per hour in the beginning, a little on the high side for the industry at that time)? Why with GM, still by far the largest car company in the world? And why with a UAW workforce??


Using an existing facility would obviously save time and money. And above all it would provide a cheap way to learn quickly.


That's what Toyota wanted most of all: to learn. GM had a clear set of business objectives above all. Toyota, on the other hand, had a different way of approaching this venture.


What exactly did they want to learn? Above all, Toyota faced two big unknowns when it came to operating outside Japan (even outside Toyota City): People and Suppliers.


Toyota had a lot of confidence in its system. Between 1950 and 1980, the company had evolved a way of working that was revolutionary. They were confident in their ability to physically put together all the mechanical pieces of producing an automobile. But the people and supplier parts were scary.


The Toyota Production System starts and ends with people building quality into the process. All the way back to Toyoda group founder Sakichi Toyoda's early 20th century automatic loom. Sakichi’s loom was brilliant in the way it combined automation with people. The automation was made to work FOR the people - not the other way around - in pursuit of better quality. Sakichi's system engaged workers minds as well as their hands in identifying and responding to problems, developing effective countermeasures to the root causes of problems on the spot. Quality wasn’t inspected in - it was built in.


And, secondly, Toyota's just-in-time system of achieving end-to-end material velocity depended on close working relationships with suppliers. NUMMI's suppliers would be expected to deliver with absolute reliability.


People and suppliers, those were the difficult questions and challenges -- how could they be answered quickly? Countermeasure: GM and the UAW as partners.


It is no secret that before approaching GM Toyota held discussions with Ford about the possibility of entering into joint production. Toyota had long held great admiration for Ford, admiration from the Toyoda family for the Ford family, and admiration by Toyota the company for Ford the company as well. But, Arab oil embargo concerns combined with a general lack of interest on the Ford side led the talks to quickly fizzle.


So, instead of Ford, GM was the easy second choice. GM is no big surprise, but what about the UAW?


It would be going too far to say that Toyota in the beginning actually wanted the UAW as a partner in the venture. But, once it became clear that the UAW was going to be in the picture, Toyota embraced them fully as a partner: "If we can make NUMMI a success with a UAW workforce in California, we can be successful anywhere."


On the supplier side, it is well-known that Toyota grew up with its own semi-captive set of keiretsu suppliers. Working with new suppliers was always a serious matter for Toyota, demanding great care. As NUMMI's first general manager of production control (and later president and chairman of Kanto Auto Body) Susumu Uchikawa said, "Without our suppliers, we can’t do anything." He was just acknowledging the truth. OEMs rely on suppliers for most of the components that go into the final product. With automobiles, everything, every component, is engineered for each vehicle. Totally integrated engineering. Close partnership with suppliers just makes good business sense. You can't produce with good quality and profitability if your suppliers are weak and going out of business. You don't get rich being a Toyota supplier, but neither do you go out of business!

GM as partner (Ford would have worked as well) could introduce their suppliers and show how they work together. Learning those lessons turned out to be a long, difficult process. But, NUMMI and GM's help was the beginning of Toyota's long journey in this critical learning process.

Learning the people side of things, especially how to work effectively with American front line production workers, proved a much faster course. While it wasn't easy, it was remarkably successful; Toyota, NUMMI, the UAW, and the entire workforce, achieved Toyota City levels of performance through attainment of an extraordinary degree of mutual trust. In terms of tangible performance, NUMMI didn't just improve; it went from GM's worst plant to its very best. That improvement was achieved in just one year, and with the same workforce.

The NUMMI Learning Ledger
I left Toyota's employ in 1994. Let’s look at the Ledger of Learning at that time, ten years into the joint venture:


Toyota

Learn about North American suppliers - check

Learn how to work with North American people - check


GM

Put an idle plant and workforce back to work - check

Add a high, quality small car to their lineup - check

Learn how to build small cars profitably - nope

Learn how to implement TPS - nope



In terms of specific, tangible results, GM had indeed benefited and arguably much more so than Toyota. The original product from NUMMI all went to GM in the form of the Chevrolet Nova. So, as planned, NUMMI enabled GM to add a nice small car to its line-up. A new model even formed the flagship product for a new brand (a sub-brand of Chevy, really), the Geo Prism in 1988.

Toyota on the other hand, initially received no product at all from NUMMI. A new hatchback version of the Corolla was added a couple of years after start-up, but quickly bombed in the marketplace (the Corolla FX - no penalty points if you don't remember it). Eventually, Corolla sedans and the small pick-up in 1991.

