NUMMI points up the state's loss of manufacturing jobs

NUMMI's demise will do more than erase 4,700 jobs in Fremont. It is a fresh blow to California's reeling manufacturing sector, which has lost nearly one-fifth of its work force over the past five years.

"It's definitely another black eye for California," said Perry Wong, director of regional economics with the Milken Institute, an independent think tank.

General Motors Corp. and Toyota Motor Corp., partners in the auto factory, decided last year to abandon the New United Motor Manufacturing Inc. plant, which will close Thursday. The plant ended GM vehicle production in August.

"It's not financially viable" to operate NUMMI in California, James Lentz, president of Toyota USA, said during a congressional hearing this month.

All of NUMMI's workers will lose their jobs. About 900 NUMMI workers live in San Joaquin County and 300 in Stanislaus County.

Across the state, about 15,500 jobs at suppliers are expected to be eliminated. Ten of the plant's primary suppliers are in San Joaquin County, with one each in Stanislaus and Merced counties.

Those job losses come at a particularly bad time for the Northern San Joaquin Valley, which is struggling with unemployment rates approaching 20 percent or higher. The region has been shedding jobs in massive numbers since the housing downturn began about 4½ years ago.

Over the decades, California has been a magnet to industries new and old, entertainment and technology tycoons, and cutting-edge corporations whose products have

revolutionized how we live, work and play.

But the state's manufacturing industry has struggled.

"It's just clear that it's very difficult for manufacturers to compete in California," said Gino DiCaro, a spokesman for the California Manufacturers & Technology Association. "NUMMI is our prime example this month."

"The economic climate here -- just read anything. It's not good," added Robert Smith, president of the USS-Posco steel factory in Pittsburg. "California is not in good shape. It's a tough state to do business."

In 2009, California lost 146,000 manufacturing jobs, the state's Employment Development Department reported.

California compares unfavorably to nearby states and Texas in terms of retaining manufacturing jobs, or at least not losing them as quickly.

During the five years that ended in 2009, California lost 18.5 percent of its manufacturing work force. Only two nearby states, Oregon and New Mexico, suffered a greater rate of loss in manufacturing, according to the Bureau of Labor Statistics.

One Modesto manufacturing victim of the NUMMI closure is Trim Masters Inc., which said it would shut down and lay off all 186 employees. The company supplied interior door panels for Toyota Tacoma pickups made at the plant.

The job losses typify the tiered effect the NUMMI closure will have. The first tier of job losses will be at the plant, the second level will be at suppliers such as Trim Masters, followed by companies that work with the suppliers, such as Mountain Valley Express.

Valley loses jobs and plants

In Stanislaus County, about 400 manufacturing jobs vanished last year.

In addition to large-scale work force reductions, the Central Valley has seen a number of outright plant closures, including Neenah Paper in Ripon, NI Industries in Riverbank and Hershey in Oakdale.

In the case of NUMMI, Toyota executives said the cost of logistics in shifting parts to the NUMMI factory was a key factor behind Toyota's decision to quit the plant, which now makes the Toyota Corolla and Toyota Tacoma.

"NUMMI engines come from West Virginia and Alabama," said Mike Goss, a spokesman for Toyota Motor Engineering & Manufacturing. "Most of the Tacoma and Corolla parts come from where nearby auto suppliers are clustered, in the Midwest and South."

California manufacturers have pressed -- without success -- for restoration of a law that allowed factory operators to claim a 6 percent tax credit on purchases of equipment used in manufacturing.

Industry pleaded for tax break renewal

That law was enacted in 1994, but it expired in 2004.

"NUMMI, our manufacturers association, and a host of other companies have begged for an exemption to that tax," DiCaro said.

State officials have cited California's large budget deficits as the reason the tax break has not been restored.

Critics of the state's business climate cite other factors beyond cost to explain the decline in manufacturing in the state.

DiCaro, Wong and others argue that over the past decade, California has piled on too many regulations and red tape on manufacturers. They point to environmental restrictions and lengthy approval processes.

"For industry to invest billions of dollars in a plant, you need a consistent policy framework," Wong said. "You need a climate where businesses can see they can operate down the line. California doesn't offer that."

Officials with the governor's office insisted that Schwarzenegger has been trying to rescue NUMMI and make the state more hospitable to business.

"The governor is continuing to fight for policies that will create and retain jobs at a time when they're needed most," said Andrea McCarthy, deputy press secretary.

The loss of NUMMI doomed a long-term chance to diversify the economies of the Bay Area and the Central Valley, said Wong of the Milken Institute.

"NUMMI could have transformed the Central Valley economy from agriculture into more of a manufacturing hub," Wong said.

Wong recalled how the plant opened as a showcase for automotive productivity.

"We never really realized the significance of that plant to the California economy," Wong said. "It was a big blunder, a lost opportunity. You can't help but wonder why we didn't do enough to take advantage of that opportunity."