The NUMMI Story: Building Trust with Employees

February 12, 2009 - Tags:

In the early 1980s, Toyota formed a joint venture with GM. It was Toyota’s first overseas plant and they did not want to go it alone. They agreed to teach GM the principles of the Toyota Production System (TPS). Toyota proposed to take over a light truck factory in Fremont, California that had been closed by GM in 1982 and run it according to the principles of the Toyota Way. Dennis Cuneo, now Senior VP of Toyota Motor Manufacturing North America, was an attorney for Toyota at the time. He explains:

The perception that everybody had at that time was that the Toyota Production System just worked people to death. It was just basically “Speed up!” In fact, I remember the first meeting we had in the union hall with union leadership and there was this gentleman by the name of Gus Billy. He was sitting at the end of the table and we were talking about the Toyota Production System and kaizen, etc. He said, “It sounds like a production speed-up to me. It’s the whole concept of making all these suggestions, trying to suggest your way out of a job.”

This was not an isolated hostile attitude. Even when the plant had been run by GM, the union local had the reputation of being militant, to the point of calling illegal wildcat strikes. Nevertheless, when Toyota took over management of the plant, against the advice of GM, Toyota decided to bring back the UAW local—and bring back the specific individuals who represented this UAW local in the plant. Cuneo says:

I think it surprised GM. Some of the labor relations staff advised us not to. We took a calculated risk. We knew that the former GM workforce needed leadership—and the Shop Committee comprised the natural leaders of that workforce. We had to change their attitudes and opinions. So we sent the shop committee to Japan for three weeks. They saw firsthand what the TPS was all about. And they came back “converted” and convinced a skeptical rank and file that this Toyota Production System wasn’t so bad.

In fact, under Toyota’s new management, when the old factory reopened in 1984, it surpassed all of GM’s plants in North America in productivity, quality, space, and inventory turns. It is often used as an example of how TPS can be successfully applied in a unionized U.S. plant with workers who had grown up learning the traditional culture of General Motors and the traditional adversarial relationships between union and management. Cuneo says the key was building trust with the workers:

We built trust early on with our team members. GM had problems selling the Nova in 1987 to ’88, and they substantially cut the orders to our plant. We had to reduce production and were running at about 75 percent capacity, but we didn’t lay anybody off. We put people on kaizen teams and found other useful tasks for them. Of all the things we did at NUMMI, that did the most to establish trust.

According to Cuneo, GM’s initial motivation for entering the venture was to outsource production of a small car. As GM learned more about the TPS, they became more interested in using NUMMI as a learning laboratory. Hundreds of General Motors executives, managers, and engineers have come through the doors of NUMMI, only to be transformed by the teachings of TPS by the time they returned to GM. I have visited GM plants in the U.S. and China and the bible for manufacturing is a version of the Toyota Production System first written by Mike Brewer, an early “alum” of NUMMI sent by GM to learn TPS. GM’s “Global Manufacturing System” is a direct copy of the Toyota Production System.

Unfortunately, it took about 15 years for GM to take the lessons of NUMMI seriously. When they began to take it seriously, it took GM about five years before they really began to see improved productivity and quality, corporate wide (as seen in the auto industry’s Harbour Reports and customer surveys by J.D. Powers and Consumer Reports).

You may be asking, “Why would Toyota teach their coveted lean manufacturing system to a major competitor, GM?” There were lots of different motivations for starting the joint venture. But at least one consideration was that Toyota realized GM was the world’s largest carmaker and was struggling in its manufacturing operations. By helping to raise the level of manufacturing at GM, they were helping society and the community, as well as creating high-paying manufacturing jobs for Americans. The senior executives at Toyota speak of giving back something to the U.S. for the help they provided Japan to rebuild its industry after World War II. This is not mere lip service or pie-in-the-sky idealism. They really believe it.