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Toyota saddled with GM venture plant shutdown costs

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Bloomberg News

Posted: 11/11/2009 05:21:06 PM PST

Updated: 11/11/2009 08:02:55 PM PST

Toyota Motor may shoulder almost all the costs to shut the NUMMI joint-venture plant as the owner of the former General Motors' 50 percent stake doesn't plan to fund expenses including severance pay for workers.

"Motors Liquidation is not contributing at all to NUMMI's closure costs," said Tim Yost, a spokesman for Detroit-based Motors Liquidation, which 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 the Toyota City, Japan-based carmaker's earnings for the year ending March 31. Toyota, which last week forecast a net loss of $2.2 billion, said it's still in talks with the Fremont venture 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 Tokyo-based 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 to 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 $110 million yen charge in the fiscal second quarter 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 in Stamford, Conn.

There will also be environmental cleanup expenses at the facility, which operated as a GM plant for 20 years before the Toyota tie-in, 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.

Regardless of the bankruptcy filing, it's "improbable from a common-sense point of view" that Motors Liquidation would pay nothing, said Koji Endo, managing director of Advanced Research Japan, a Tokyo-based equity research company. "It was a 50-50 joint venture for 25 years."

Toyota's American depositary receipts rose 39 cents, or 0.5 percent, to $76.79 Wednesday. They have climbed 17 percent this year.

Link: http://www.mercurynews.com/drive/ci_13765521?nclick_check=1

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It's about time Toyota started to pay back for the billions in all the free help GM's dealers have given it over the past 3 decades. For those of you who don't know, many of the Toyota dealers set up in North America were built by GM and Ford franchisees back when Datsun, Honda and Toyopet franchises were dirt cheap, and GM and Ford franchisees were awash in cash. I've never understood why this sort of conflict of interest was tolerated, but I guess 30-35 years ago wealthy North American franchise owners viewed their Japanese acquisitions as boutique operations.

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Yeah, all the news agencies are always touting how great toyotas are and that they want us to believe they have "a whole bunch" of cash. Well, since toyota is such a bad ass company, I say let THEM pay for the entire thing. That shouldn't even phase such a stable, "cash-o-plenty" company. :Toyota:

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