NUMMI: A pioneer of a unique corporate culture in America
Wednesday, 27 February 2008
Abu N.M. Wahid and Syed Abdullah Salim
In 1982, General Motors (GM) -- the then largest motor company of the world -- permanently closed its production plant in Fremont, California. The same year, the Japanese automobile giant -- Toyota engaged in discussions with GM to launch a joint venture company in the United States using the GM's just-closed Fremont facility. In April, 1984, Toyota and GM reached a final agreement about the proposed joint venture. Immediately afterwards, completing the legal procedures with the state of California and the Federal Trade Commission (FTC), GM and Toyota gave birth to an independent California based corporation located in Fremont, CA. The name of the corporation was given New United Motor Manufacturing, Inc. abbreviated as NUMMI.
NUMMI's Philosophy and Work Ethics: NUMMI is the result of a historic alliance of the two automobile giants on a fundamental principle that allows for individual contribution and involvement through teamwork. In other words, NUMMI came into being with a view to transforming the modern automobile industry by incorporating the Toyota's lean System of Production into a teamwork-based work environment of America. For GM, NUMMI has been an opportunity to produce compact cars more efficiently applying Toyota's production method. For Toyota, NUMMI is a challenge to test the effectiveness of its production system in American setting. From these considerations, Toyota and GM seemed to be the perfect partners for each other.
NUMMI's core corporate values consist of teamwork, equity, involvement, mutual trust and respect, and safety. Since its inception, NUMMI has been working tirelessly to create a new and unique corporate culture combing the work ethics of Toyota corporation, General Motors, and the nearby Silicon valley environment.
NUMMI considers its team members as a very important and valuable asset and thus treat them equally as professionals. In the late 1980s, the then Labor Secretary of the Reagan Administration -William Brock visited the NUMMI plant and declared that NUMMI had been chosen as a model of labour-management cooperation in America. This model was presented at the International Labour Organization Conference as a case study.
NUMMI's Financing and Legal Battle: In 1982, GM contributed $450 million to NUMMI in kind by giving its Fremont facility while Toyota provided $100 million in cash. Addition capital was raised by NUMMI as an independent California based corporation. The other big two American auto manufacturers- Ford and Chrysler -- got scared at the NUMMI news. They filed a law suit against the inception of NUMMI. After a lengthy 15 month investigation and deliberations, the U.S. FTC gave clearance to NUMMI. The rationale for this clearance was that NUMMI would provide a wider range of automobile choices for the consumers. Furthermore, FTC considered NUMMI as a potential role model of US-Japan collaboration and a classic example of labour-management relations. Initially, there was a 12 year limit on the operation of NUMMI in the U.S. Later on, this restriction was lifted, and NUMMI was allowed to operate indefinitely in America.
NUMMI Builds Its Teams the First Product Line: Former GM workers were invited to apply for jobs at NUMMI. They were told of the need for employees willing to contribute to an atmosphere of trust and cooperation. Potential former GM production employees went through a three-day assessment that included production simulations, individual and group discussions, and written tests and interviews. Once hired, team members attended a four-day orientation covering the team concept, production system, quality principles, attendance policies, safety policies, labour management philosophies, and the competitive condition of the auto industry.
About 450 group leaders and team leaders traveled to Toyota's Takaoka plant in Japan for three weeks of classroom and on-the-job training. This training is now conducted almost exclusively at the NUMMI plant in a two to four week programme referred to as "Foundations In Training," or FIT. Classes include an introduction to the Toyota production system, team building, union-management relations, and safety. These are followed by on-the-job training with team members working side-by-side with experienced trainers.
The NUMMI team of approximately 700 members, built the first NUMMI car -- Chevrolet Nova in December of 1984. Automotive writers compared its quality to similar cars being produced in Japan. Consumer Reports commented that the Nova was "a class act among small cars... was virtually identical to the Corolla and it is assembled, fitted and finished as well as any Toyota we have seen." The NUMMI team is now more than 5,740 strong and NUMMI quality continues to be among the best in the industry, having received several J.D. Power and Associates Initial Quality Study vehicle and plant awards through the years.
