In the mid-Seventies, just as half the Baby Boomer generation came of age, the hottest vehicles on the market were the two-door coupes from General Motors. Chevy’s dealers had the Monte Carlo, Pontiac the Grand Prix, Oldsmobile seemed to be passing out Cutlass Supremes on Boomers’ 21st birthdays, and Buick had the Regal. Suburbans at the time were for hauling oilfield workers out to their jobs, and owning a pickup truck meant you were in construction or farming.
By 1976 dealers and their management who were paying close attention could easily notice the quality differences between some GM plants. For example, the Buick Regal would be built at one of two GM plants — in Doraville, Georgia, or in Fremont, California. If a Buick dealer received Regals out of Fremont, then it was certain that those vehicles would be the subjects of numerous warranty claims— particularly for paint runs, trim mismatch and generally shoddy quality. I was with Buick at the time, and any week in which General Motors marked vehicles in our order bank to be built at Fremont Assembly, I immediately canceled those orders. Soon after the second energy crisis hit in 1979, the relatively new GM Fremont Assembly plant built its last car.
But even as General Motors closed that plant, the political movement to inhibit the ever-rising sales of Japanese cars in America was growing louder. To quell that uprising, Toyota offered to take over what had been one of GM’s most troubled factories and they would build vehicles together. In essence, Toyota was willing to teach General Motors its vaunted Just In Time production system, along with how to keep extremely high quality in the process. So, in 1984 the failed Fremont Assembly came back to life as a joint venture between Toyota and General Motors, building Corollas for Toyota dealers and Chevy Novas for GM. (Later renamed the Geo Prizm)
What did GM learn from its hands-on experience working with Toyota’s best manufacturing executives? Quite a lot. However, as told in Paul Ingrassia and Joe White’s mid-Nineties book on the American auto industry, many GM manufacturing executives assigned to NUMMI tried to take those lessons and spread them across General Motors’ expansive manufacturing base. Only no one cared about Toyota’s lean manufacturing at the time; sounded like too much work to most. As I recall, the only GM plant to embrace this concept for superior manufacturing at the time was Opel’s factory in Russelsheim, Germany (since closed).
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GM would pull out of that joint venture with its 2009 bankruptcy, but it probably wasn’t much of a loss; sales volume goals never seemed reachable on these exceptionally well built GM products. The following year Toyota threw in the towel and closed that factory, marking an end to automobile production on the West Coast — that is, until Elon Musk came along and turned it into Tesla’s factory. Ironically, he’s had to bring in a former GM manufacturing heavyweight to go over his assembly line and make recommendations for improvement.
Of course, that was not the only joint venture automotive factory. Ford opened Flat Rock, Michigan, assembly in 1972, but 15 years later Mazda took it over to build its MX-6 and the Ford Probe. That status lasted five years; it became a truly joint venture between Ford and Mazda until Ford unwound its position in Mazda. The last Mazda 6 was built at Flat Rock in 2012.
Not to worry, Mazda was in the process of building a new assembly plant of its own in Salamanca, Mexico. It would open in early 2014, designed to build the Mazda 2 and Mazda 3, though somewhere along the way the company quit selling the Mazda 2 in America — at least, as a Mazda. Hedging its bets, Mazda now builds its subcompact in Mexico, but ships them to your local Toyota dealer as the iM and iA models.
The list goes on and on. General Motors had a joint venture factory with Suzuki in Canada and owned quite a bit of the Japanese automaker’s stock. Additionally, GM was vested in Isuzu for a long time, and in Subaru for less time, because GM wanted access to those exceptional all-wheel-drive platforms. But then engineers in Michigan pointed out that nothing GM builds would ever fit on a Subaru platform, so in time GM unwound its stake in every Japanese automobile. In 2009 GM’s joint venture Canadian plant with Suzuki fell apart, too. Still, as early as 2001, WardsAuto had described that GM-Suzuki joint venture factory as “modern, efficient and half empty.”
And there were more minor joint automotive ventures; 20 years ago Isuzu gave Honda a rebadged Rodeo SUV to sell as a Honda Passport, in exchange for Honda’s expertise on interiors.
So GM walked away from all of its Japanese joint ventures, not to mention the one in Russia. Ford dumped its ownership in Mazda, and Chrysler had long since broken their close ties to Mitsubishi. The reality is that in the automotive industry, it’s almost impossible to name a joint venture between two car companies that has worked for any length of time. Because everyone goes into these projects as equals, but quickly one side becomes the much weaker partner. The perfect example was Fremont, or NUMMI. Toyota was doing well with sales for its California-built Corollas, but GM always struggled to sell enough of the Novas — even though the Chevy was every bit as exceptional as the Corolla version and, at first, had more than a $1,000 price advantage.
That’s why it generated some surprise when Toyota and Mazda announced that they too would become joint venture partners, buying into each other’s companies, jointly developing electric cars and — oh, by the way — building a new $1.6 billion factory here in the U.S. for the production of, you guessed it, Corollas and an unnamed Mazda crossover. Here Mazda might remember its own history on joint ventures with compact SUVs, best known as the Mazda Tribute/Ford Escape era. Ford took credit for the CD2 platform that these vehicles used, although engineers will remind everyone that the Ford platform was based on one by Mazda. Doesn’t matter: Both vehicles were huge successes back in 2000, but for whatever reason, Mazda dealers could never get enough Tributes. It blamed Ford for tying up all the parts suppliers for their Escape. Was that true? Who knows? But that’s what they believed at the time.
Some think that what is going on today is all actually a slow consolidation of the Japanese automobile industry. Similarly, GM just completed the sale of both Vauxhall and Opel in Europe to Peugeot, which is in fact a further consolidation of the European auto industry. Yet, while GM has walked away from all of its Japanese joint ventures, Toyota has walked behind it picking some of them up.
Yes, the timing of the Toyota Mazda announcement was a bit staged, at least if one was truly paying attention. Because right before that happened, it was revealed that for the first six months of this year Renault-Nissan was the largest seller of vehicles worldwide. And last year, in spite of all its problems, Volkswagen gave Toyota a run for its money. Of course, “Volkswagen” is shorthand, because its sales include Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT, and Skoda — not to mention the Ducati motorcycles and commercial trucks built under the MAN nameplate.
Now Toyota has scarfed up partnerships with Daihatsu, Hino trucks, Subaru, and now Mazda. And once you hit a certain high percentage of ownership in another car company, their sales count as yours. It should be noted that back in 2010, Toyota and Tesla proudly announced a joint venture for electric cars; after all, Tesla sits in that old Toyota-GM plant. And that plan had Toyota investing $50 million in Tesla, selling it that California factory for an undisclosed sum, and sending Toyota’s engineers to Fremont to work with Tesla’s on electric cars. A Toyota RAV4 with Tesla’s powertrain was the result.
That RAV4 was introduced in 2012; two years later, when sales had totaled a pitiful 2,489, that electric got its plug pulled. Worse than the pathetic sales, it was a stunningly inefficient electric vehicle; it had a range of only 103 miles with a 41.8 kWh battery, or 2.46 miles of range for each kilowatt-hour. Just over half what a Kia Soul electric car can do.
So everyone is jumping up and down about the new Toyota Mazda factory, and who knows how much money one state will kick in toward making it a reality. And we wish the partners the best in their new endeavors — we just need to remind everyone that no such partnership has ever worked out in the past.
We have to, because apparently no one in the car business has ever read the history of their industry, either.
© Ed Wallace 2017
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA, and hosts the top-rated talk show, “Wheels,” 8:00 to 1:00 Saturdays on 570 KLIF AM. Email: firstname.lastname@example.org