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A Case Study of NUMMI and Its Suppliers
The arrival of the automotive transplants from Japan over the last decade has brought about a different method of dealing with suppliers. Long known for close working relationships with suppliers, the Japanese transplants brought a new focus on supplier relations. After developing its own "corporate culture," the joint venture between General Motors and Toyota, named New United Motors Manufacturing Inc. (NUMMI), embarked on a program of supplier development. This program encompasses effective communications with the supplier as well as a sharing of information which is essential to supplier performance. The NUMMI approach may have significant implications for supplier relationships throughout American industry.
Over the last decade the Japanese investment pattern has largely shifted from a passive approach of capital investment in nonmanufacturing ventures to an active model. In the passive mode, the Japanese merely supply the capital investment and let the company operate as usual. They take no active managerial role. In the active approach, the Japanese owners occupy key positions in top management, design engineering, quality assurance, and manufacturing. If the relationship is a joint venture, the Japanese typically are actively involved in those areas that impact product design, manufacturing, and the financial side of the business.
This shift has been most evident in the automotive industry, with the building of six "green field" facilities in the Midwest. The green field facility is a new plant that is built from the ground up on undeveloped land. Everything, including utilities, must be brought to the plant site.
The only exception to this approach has been the renovation of the General Motors facility at Fremont, California. It is now the home of New United Motors Manufacturing Incorporated. NUMMI, as it is called, is a joint venture between General Motors and Toyota. It is unique not only because it is housed in a renovated facility, but also because it employs former GM workers who are represented by the UAW. None of the other Japanese plants are unionized.
The arrival of the Japanese has resulted in significant changes in the way business is conducted within the industry, as well as how the work force is managed. From the perspective of organized labor, the change has been almost revolutionary.
The U.S. automotive industry historically has been characterized as a constant clash of titans. Cooperation and consensus sensus are not words that have characterized the relationships between the "big three" and the United Auto Workers. As recently as 1988, the press carried references to the two class system: "workers pay the price of failure and managers survive, no matter what happens." On the other hand, quotations can no doubt be found that paint the picture as seen from management's perspective. But regardless of one's perspective, the fact remains that antagonism and disagreement are what characterize the management-labor culture encountered by Toyota and the NUMMI venture. It is a distinctly different culture from one in which the worker comes early to the plant and stays late. It is also significant that NUMMI should be located at the permanently closed General Motors facility at Fremont, California. This facility was closed in 1982 due to its low productivity record coupled with a recession-induced sales decline. Hiring over two thousand former GM employees represented by the UAW, Toyota embarked on an ambitious plan. They would "build the higher quality automobile in the world at the lowest possible cost to the consumer."
NUMMI AS AN ENTITY
While the other transplants and joint ventures were green field operations, NUMMI had to establish a "green field mentality." This was important to Toyota from several perspectives. Toyota was unwilling to find itself saddled with any of the preexisting conditions of the former GM facility, even while in partnership with GM.