Was NUMMI a Success?

John Shook
9/14/2009
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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.


nummi article


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.

16 Comments | Post a Comment
Anonymous September 14, 2009
good job
Mark Rosenthal September 15, 2009
The biggest learning that GM left on the table was, as it is put here, "learning how to learn."

While GM developed a core of middle-management operational leaders who understood the fundamentals, the actual people making the strategic decisions didn't seem to have ever understood what they had there.

Individuals at GM learned, and applied what they knew. But I would argue that GM never really learned how to systematically take ownership of their results, or challenge their thinking.
Joe September 15, 2009
Terrific summary, John, from a guy who should know and who was there.

The principle of the "Learning Organization" is huge... and usually missed.

And look what Toyota learned. More importantly, how they applied it.

So long, NUUMI. Long live NUMMI.
Anonymous September 17, 2009
I had the good fortune to receive TPS training at NUMMI. At the time I worked for a tier 1 supplier to GM. It was, hands down, the best training and learning experience of my life and that training stays with me today. I am very sorry to hear that NUMMI is finished.
Tiago Lopes September 17, 2009
I heard about Nummy in 1994 when I did a trainee period at a Portuguese site from GM (GM Azambuja), closed in 2005(?). I was just coming out of the university and I wanted to absorb all that I could from the best examples in the industry.
My Manager gave me a report, from this far away plant called Nummy. Visitors would write a report after a visit – white paper – showing what they had learned, what were the breakthroughs they found, etc. I found it to be so clever…
I remember that engineers who had visited Nummy were very respectful of what the project represented but they were aware of the differences between GM and Toyota – they joked about Nummy being the best GM plant and the worst Toyota’s, but it was only a joke stressing the point…
I never visited the United States, never worked for Toyota – Only with Honda and Isuzu – but the Nummy project changed my life. It told me that there was a benchmark somewhere and we needed to measure against the best (not hopping for the others to be worst then us).

To the project, men and women that made it come through, my congratulations you were (are) my inspiration,

Tiago Lopes
John DiNicolantonio September 17, 2009
My work with NUMMI was the greatest experience of my professional career. That statement covers it. The learning and learning how to learn needs to be transferred to our education system. Thanks John
John September 18, 2009
Yes, Mark, Toyota's greatest strength is that it learned to learn. And we don't know that GM - as an organization - has yet embraced, deeply in its corporate character, the ability to learn.

I agree with you, too, Joe. The ability of an organization to learn is more than just another attribute to put on a list of "core competencies". And your words capture my sentiment exactly: "So long NUMMI - long live NUMMI"!

- john shook
Glenn Mercer September 18, 2009
Great thoughts JS (and by the way, long time no see!) but nowhere did you mention "Did the plant work?" That is, when Toyota looks at all its plants in NA, was NUMMI cost- and quality-competitive with the rest? (I am not referring to whether the products it made "made money" or not: it is the plant's job to build what it is assigned) Another way of looking at it is, did the learning Toyota got from NUMMI come at a cost? To make an absurd example, if building cars in NUMMI incurred a cost penalty of $5,000 a car (relative to say Georgetown) presumably Toyota would not tolerate this. If the penalty was $5, no problem. But I do not have a sense of where between these extremes NUMMI was. Was NUMMI's value wholly as a laboratory, or was it a competitive plant in its own right?

Thanks... Glenn Mercer
MRZ September 18, 2009
Great job, John and very good synopsis. I visited NUMMI few years ago and was impressed.

I wonder whatever happened to the employees? They were all very enthusiastic about their work.
Sean September 18, 2009
It is amazing what 25 years will do to a company. I never looked at it in the way that Toyota was looking for a cheap way into manufacturing on US soil. It certainly worked! It's taken that time but I would agree that GMs quality is on the rise and some of their cars are the best I've ever seen. However I can't help but wonder if they actually retained the idea of lean and made it part of their culture or if they are only using the "tools". I also laugh because in 1994 they hadn't been able to build an affordable small car profitably. 15 years after that, and with their small car built in Korea one wonders....

