9-625-003

REV: OCTOBER 21, 2024

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WILLY SHIH

Knowledge Transfer: Toyota, NUMMI, and GM

There was a group of General Motors managers who were assigned to work at NUMMI for those early years.
They were very smart people, and they absolutely understood what they were experiencing. And after two, three

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years, they went back to General Motors, and they knew the enormity of the challenge that faced them. Although
they had been asked to learn about these technical tools, they learned that it was more than that. They learned that
you could put the technical tools in place, and that was not going to give the result that was required. But they
struggled to communicate that to GM management.

— John Shook

John Shook was the first American hired by Toyota to work in a new Toyota City, Japan-based
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training office. This was immediately after the company signed a joint venture agreement with General
Motors (GM) to establish New United Motors Manufacturing, Inc. (NUMMI) in a shuttered Chevrolet
factory in Fremont, California. This gave Shook a front row seat on a great experiment.

Shook first went to Japan as an intern in 1983 and decided that he wanted to work inside a Japanese
company. At that time, Japanese companies really didn’t hire foreigners, but Toyota’s new partnership
with GM meant the company needed to venture into new ground. This gave Shook a rare opportunity,
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as he explained:

Toyota signed the agreement with General Motors to create NUMMI, and as the senior
executives returned to the company’s headquarters in Toyota City with this deal,
everyone immediately recognized this was something they had never done before. This
was a huge challenge for the organization, and they knew they absolutely had to be
successful at it. They created a Fremont project office at that time, headed up by Tatsuro
No

Toyoda, who eventually became the first president of NUMMI. And they decided they
should hire one American to work on the project, based in Toyota City. They had never
hired an American as a regular employee in the Toyota City headquarters before. So I got
the call and went in for an interview, and fortunately for me they hired me to work in the
education and training department. My work focus at that time was on the Japan side,
training for General Motors, NUMMI managers, and UAW people.

The NUMMI joint venture was an opportunity for GM to learn about the Toyota Production System
(TPS), which was quite different from the mass production processes American automakers used at the
time. The question was what the most effective way was to transfer the knowledge. There were the
Do

Professor Willy Shih prepared this case. It was reviewed and approved before publication by a company designate. Funding for the development
of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion.
Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

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 625-003 Knowledge Transfer: Toyota, NUMMI, and GM

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technical tools, but then there were important aspects of organizational culture that would be key to
their successful implementation.

NUMMI took what had been widely acknowledged as the worst factory in the GM network to the
best in only one year. Several years after the start of operations at the joint venture, one group of
assignees who had spent two years there proposed to GM management that as part of their return they

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all be assigned as a group to one GM factory so they could work together to fully transform one site.
But the initial reaction from GM management was that the company had hundreds of worksites, and
these people needed to be scattered around to maximize change in as many places as possible. Was the
best approach to concentrate these experts at one existing GM site that needed conversion, or would it
be better to spread people around?

Toyota and the Toyota Production System

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Toyota’s famous production system arose out of necessity in post-World War II Japan. Japanese
automakers had to produce small quantities of many varieties of models in an environment of low
demand. While TPS was conceived and its implementation began in the post-war years, it really began
to attract attention within Japanese industry during the 1973 oil embargo when many firms were forced
to confront production decreases. 1 This led to a collapse in profits for many Japanese companies. But
profits held up much better at Toyota, so this attracted a lot of attention to how the company operated.
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Philosophically, TPS is a pull system in which the final process step withdraws quantities from the
preceding process step, and this is then repeated through all the earlier steps right up to the beginning.
There is a philosophy behind this, as well as a wide range of tools and techniques. Taiichi Ohno, the
inventor of TPS, describes its basis as the absolute elimination of waste, with two pillars to support
this: 2
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• Just-in-time. A process goes to the one preceding it and withdraws only the parts needed when
needed. Each link in a production chain is connected and synchronized, and the system uses a
kanban (sign board) to indicate the amount needed. The takt time is the required duration of
these synchronized steps for the process to meet the pace of customer demand. One of the
powerful aspects of just-in-time systems is that disruptions to the flow of materials become
visible immediately.

