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15 July 2009

NUMMI implications

There's a cloud over south Fremont, and its name is Toyota. With GM and the Pontiac Vibe out of the picture at NUMMI, Toyota had been silent about the plant's future until last weekend. That's when the #1 automaker in the world, which up to this point has never closed a plant, announced that the plant may indeed shut down for good. The leading question from that outcome, within the narrow scope of this blog, is of course, Does that open up a ballpark site in Fremont?

Before I answer that, a little history is in order. NUMMI arose from the remains of a plant that built various incarnations of the Pontiac GTO, among other vehicles. The GM-only plant shut down in 1982, then returned in 1984 as a joint venture between GM and Toyota. The mission was to employ Japanese production methods at an American plant. Since the (re)opening of the plant, it has built millions of vehicles, mostly the popular bedrock Tacoma pickup and Corolla sedan. GM offerings included the ill-fated 80's-era Chevy Nova, the Corolla-twin Geo Prism, and the Vibe. The problem with NUMMI really boils down to this:
Nummi, the only large auto-assembly plant on North America’s West Coast, has the capacity to make 420,000 cars and pickups each year. It only made money in 1992, the result of California’s taxes and labor and pollution rules, as well as the plant’s UAW contracts, according to an estimate by Tokyo-based Credit Suisse Group AG analyst Koji Endo.
Now before you start blaming the UAW for this, let's keep the labor costs in perspective. NUMMI team members make $29 an hour. Their counterparts at non-union Toyota plant in Kentucky make $25-27 an hour, in Texas it's $21-25 an hour. That difference can be chalked up to cost-of-living as much as anything else. Cost-of-living for Toyota at NUMMI can't be denied. Taxes are high, prohibitively so for many companies who choose to leave California. If Toyota is truly serious about shutting the plant down, over 5,000 jobs will be lost.

Last year, Toyota put the kibosh on reports that it was in talks to build the hybrid Prius model at NUMMI. This came as plans emerged for a new factory in Mississippi - those plans are now stalled, with the Prius production going somewhere else. It would appear that the door is open for the Prius, which is equally revered and detested as the darling of Bay Area freeways. Unfortunately, Toyota's writing may have been on the wall when it came out with lower-than-expected pricing so that the car could better compete with Honda's newly released Insight hybrid.

From an outsider's standpoint, the only thing that could save NUMMI is - that's right - massive federal money. The Department of Energy handed out 1/3 of its $25 billion in advanced technology loans last month, including $460 million for Tesla. Tesla has already committed to building its Model S sedan in SoCal, but it plans to build its battery and drivetrain factory somewhere in the Bay Area. The factory would employ less than 500. Ford got a whopping $5.9 billion to better improve fuel economy of its entire line, while Nissan got $1.6 billion to retrofit a plant in Tennessee in anticipation of one or more electric cars. Toyota received nothing (not to say that they didn't apply). Toyota may be up for one of the next two rounds, and if that's the case, a major infusion of cash to get NUMMI up to Prius production standards may be in order. Knowing what hangs in the balance, I can only imagine that locals and union officials are lobbying Congressman Pete Stark and Senators Barbara Boxer and Diane Feinstein to get the ball rolling. Couple that with state tax breaks authorized by Governor Schwarzenegger and the state legislature (um...), and suddenly the climate becomes much more hospitable for doing business in south Fremont. Like the initial closure of the GM plant and reopening as NUMMI, the process could take some time to hash out. There's zero chance you'll see Priuses rolling off the assembly line this fall.

Got that? Okay, now for the doomsday scenario. Let's assume, God forbid, that the plant does close for good. Suddenly there are now 400 acres to develop in Fremont. The Alameda County Assessor's office pegs the assessed value of the land and plant at $1 billion. The plant has plenty of historical value, which means it's not getting demolished anytime soon. Toyota, which as mentioned before has no experience closing down a plant, would have to deal with messy, ugly divestment of the various assets at NUMMI. As the NUMMI legal arrangement is dissolved, the land will be divvied up and sold. The ripest fruit would be at the northern and southern ends, which are undeveloped. The 107-acre northern section has been considered as part of a large area where a ballpark and/or parking could be built. It's also the parcel that NUMMI considered for a parts warehousing operation, if it wanted to run things the non-Lean, old-GM way. Since any debate of the impact of placing a ballpark there would be rendered moot, it's suddenly a prime site. Just sell the land and bring the piledrivers, right?

