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Toyota may pay for joint closing

November 12, 2009




Toyota may pay for joint closing



Bloomberg News

Toyota Motor Corp. may shoulder almost all the costs to shut a California joint-venture plant as the owner of the former General Motors Corp.’s 50 percent stake doesn’t plan to fund expenses including worker severance pay.

Motors Liquidation Corp., which took over discarded assets from GM as part of the carmaker’s bankruptcy reorganization, is not contributing at all to the plant’s closure costs, said Tim Yost, a spokesman for Detroit-based Motors Liquidation. "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 yen ($2.2 billion), said it is 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 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 Motors Liquidation have contributed any funds toward NUMMI’s end-of-production costs, said Lance Tomasu, a NUMMI venture spokesman. "We do not know what the overall cost will be."

Toyota took a 10 billion 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-up, she said.

"This is an old factory, built when rules were quite different," Keller said. "Who knows what kind of environmental issues will have to be resolved?"

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.


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