So that's the way the ledger looked in the mid-90s, half-way through the life of the JV. Note that the JV wasn't even supposed to last this long to begin with. Back in the beginning, Chrysler led a lawsuit to prevent NUMMI from even getting off the ground, claiming monopoly concerns. Here were the largest auto companies in the US and Japan teaming up on everybody else. The judgment handed down limited the life of the JV to 12 years, so NUMMI should have closed up shop in 1996. But, as the time approached, an appeal to the Court resulted in a ruling that allowed the JV to operate with no legal time limit.

As it turns out, legal time limit or no - the end is in sight.

If that was the Learning Ledger half-way through, what about now, 25 years in as the venture comes to an end?

Toyota got the basic learning it wanted very early on. Toyota's ongoing involvement as GM's JV partner at NUMMI has been a matter of loyalty as much as anything. Under ordinary circumstances, Toyota would never close an operation it had invested in. Toyota has a track record of proving time and again the lengths to which it will go to preserve jobs well past the apparent business need for them.

From the beginning, Toyota's objectives at NUMMI were defined by learning rather than the specific business tangible objective that typically define a joint venture. And if there's one thing Toyota knows how to do it is how to learn, especially where it's important down at the operational levels of the company - a characteristic that is the embodiment of the learning organization. Toyota's biggest strength is that it learned how to learn, and it was that approach to learning that defined its approach to NUMMI from day one.

For GM, on the other hand, it was only about half-way through the life of the JV that the deeper learning started to pay off. Jack Smith was on the negotiating team that created the agreement with Toyota. As chairman in the mid-90s, Smith is the one who finally put senior level shoulder into making something of the learning of the by then substantial number of mid-level managers who had gone to NUMMI to learn. With the edict to "run common, run lean," Smith authorized a team to execute the establishment of GMS - Global Manufacturing System - and to build a model lean factory where all the learnings of the previous ten or so years could be put together. They decided it would be easier to experiment far from the mothership in Detroit (and away from the UAW) so chose Eisenach in Germany. From there, plants in Brazil, China, finally back in the good old USA (even in the middle of Michigan and with the UAW!) incorporated the same principles, design, and ways of working.

GM's global initiative was successful because of the deep learning that had occurred among the ranks of people with NUMMI experience. In the 1980s, GM NUMMI grads recast the TPS they had learned at NUMMI into something they called "Synchronous Production" and began offering training to significant numbers of GM people. Meanwhile, back at NUMMI, GM turned its small liaison office - called TLO, or Technical Liaison Office - into a training operation that organized short and longer-term visits to NUMMI into true development opportunities for the GM folks who went through there.

It all finally paid off, by many objective standards and according to numerous third-party observers, GM’s new plants are world class, in quality and cost.

And, starting about five years ago, GM even began applying what it had learned of lean practice in the plants to work in the office. GM’s "Enterprise GMS" initiative saved a billion dollars in the first year of applying lean thinking to office processes.

But, by 20 years or so into the venture, GM seemed to have decided that it had really had enough of NUMMI. They recreated the training provided by the NUMMI TLO by offering the same experience in Michigan, eventually shutting down the training operation at the liaison office at NUMMI.

And, by the end, when other GM operations had improved so much, NUMMI no longer provided the dramatic impact on visitors it did back in the 80s, when visitors would leave slack-jawed at what they had seen. In fact, by the end, not only was NUMMI no longer GM's quality leader, NUMMI was actually a drag on GM's overall quality scores. That means: the quality of products manufactured at NUMMI was worse than GM’s average! Ouch. (Note: that is my understanding based on discussions with various people - I can’t verify it, but it sounds credible.)

So, why is NUMMI closing?

Clearly, the dollars and cents don’t add up for either Toyota or the new GM. Neither needs the capacity right now, and who’s to say if they will need it in the future.

But, also - more importantly - the learning is done. Fini. Caput.

Or so it seems.

But, I would argue that there is still a LOT more to learn. About technology transfer, the dissemination of learning, the MANAGEMENT system that underpins and enables the more famous Production System, the importance and attainment of mutual trust between labor and management, about how to sustain a powerful operating system over decades and decades.

NUMMI was a great story in its own right. A story of people coming together and doing something great at a time and place in history. And NUMMI was important to both GM and Toyota. I think it was important for the UAW, too.

But, a less considered fact is that NUMMI was hugely important to American manufacturing. NUMMI proved that the best, supposedly "Japanese," production methods in the world could work on American soil with American labor. An early motto at NUMMI was "Best of Both Worlds." I truly believe NUMMI in its heyday embodied that motto in principle and in practice. And, if lean production and lean thinking and the lean enterprise are the way forward for American organizations in all industries, NUMMI was the most important lens for the world outside Toyota to see it up close.

john

John Shook, Senior Advisor
lean enterprise Institute, Inc.

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