NUMMI and UAW as Partners: NUMMI signed the agreement with United Auto Workers (UAW) Local 2244 that took effect on July 1, 1985. This was a historic agreement between NUMMI and the UAW as two cooperative partners. Under this agreement, NUMMI accepted the UAW as the legitimate bargaining agent of its team members and willingly agreed to pay the prevailing US auto workers wage and benefits. On the other hand, UAW agreed to be an active participant and take a cooperative role in labour management relationship at the production facility. Since then, NUMMI's collaborative partnership with the UAW has been a topic of numerous labour relations studies. At NUMMI, Toyota and GM have been jointly researching alternative-fuel vehicles. From 1984, NUMMI has produced and marketed more than 6.0 million vehicles. The UAW also agreed to accept Toyota's production methods and to work with the company to improve productivity and quality continuously.
Labour Relations at NUMMI: Both NUMMI and the UAW 2244 reached firm and unambiguous commitment to resolve all outstanding problems between the two parties in a cohesive and collaborative manner that is consistent with constant improvement of quality, efficiency, and the work environment. This is supposed to perpetuate indefinitely. The agreement between NUMMI and UAW 2244 also emphasized the job security of the NUMMI employees. As such, NUMMI is not allowed to lay off employees "unless compelled to do so by severe economic conditions that threaten the long-term financial viability of the company." NUMMI has stood by its "no lay off" policy even through lean periods. During the bad days of 1988, NUMMI was forced to slow down its line speed but did not lay off employees. Displaced team members were employed in special project teams, such as continuous improvement (kaizen) teams.
NUMMI's contract with the UAW 2244 was based on the philosophy of mutual trust and respect, it also has many other clauses that are not usually found in any traditional labour-management agreement. They are: "Non-confrontational conflict resolution procedures based on negotiation, discussion, and consensus; Advanced consultation with the union and on relevant business issues; Minimum job classifications that provide work flexibility; "No strike" provision over production or safety standards." In order to make these clauses of the agreement workable NUMMI and UAW 2244 maintained a very efficient, smooth, and fruitful means of communication.
To NUMMI, human values, cooperation and mutual trust were more important than the literal meanings of the wordings of the contract. NUMMI follows this principle to the extent that it does not keep provision of traditional management amenities such as an executive cafeteria, reserved parking spaces or private offices. NUMMI considers these perks and benefits as barriers to a participatory and cooperative management style.
NUMMI Products: NUMMI started its production with Chevrolet Nova in 1984, then it added to its production line Toyota Corolla FX16, Chevrolet Geo Prizm, Toyota compact pickup trucks 4X2 and 4X4, Toyoto Xtracab compact pickup truck, Toyota Tacoma pickup, Toyota Double Cab, GM Pontiac Vibe sport wagon, and Toyota Voltz. In 2001 NUMMI stopped its Chevy Geo Prizm line.
Awards Annexed by NUMMI: Now NUMMI has grown to be a joint venture company of more than 5,440 team members. The vehicles produced by NUMMI such as Toyota Corolla, Toyota Tacoma and Pontiac Vibe sport wagon received the best vehicle awards from the J.D. Power and Associates.
A full list of awards received by NUMMI from J.D. Powers and Associates is as follows. In 1992, Toyota 4X4 compact pickup truck received award for the best compact pickup in initial quality. In 1994, NUMMI got the Silver Plant Award. The following year, Bronze Plant Award was given to NUMMI for its compact pickup in its initial quality. In May of 1996, it received the Bronze Award. Toyota Tacoma was named the best compact pickup in initial quality in 1995. Toyota Tacoma received the same award in both 1996 and 1997. NUMMI's Toyota Corolla received the Silver Plant award in 1999. Again in 2000, it received the same award and also J.D. Power and Associates Chairman's award for quality initiatives. Again in 2002, NUMMI's Toyota Corolla got the best compact car award and Toyota Tacoma obtained the best pickup truck award. In 2004, Toyota Corolla again ranked the best as a compact car.
Diversity at NUMMI: In addition to manufacturing automobiles, NUMMI broke ground for a plastic manufacturing plant in 1993. In 1994, production of small plastic parts for pickup trucks began. In 1998, NUMMI completed a new passenger paint building. In the following year, the north paint shop began operation.
Summary: NUMMI is based on the principle of mutual cooperation, trust and efficiency. It has innovated and nurtured a new business culture whereby the management and the employees are not two opposing entities. They work together for their common benefits and the welfare of the society at large. NUMMI, with its unique management-employee relations, couples with lean management and lean production style will continue to serve the automobile industry by making superb cars and trucks in the years to come.