• Automation with a human touch (jidoka). This means using machines that stop when an
No

abnormality is detected. Stopping the machine forces attention on the problem. See Exhibit 1
for an outline of basic principles.

There are many other tools that are a part of TPS. Some are particularly effective expressions of its
underlying philosophy. Some of the better-known ones include:

• Production leveling (heijunka). Equipment, workers, and inventory should be deployed to meet
the needs of peak production. Valleys between those peaks therefore represent waste, and
leveling production will reduce it. The high-level purpose of heijunka is to foster supply chain
Do

stability.

• Root cause and genchi gembutsu (real place, real thing). Every time a problem comes up, one
must dig up the real cause by asking why, why, why, why, why (the 5 whys).

• Small lot sizes and quick setups. This shortens the lead time and reduces the time needed to
find and correct any abnormalities.

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 Knowledge Transfer: Toyota, NUMMI, and GM 625-003

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• Stopping the line. Ohno observed that “a production line that does not stop is either a perfect
line or a line with big problems.” 3 With a long assembly line, such as for vehicles, if a line never
stoped it meant problems were not surfacing. The TPS philosophy is to prevent generating
defective products and therefore build the line in a way that it rarely needs to be stopped. If it
does need to be stopped, workers should be able to identify and fix the problem so that it does
not recur. (The full name of this process is ”fixed position stop system,” called this because the

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line does not stop immediately, which would cause disruption up and down the line, but rather
does so at a “fixed position” at the end of each job.)

• Andon. The andon cord is a rope that workers can pull to stop the line and call for help. An
andon board is a display hung above the line that shows trouble indicators and is a form of visual
control (andon means “lantern” or visual signal). Exhibit 2 shows an example in use. This
reflects a priority of calling attention to problems and fixing them immediately.

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There were a range of other tools described by Ohno and others. 4 But underlying TPS are some
fundamental beliefs around the importance of mutual trust and collaborative problem solving, and the
respect for people and their wisdom on the front lines. Toyota describes it as an organizational culture
of highly engaged people, solving problems or innovating to drive performance that is created and
sustained by a three-part system of philosophy, technical, and managerial roles. 5

The U.S. Auto Market in the 1970s and Early 1980s

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The U.S. auto market leading up to the 1980s was in flux. Following World War II, most auto
producers concentrated on designs and styles of vehicles tailored to their national markets. 6 U.S.
manufacturers emphasized large vehicles like the Chevrolet Impala with separate frame construction,
while there was a range of types in Europe. In Japan the dominant types were light and medium sized
vehicles like the Toyota Corolla. 7 This pattern changed drastically with two energy shocks in 1973 and
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1979. Demand for small vehicles rose sharply in the U.S., and Japanese manufacturers’ cost advantages
from their efficient production systems led to dramatic increases in imports and competition.

U.S. automakers faced the daunting task of becoming competitive in small cars to compete with
companies like Toyota, Honda, and Nissan. In 1979, GM introduced vehicles based on its X-body car
platform. These were its first mass market front wheel drive vehicles. While they were viewed as
credible, they were too complex and expensive to manufacture and did not offer drivers and
passengers efficient use of internal space compared to imports. 8
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In 1980 Japan passed the U.S. as the world’s largest producer of automobiles, a development that
was driven by exports. 9 Also in that year, Japanese vehicle exports reached 5.97 million units, marking
the first time that more Japanese-made vehicles were exported than were sold in Japan. 10 The U.S. was
in the midst of a recession, and while domestic demand for new vehicles slumped 16% to 8.98 million
units, Japanese-made vehicles accounted for 1.91 million of that total, an increase of 9%, while the share
of U.S.-made vehicles fell by 21%. 11 This marked the lowest sales of domestically produced autos in 19
years. 12 In 1980, G.M. lost $750 million, Ford lost $1.5 billion, and Chrysler lost $1.7 billion which was
the largest loss ever recorded for an American corporation up until that time. 13
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Losses and poor car sales led the U.S. automakers to lay off workers, and unemployment soared.
By 1980, 300,000 auto workers had been laid off or had become permanently unemployed, with an
additional 500,000 job losses in auto parts, steel, and other supply sectors. 14 The United Auto Workers
(UAW) joined anti-Japan members of Congress to claim that Japan was “exporting unemployment.” 15
The intense political pressure led to a June 1980 filing by the UAW of a petition with the U.S.

