Toyota gets stuck with NUMMI closure costs

Bloomberg

Toyota Motor Corp. may shoulder almost all the costs to shut its California joint venture plant as the owner of the former General Motors Corp.’s 50 percent stake doesn’t plan to help out, including with worker severance pay.

“Motors Liquidation is not contributing at all to NUMMI’s closure costs,” said Tim Yost, a spokesman for Motors Liquidation Corp., the Detroit-based entity that took over discarded assets from GM as part of the carmaker’s bankruptcy reorganization. “We don’t believe there will be a requirement for us to do so.”

Costs to close New United Motor Manufacturing Inc. may affect Toyota’s earnings for the year ending March 31. Toyota, which last week forecast a net loss of ¥200 billion, said it’s still in talks with the Fremont, Calif., venture known as NUMMI and Motors Liquidation and that it’s too soon to estimate the expenses.

The costs are “chiefly an issue for NUMMI to decide,” said Paul Nolasco, a Toyota spokesman. “Although we cannot provide any figures at this time, it is something for which we plan to make allowance in our earnings report.”

He declined comment on Motors Liquidation’s position.

Toyota said Aug. 27 it would stop using NUMMI in March, after GM decided in June to abandon the plant.

“Neither GM nor MLC have contributed any funds toward NUMMI’s end-of-production costs,” said Lance Tomasu, a venture spokesman. “We do not know what the overall cost will be.”

Toyota took a ¥10 billion charge in the fiscal second quarter that ended Sept. 30 related to a drop in the value of its stake in the California plant.

With about 4,700 employees, severance packages alone may total at least a “few hundred million dollars,” said Maryann Keller, president of consulting firm Maryann Keller & Associates.

There will also be environmental cleanup expenses at the facility, which operated as a GM plant for 20 years before the Toyota tieup, she said.

“This is an old factory, built when rules were quite different,” said Keller, who has covered the auto industry since 1972. “Who knows what kind of environmental issues will have to be resolved?”

GM in July estimated that “wind-down” costs for 16 discarded facilities would exceed $1.25 billion because of environmental cleanup and legal fees.