Mohammad Salahuddin is Assistant Professor, Southeast University, Dhaka and Dr M. N. Wahid, a Professor of Economics and Finance of Tennessee State University, USA. They can be reached at internet: www.nummi.com/us_roots.php and www.nummi.com/timeline.php
In 1982, General Motors (GM) -- the then largest motor company of the world -- permanently closed its production plant in Fremont, California. The same year, the Japanese automobile giant -- Toyota engaged in discussions with GM to launch a joint venture company in the United States using the GM's just-closed Fremont facility. In April, 1984, Toyota and GM reached a final agreement about the proposed joint venture. Immediately afterwards, completing the legal procedures with the state of California and the Federal Trade Commission (FTC), GM and Toyota gave birth to an independent California based corporation located in Fremont, CA. The name of the corporation was given New United Motor Manufacturing, Inc. abbreviated as NUMMI.
NUMMI's Philosophy and Work Ethics: NUMMI is the result of a historic alliance of the two automobile giants on a fundamental principle that allows for individual contribution and involvement through teamwork. In other words, NUMMI came into being with a view to transforming the modern automobile industry by incorporating the Toyota's lean System of Production into a teamwork-based work environment of America. For GM, NUMMI has been an opportunity to produce compact cars more efficiently applying Toyota's production method. For Toyota, NUMMI is a challenge to test the effectiveness of its production system in American setting. From these considerations, Toyota and GM seemed to be the perfect partners for each other.
NUMMI's core corporate values consist of teamwork, equity, involvement, mutual trust and respect, and safety. Since its inception, NUMMI has been working tirelessly to create a new and unique corporate culture combing the work ethics of Toyota corporation, General Motors, and the nearby Silicon valley environment.
NUMMI considers its team members as a very important and valuable asset and thus treat them equally as professionals. In the late 1980s, the then Labor Secretary of the Reagan Administration -William Brock visited the NUMMI plant and declared that NUMMI had been chosen as a model of labour-management cooperation in America. This model was presented at the International Labour Organization Conference as a case study.
NUMMI's Financing and Legal Battle: In 1982, GM contributed $450 million to NUMMI in kind by giving its Fremont facility while Toyota provided $100 million in cash. Addition capital was raised by NUMMI as an independent California based corporation. The other big two American auto manufacturers- Ford and Chrysler -- got scared at the NUMMI news. They filed a law suit against the inception of NUMMI. After a lengthy 15 month investigation and deliberations, the U.S. FTC gave clearance to NUMMI. The rationale for this clearance was that NUMMI would provide a wider range of automobile choices for the consumers. Furthermore, FTC considered NUMMI as a potential role model of US-Japan collaboration and a classic example of labour-management relations. Initially, there was a 12 year limit on the operation of NUMMI in the U.S. Later on, this restriction was lifted, and NUMMI was allowed to operate indefinitely in America.
NUMMI Builds Its Teams the First Product Line: Former GM workers were invited to apply for jobs at NUMMI. They were told of the need for employees willing to contribute to an atmosphere of trust and cooperation. Potential former GM production employees went through a three-day assessment that included production simulations, individual and group discussions, and written tests and interviews. Once hired, team members attended a four-day orientation covering the team concept, production system, quality principles, attendance policies, safety policies, labour management philosophies, and the competitive condition of the auto industry.
About 450 group leaders and team leaders traveled to Toyota's Takaoka plant in Japan for three weeks of classroom and on-the-job training. This training is now conducted almost exclusively at the NUMMI plant in a two to four week programme referred to as "Foundations In Training," or FIT. Classes include an introduction to the Toyota production system, team building, union-management relations, and safety. These are followed by on-the-job training with team members working side-by-side with experienced trainers.
The NUMMI team of approximately 700 members, built the first NUMMI car -- Chevrolet Nova in December of 1984. Automotive writers compared its quality to similar cars being produced in Japan. Consumer Reports commented that the Nova was "a class act among small cars... was virtually identical to the Corolla and it is assembled, fitted and finished as well as any Toyota we have seen." The NUMMI team is now more than 5,740 strong and NUMMI quality continues to be among the best in the industry, having received several J.D. Power and Associates Initial Quality Study vehicle and plant awards through the years.
NUMMI and UAW as Partners: NUMMI signed the agreement with United Auto Workers (UAW) Local 2244 that took effect on July 1, 1985. This was a historic agreement between NUMMI and the UAW as two cooperative partners. Under this agreement, NUMMI accepted the UAW as the legitimate bargaining agent of its team members and willingly agreed to pay the prevailing US auto workers wage and benefits. On the other hand, UAW agreed to be an active participant and take a cooperative role in labour management relationship at the production facility. Since then, NUMMI's collaborative partnership with the UAW has been a topic of numerous labour relations studies. At NUMMI, Toyota and GM have been jointly researching alternative-fuel vehicles. From 1984, NUMMI has produced and marketed more than 6.0 million vehicles. The UAW also agreed to accept Toyota's production methods and to work with the company to improve productivity and quality continuously.
