By James Kwak
Once again proving that they do in-depth business reporting as well as anyone on the radio, This American Life did an episode this past weekend on NUMMI, the auto plant in Fremont, California that is jointly operated by Toyota and GM. Well, since the GM bankruptcy it’s been operated by Toyota. And Toyota is closing it this week — the first plant to be closed in the history of the company, according to TAL.
I listened to the episode this morning in my car, a 1999 Chevrolet Prizm that was built at NUMMI and that was the first car my wife and I bought. (It has 111,000 miles and has only required minor repairs, like a power steering pump and a muffler strap.) I’ve passed by the plant itself many times on 880, driving between the East Bay and the southern end of Silicon Valley. So it was a sad and poignant story for me.
In its basic outlines, the story goes like this. (I’m basing this on the radio show, since I don’t have independent knowledge of the facts.) Toyota and GM agreed in the early 1980s to build cars together in what had previously been a particularly low-quality GM factory; GM wanted to learn about the Toyota system, and Toyota wanted to learn about building cars in the United States. NUMMI itself was a near-instant success in terms of efficiency and quality, because the American workforce was trained in and adopted the Japanese production methods. But GM, through a combination of short-sightedness, bureaucracy, and organizational inertia, wasted well over a decade before really implementing what it had learned across its North American operations, and that combined with a number of other strategic errors (reliance on SUVs) and structural problems (fixed and increasing retiree benefits) pushed it into bankruptcy when the financial crisis hit. (Note that the radio show didn’t really try to prove that the failure to implement the lessons of NUMMI was more important than those other factors.)
But more valuable than the simple history are some of the basic business lessons to be learned from the story, which were very familiar from my years in the business world: Put quality before volume. Everyone has to care about quality. People need to feel ownership over their work. People want to see other people using their products and services. (One NUMMI employee walked around with postcards addressed to himself and put them on the windshields of cars he saw that had been built at NUMMI, asking for feedback.) If people are doing work they are proud of, they will care about it more and will be happier. And, as the head of Toyota recently said before Congress, you shouldn’t grow faster than the natural capacity of your organization.
Update: I forgot to mention that Simon also had a Prizm for ten years, also built at NUMMI.