Not so fast, my friends. It's unlikely that any parcels will be designated for new development on their own without a larger development plan. Before the City of Fremont even gets to that point, they'll probably exhaust every effort to keep some kind of manufacturing in place at the site. The last thing they'd want to do in the near term is approve incompatible development that could jeopardize that. Let's say that Tesla becomes a major financial success and becomes a standard bearer for electric car manufacturers worldwide. Last summer they'd shown interest in a from-scratch plant in San Jose, before they caught wind of incentives that come with reusing brownfield sites. Perhaps they'd want a piece of the old plant. Who's to say they won't have the same concerns that NUMMI had? Given the generally low wage jobs that come with a ballpark, I'd expect the City to move very slowly on this.

The future of NUMMI, even in death, lies with Toyota. Toyota may very well close the plant, while showing no interest in selling any land. They have every right to reopen the plant at a later date when the economy rebounds. They can also dictate the pace and style of development there. Toyota has some difficult decisions to make here, and closing the plant is only the first. Should the plant close, the aftermath will not be swift, and it will be difficult.

17 comments:

Georob said...

I'm assuming that there's sufficient vacant land to do a ballpark (and maybe other development) on the undeveloped NUMNI property. It would take some creative planning to be sure and would likely tie into the Pacific Commons property even it it was just parking. (why don't you come up with some ideas, ML?)

Bottom line is that anything that gets a stadium closer to Warm Springs BART is worth a shot.

I agree though that if the city of Fremont took over the property it could take years to unravel Therefore, Lew Wolff ought to start talking to Toyota directly. In fact, it wouldn't surprise me if the blue ribbon panel doesn't suggest it.

Marine Layer said...

The old HOK study covered a stadium concept on the site quite well. But there's an additional problem that I didn't address in the post. Assuming that the A's and Toyota lined everything up, the new site is only 1000 feet from the site the NIMBYs protested against. Are they going to be less vigilant because the ballpark is 1000 feet further away? I doubt it.

It wouldn't be a bad idea to at least have some initial discussions. It probably wouldn't go much further than that due to the complexity and inherent resistance.

Steve said...

I've always wondered why there's been no talk of Tesla occupying the NUMMI plant. It seems like a perfect fit. Tesla needs a place to build its Model S and, being a San Carlos based company, has shown desire to keep manufacturing in the bay area. If Toyota abandoned NUMMI wouldn't that make it a brownfield site allowing for federal stimulus money?

Marine Layer said...

Tesla is building the Model S in SoCal. That was specified in their application to DoE. If NUMMI had already been closed down, cleared out and sold, it might've been possible.

Tesla's manufacturing capacity may reach 100,000 per year at some point, but that would only reach 1/4 of NUMMI's current capacity. Others would have to be involved.

Tony D. said...

NUMMI closing down would not only be devastating for Fremont, but for the Silicon Valley economy as a whole (at least psychologically). I have relatives who work there, so the negative implications go beyond Fremont.

Rob, you're an interesting fellow. You give ML some ideas for a hypothetical "NUMMI A's ballpark" in south Fremont (on the SCCo. border), yet entertained with the theoretical move a mere 11 miles south into San Jose, and you recommend MLB consider everywhere for the A's, from Sacramento to Timbuktu, before San Jose.

After all these years Rob, come clean! What gives with your bias towards San Jose? And don't simply resort to the age-old adage "It's in Giants territory"-crap either! Because, well, the territory rights argument is a bunch of crap!

Georob said...

My skepticism about San Jose stems mainly from the fact that like you, I think it would be a perfect spot for the A's to move. So much so that I'm baffled as to why it didn't happen a long time ago.

In my opinion, the answer to that and many of the A's problems lies with the Giants and MLB. My gut feeling is that the Giants just want the A's out of Northern California and that many other MLB owners feel the same way. Even Bud Selig himself has gone on record to say that the A's never should have been allowed to move to Oakland. And despite all the changes in the last 40 years, I think the "anti-A's sentiment" still lingers with many MLB owners and likely traces back to the hatred for Charlie Finley.

