Page 67 - Toyota Under Fire

TOYOT A UNDER FIRE

all the time, otherwise it falls. In terms of the volume, we
were producing more for Toyota badges than for the GM
badges. But when GM made a decision to withdraw from
the NUMMI project, and given the high cost structure
in the California area, it was not feasible for us to continue
this project from a long-term viewpoint.

In the depth of the recession, Toyota already had too much
capacity, and so the difficult decision was made to close the
joint venture. Toyota went above and beyond legal require-
ments, paying $250 million in severance to NUMMI employees
and providing job placement services. In the meantime, no as-
sistance at all was offered by GM, or the United Auto Work-
ers, for that matter. That wasn’t the end of Toyota’s association
with NUMMI, however. After Toyota invested in Tesla Motors in
2010, Tesla purchased NUMMI and decided to hire back some
former NUMMI employees.

Another popular way of confronting a profitability crunch
is to cut back on research and development and on new prod-
uct launches. Toyota did reduce R&D expenditures: it fell from
number one globally to number four, according to Booz Allen
Hamilton’s annual review of global R&D spending, but was the
only auto manufacturer in the global top 10 as measured by 2009
spending. In fact, Toyota spent $1.8 billion more in R&D than
GM, and almost $3 billion more than Honda or Ford that year.*
Global Vision 2020 provided a framework indicating where
* Booz Allen Hamilton’s research on global R&D spending can be found at
http://www.booz.com/global/home/what_we_think/featured_content/inno
vation_1000_2010.

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