Now Toyota is closing themselves to their competitors. Where they used to encourage sharing, they now deny access. An excellent example is the annual Carlisle Report (chose not to participte). Another is tours at their distribution facilities.(I work for a company that competes with one of their other non-car industries) They let us in 2 years ago, but now are citing the fact that we are a competitor in an adjacent industry. Yet they opened up the doors to GM and others to show them the Toyota Way.

I wonder at times if they are closing their ranks because they feel the pressure is on as number 1, or because they felt the need to open up their doors to gain acceptance. I know that the auto business in the 80s was a difficult time for japanese manfacturers.

I honestly think without the help of Toyota or others, Chrysler won't make it out of this decade...
Shaibo September 20, 2009
I happened to work for GM India with Joe Bibeau from GMC who had a learning stint at NUMMI.In south-east Asia, GM-India plant was one of the classical example of Lean organization which really exemplifies a real economic value added manufacturing facility.As History changes its natural course,May the best practices learnt from Nummi experience be deseminated to build newer organization in US and other countries globally.

Ratan Krishna Pal
New Delhi, India
Ralf Lippold September 21, 2009
John,

You have given us a joyful and deep summary of what has been going on at NUMMI since the start in 1983.

As most of your insights is probably still unknown to the wider public and even politicians in the economic round, the mere action taken at the end (closing the plant) gives a negative touch.

Toyota, in my eyes, hasn't taken short its long-term path to bring value to society. The iddling plant of the Tundra months before the financial crisis hit us everywhere was also a big sign and other companies couldn't believe it.

Over here in Germany the same thing, even if companies have the ability to run iddling (due to German labor laws, that enable payment for the workforce on a cut-down weekly work-time), there is almost no move towards using this valuable "free" time in order to find new innovative ways out of the crisis.

I still wonder why that is, and whether the lean initiatives are fighting against windmills in small scale, whereas the larger system is sticky to the old procedures that provide the frame for organizations and people to work (and live).

Johannes Partanen, Head Coach of Team Academy, is running a university of a pretty unique style, which I would call "LeanEducation" and even his concept is not main stream yet (http://www.oecd.org/dataoecd/47/2/37544053.pdf).

We have to scale up our view in order to see the far end of the stairs (especially to see where we could be trapped by a missing connection!).

After the workshop with EdgarSchein on Cape Cod, where I was lucky to meet you in person, I think that we -as lean thinkers- have to step back from our present action and understand what dynamics are in play in the larger picture, in order to make the difference we all truely try find (at least if we strive for perfection and the lean enterprise (even society)!)

Otto Scharmer's (he worked closely together with Edgar Schein for the last couple of years) work on large scale change could be a valuable broadening of our current actions.

http://community.presencing.com

http://ottoscharmer.com

Cheers, and looking forward to make the change

Ralf
John September 23, 2009
Ratan Krishna Pal,
Thanks for the story of NUMMI's impact finding its way to you in India! I love stories like that. NUMMI isn't perfect, but directly and indirectly it has provided so much to learn for so many.
john shook
John September 23, 2009
Thanks Ralf. You must be correct that while we work away making improvements at our organizations, at the gemba, there are huge macro issues/problems looming in the background (sometimes foreground). Thanks for informing us about the lean education work that is going on by Partanen and Scharmer. Everyone should also be aware of the work being done by the L.E.A.N. group - Lean Educators Academic Network. Director Peter Ward of Ohio State and the others are also struggling with aspects of some of the same issues.
john shook
Anonymous October 2, 2009
Why GM lost to Toyota?
1. Used TPS tools to design the production system instead of designing the work to reveal problems
2. Worked around problems to get the job done-firefighting and hero mentality instead of containing and solving problems immediately
3. Kept solutions local instead of sharing the knowledge of collaborative problem solving
4. Made TPS as a project that can be delegated to others instead of developing in others the capability to design and improve processes and to share knowledge
khaja ansari
Lean consultant
949-748-9584
Mike Dubeck November 19, 2009
While my stay at NUMMI's TLO was short, you really captured my memories of those early years. I was happy to bring my grandfather through the facility during operations -- he was one of the GM managers who opened Fremont. His big question: "Where is everybody?"

NUMMI expatriates have made a "brand" for the lessons they have brought to many companies throughout the world -- even GM.
Mike Dubeck