I agree one thousand percent about the stupidity of territorial rights, but it's how MLB chooses to do business and until someone decides to legally challenge it, we have to deal with it. I've always felt that it would take someone like an Al Davis to challenge the system and say "I'll see you in court, but in the meantime I'm moving to San Jose."

Where you and your buddies frustrate me is this consistent whining and cheerleading about why baseball should be in San Jose. And my response to that is that it doesn't matter, and will never matter until someone decides to legally challenge territorial rights.

Argue all you want that moving to Fremont is the same as moving to San Jose. The fact remains that the Giants don't want the A's in San Jose, Fremont, Oakland, or anywhere in the Bay Area.

So once again, let me repeat my prediction. When MLB comes to the realization that the A's are a money losing franchise that can't get a new stadium in the East Bay, can't be relocated, and can't be contracted, ONLY THEN will they be allowed to move to San Jose.

Unfortunately Tony, you have this "your either with us or against us" approach to San Jose. And over the last three years I've stated many times why San Jose would be a great place for the A's

However, there are also many reasons why a San Jose move wouldn't work. And if honestly presenting them on this blog automatically makes me a "San Jose hater", then well, I give up!

Tony D. said...

Sorry for going off on a tangent Rhamesis.

Rob, your the best! Seriously! An excellent post like always, even if I do disagree with almost everything you put out.

I know it's downplayed a lot here, but I personally think there's value (in terms of the A's future) in Lew Wolff being close/good friends with Bud Selig (long time at that). Not only with Selig, but also the White Sox's Rheinsdorf, the Cardinals DeWitt Family, and probably other MLB owners. Also, Bill Neukom is the "new kid on the block" in terms of ownership. Heck, the guy still sports Washington State license plates on his Mercedes (damn carpetbagger!). Most (if not all) of today's MLB owners were either in college, protesting the Vietnam War, or starting their white-collar careers when the A's moved to Oakland in 68. My point to all this: there is no "anti-A's sentiment" lingering in MLB! Where in the hell did you get that idea?!

You remember the big 06 announcement at Cisco's HQ's in San Jose: Wolff, Selig and Chambers announcing a new ballpark for the A's in Fremont! This announcement never happens if MLB wants the Giants to have the entire Bay Area market to themselves. And as others have stated, why do you think that somehow the Giants are more entitled to the Bay Area than the A's? Yes, one team has been here 51 years vs. 41, but on the grand scheme of things, that's nothing. I wasn't even born when the A's moved west; now that's a long time ago.

Again Rob, I respect your opinion and your posts are excellent. But, like many times in the past, I respectfully disagree with your post/opinion.

And for the record, yes, I do want my hometown of San Jose to host the A's. And if advocating/fighting for it on-line is considered "whining" and "cheerleading," than pass me a pacifier and pompons!

Anonymous said...

I think Rob's argument can be simplified a bit:

1) The Giants can't stop the A's from doing anything in Oakland. Unfortunately, Oakland doesn't want to do a deal.

2) The Giants can't stop the A's from doing anything in Fremont. Unfortunately, Fremont is unable to do a deal.

3) However, the Giants CAN stop the A's from doing anything in San Jose. And unfortunately, San Jose is very willing and able to do a deal.

Connect the dots, Tony. It aint hard!

Tony D. said...

anon 8:05,

I LOVE IT! A rookie to this blog who thinks he (or she) knows a little something.

"However, the Giants CAN stop the A's from doing anything in San Jose..."

How could I forget! The Giants have territorial rights to San Jose/SCCo. (which are as "sacred" as marriage is in this country), rookie owner Bill Neukom has devine powers and can/will exert his God-like will on all of Major League Baseball, regardless of what Selig, Wolff and the other owners want. Silly me!

Me connect the dots?! Anon, I suggest you read up on all of ML's prior threads, catch up on all the news of the past six months, and come back with something harder than that. In other words, don't be bringing milk into this bar!

By the way, how exactly can the Giants stop the A's from doing anything in San Jose? Can't wait to hear your answer to that one!

Georob said...

Take a deep breath, Tony. You were pretty ugly to that last poster. Would you have chided him/her for being a "rookie" had the opinion agreed with yours?

Like I've said, all you want is to see "San Jose" on a baseball uniform, and whatever gets you there is justified.

Whatever floats your boat....

Tony D. said...

I hear yah Rob,

So I was a little ugly with the "rookie" poster. And yes, if someone discovered this blog today and posted a pro-SJ post, of course I would agree with them.