Labour Relations at NUMMI: Both NUMMI and the UAW 2244 reached firm and unambiguous commitment to resolve all outstanding problems between the two parties in a cohesive and collaborative manner that is consistent with constant improvement of quality, efficiency, and the work environment. This is supposed to perpetuate indefinitely. The agreement between NUMMI and UAW 2244 also emphasized the job security of the NUMMI employees. As such, NUMMI is not allowed to lay off employees "unless compelled to do so by severe economic conditions that threaten the long-term financial viability of the company." NUMMI has stood by its "no lay off" policy even through lean periods. During the bad days of 1988, NUMMI was forced to slow down its line speed but did not lay off employees. Displaced team members were employed in special project teams, such as continuous improvement (kaizen) teams.
NUMMI's contract with the UAW 2244 was based on the philosophy of mutual trust and respect, it also has many other clauses that are not usually found in any traditional labour-management agreement. They are: "Non-confrontational conflict resolution procedures based on negotiation, discussion, and consensus; Advanced consultation with the union and on relevant business issues; Minimum job classifications that provide work flexibility; "No strike" provision over production or safety standards." In order to make these clauses of the agreement workable NUMMI and UAW 2244 maintained a very efficient, smooth, and fruitful means of communication.
To NUMMI, human values, cooperation and mutual trust were more important than the literal meanings of the wordings of the contract. NUMMI follows this principle to the extent that it does not keep provision of traditional management amenities such as an executive cafeteria, reserved parking spaces or private offices. NUMMI considers these perks and benefits as barriers to a participatory and cooperative management style.
NUMMI Products: NUMMI started its production with Chevrolet Nova in 1984, then it added to its production line Toyota Corolla FX16, Chevrolet Geo Prizm, Toyota compact pickup trucks 4X2 and 4X4, Toyoto Xtracab compact pickup truck, Toyota Tacoma pickup, Toyota Double Cab, GM Pontiac Vibe sport wagon, and Toyota Voltz. In 2001 NUMMI stopped its Chevy Geo Prizm line.
Awards Annexed by NUMMI: Now NUMMI has grown to be a joint venture company of more than 5,440 team members. The vehicles produced by NUMMI such as Toyota Corolla, Toyota Tacoma and Pontiac Vibe sport wagon received the best vehicle awards from the J.D. Power and Associates.
A full list of awards received by NUMMI from J.D. Powers and Associates is as follows. In 1992, Toyota 4X4 compact pickup truck received award for the best compact pickup in initial quality. In 1994, NUMMI got the Silver Plant Award. The following year, Bronze Plant Award was given to NUMMI for its compact pickup in its initial quality. In May of 1996, it received the Bronze Award. Toyota Tacoma was named the best compact pickup in initial quality in 1995. Toyota Tacoma received the same award in both 1996 and 1997. NUMMI's Toyota Corolla received the Silver Plant award in 1999. Again in 2000, it received the same award and also J.D. Power and Associates Chairman's award for quality initiatives. Again in 2002, NUMMI's Toyota Corolla got the best compact car award and Toyota Tacoma obtained the best pickup truck award. In 2004, Toyota Corolla again ranked the best as a compact car.
Diversity at NUMMI: In addition to manufacturing automobiles, NUMMI broke ground for a plastic manufacturing plant in 1993. In 1994, production of small plastic parts for pickup trucks began. In 1998, NUMMI completed a new passenger paint building. In the following year, the north paint shop began operation.
Summary: NUMMI is based on the principle of mutual cooperation, trust and efficiency. It has innovated and nurtured a new business culture whereby the management and the employees are not two opposing entities. They work together for their common benefits and the welfare of the society at large. NUMMI, with its unique management-employee relations, couples with lean management and lean production style will continue to serve the automobile industry by making superb cars and trucks in the years to come.
Mohammad Salahuddin is Assistant Professor, Southeast University, Dhaka and Dr M. N. Wahid, a Professor of Economics and Finance of Tennessee State University, USA. They can be reached at internet: www.nummi.com/us_roots.php and www.nummi.com/timeline.php