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Toyota Sues GM Over Closing Of NUMMI

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On: Tue, Dec 7, 2010 at 3:58PM | By: Sherry Christiansen

Toyota Sues GM Over Closing Of NUMMI

Toyota Motor Corp. is planning to sue Motors Liquidation Corp., the old General Motors, for breach of contract related to a joint venture at the NUMMI plant. It is common that two industry leaders join forces in order to participate in a project that is mutually beneficial—particularly in the automotive world. On numerous occasions the public has come to hear about various vehicle-producing moguls who join forces in the name of efficiency.

As long as things go well, each party knows their duties, communication is reciprocated, and jobs are taken care of according to plan. Inevitably, problems will arise in business. This is certainly the case recently, when a deal between Toyota and General Motors went sour. Litigation is now impending.

The problem between Toyota and GM revolves around circumstances related to the New United Motor Manufacturing, Inc. (NUMMI) plant located in Fremont, California. The plant itself, which was opened in 1984, was recently shut down in October 2010.

According to a recent Automotive News article, Toyota incurred research and development costs of $73 million, for which the Japanese automaker believes that General Motors should be partially or fully responsible. GM backed out of this particular joint venture last year, as part of their bankruptcy proceedings. Since that time, Toyota has sold this California NUMMI plant to Tesla Motors. Toyota has invested around $42 million in the company in an attempt to cash in on the development and distribution of Tesla’s electric automobiles.

The closing of NUMMI was extremely unfortunate, particularly for the 4,500 union workers who lost their jobs. While Toyota is suing GM for breach of contract, it is unclear why the Japanese automaker feels that GM should be held legally accountable, rather than being able to shield themselves behind bankruptcy laws.

It seems that things are really turning around for General Motors. The company recently raised $23 billion as a result of their initial public stock offering. The company paid back $11.7 billion of government money and there seems to be light at the end of the tunnel, with respect to economic recovery. Automotive sales have been relatively strong in recent months, but evidently there are still some fallout that needs to be dealt with, resulting from their over-leveraging and subsequent collapse.

In fact, just two years ago GM was dethroned, ironically enough, by Toyota—the world’s biggest auto manufacturer. Perhaps GM can put the ugliness of the past behind them, continue to pay off their debt to the government, and reclaim their title once again.


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