My big problem is with those who somehow think the Giants/Bill Neukom are invincible with their current territorial situation. That somehow they can exert their will upon not only San Jose but all of Major League Baseball. That somehow they are more entitled to the Bay Area market than the A's. The truth, and it's been stated here many times over, is that Giants and their rights aren't invincible and CAN be dealt with within Major League Baseball.

As "sacred" as they may be, territorial rights have changed in the past when it was in the best interest of MLB.

We had the Giants territorial expansion into Santa Clara Co. in 1992 to accomodate their relocation to San Jose (which obviously never happened). And believe it or not, prior to 1958 the Bay Area was under the territorial rights of the Boston Red Sox, as the SF Seals of the old PCL were their minor league affiliate. And more recently, while not geographical, the broadcast territory of the Orioles were altered/compromised to allow the Expos (Nationals) entry into Washington DC.

So while some STILL think that the Giants can succesfully block an A's move into San Jose (see no teams can sue each other per MLB Constitution), the truth is that the league will do what's in the best interest for all teams; not just the Giants!

San Jose baby!

Tony D. said...

For clarification.

From the book "When Panthers Roared" by Jeff Guinn, Bobby Bragon:

"(New York Giants owner Horace) Stoneham would give the Red Sox his Minneapolis farm team in exchange for territorial rights to San Francisco and shutting down the (SF) Seals."

Anonymous said...

Jesus, Tony, I want the A's in San Jose, but you have me wanting to tell you to shut the hell up. 1. You don't know how long Anon 8:05 has been around so your crowing about him/her being a rookie is pretty weak. 2. He/She pretty much stated the facts as they stand today. The Giants, right this minute, can stop the A's from going to SJ. That may change with time and a vote of the owners. But whether we like it or not, right now them's the facts. Don't be so assumptive and reactionary.

Anonymous said...

Tony,

I guess I'll pick sides with you on this one. I don't think it's the Giants that are stopping the A's from going to SJ, rather its MLB itself. I for one think it's far more interesting what Selig didn't say in regards to the A's moving to SJ. While he gave a nod to the concept of TR's, he sure as hell didn't say anything to dissuade the Mayor and City Council of SJ from pursuing the A's. I think that that little caveat in and of itself is very telling.

Rob is right insofar as he guages the intent of the Giants. They would love nothing more than to force the A's out of the bay area entirely. Why wouldn't they? It's the best possible outcome for their bottom line.

But the fact of the matter is that that's not going to happen. There is no alternative market that would suit MLB's requirements for relocation. A bifurcated bay is still far superior to any alternative. So the question is, what will the other owners do with the prospect of the A's being one of the last welfare cases in its ranks? Business is business, and they aren't likely to continue subsidizing the A's as a philanthropical gesture to the Giants.

Selig already knows what is in the best interests of the league. In my opinion the blue ribbon panel is nothing more than a tool to be used in manuevering the other owners into his way of thinking. He won't act until he is positive that he has the quorum he feels necessary to overcome the Giants resistance. But once he has built his case, he'll force the issue, TR's be damned.

It defies logic to think that the city of SJ is putting out so much effort without some sort of tacit approval from the halls of power within MLB. In the end, I think SJ will end up with the A's, or Selig and company will end up with some explaining to do, quite possibly inside a Federal court. People can believe whatever they want about Selig, but that man is nobody's fool. Everything he's touched within baseball has literally turned to gold. In the end, I think history may well remember his as the shrewdest commish the game ever knew. And if SJ does eventually end up hosting the A's, I think the first monument they put up should be dedicated to Selig.

Jeff

Anonymous said...

Great post Jeff, and thanks!

Did I mention NUMMI closing would be devastating?

Tony D.

Anonymous said...

Oh, as far as the "sacredness" of TR's goes, it is fair to ask which incarnation of TR's Selig was referring to? Their current incarnation, or the original incarnation? Because it's obvious that if they are "sacred", they shouldn't have been tampered with in the first place. So in keeping with their sacred status, should they be restored to their original state immediately?

Jeff

Dan said...

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/07/23/financial/f081144D15.DTL&tsp=1

Looks like Toyota has made a decision. They're liquidating their stake in NUMMI. And with GM shutting their portion down it looks like the writing is on the wall...