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 625-003 Knowledge Transfer: Toyota, NUMMI, and GM

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International Trade Commission (USITC) seeking import relief under Section 201 of the Trade Act of
1974. 16 Proponents of the petition argued that the major problem was the financial difficulties of the
Detroit automakers, while opponents argued that it was other factors: the recession, high interest rates,
the oil shortage, consumer preference for smaller cars, and inefficient domestic production. 17

In November 1980, the USITC denied the petition in a 3-2 decision, holding that increased imports

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were not a substantial cause of the industry’s problems, rather it was a shift in consumer demand
towards smaller cars. 18 In early 1981, identical bills were introduced in the U.S. House of
Representatives and the Senate, calling for imposition of a direct quota on Japanese auto imports. 19
This would have violated the U.S.’s obligations under the General Agreement on Trade and Tariffs
(GATT), and it was also not aligned with the newly-elected President Ronald Reagan’s commitment to
free trade and a market-based economy. After extensive back-and-forth discussions, on May 1, 1981,
the Japanese government announced a quota on auto exports to the U.S. market. 20

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Toyota’s decision to come to the U.S.
It had become clear that if Toyota wanted to become successful globally, it had to be successful in
the U.S. market. The company believed that it needed to manufacture in the U.S. for the U.S. market,
but the question was the best way to do so? Honda and Nissan had already started U.S. production, 21
so what was the quickest way for Toyota to learn? It needed to learn how to work with American
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suppliers, because it had almost none at the time, and for its production system to work it had to
collaborate closely with suppliers. Another key area was the workforce – not just how to work with
American managers, but with hourly labor. “This was the big question mark,” Shook explained. “Was
it possible to transplant the TPS culture as found in factories in Japan to a factory in the United States?”
There had been discussion in the company that this was possible, but it had not yet been proven.

Shook explained that a joint venture seemed like a good way for Toyota to learn:
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A joint venture could be an effective way to do that very quickly. The company
approached Ford first, but Ford declined the opportunity. Roger Smith at General Motors,
saw the wisdom. GM had an empty factory in California. They had contentious relations
with the UAW. They needed, but didn't have a small car they could make profitably. And
they were faced with this competition coming at them from Japan, which was frightful.

The GM Fremont Factory

No

GM built the Fremont assembly plant in 1962. At the time, the three million square foot facility was
probably the most modern in the world. 22 The UAW, which would represent the workers, built a union
hall across the street. Over the next 20 years, the plant had a tumultuous history, with numerous
wildcat strikes, constant bickering not only between GM management and the UAW, but within the
parties themselves. 23 The quality of the vehicles produced there was the worst within GM, 24 with
workers sometimes intentionally sabotaging vehicles, for example by leaving bottle caps in the doors
to annoy customers, by welding in half-eaten tuna sandwiches, or intentionally leaving screws on
safety-critical parts loose. 25 Many cars arrived at the end of the assembly line inoperable and had to be
Do

towed away for repairs. 26 Illegal activities were widespread in the plant as well, and attendance was
abysmal with 20% of the workforce not showing up on a typical day. 27

During the last 18 months of its operation, GM invested $280 million to modernize the plant. It
wanted to build a competitive front wheel drive subcompact to compete with the Japanese. 28
Nonetheless the company announced Fremont’s closure in March 1982, as it still was going to cost $500

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 Knowledge Transfer: Toyota, NUMMI, and GM 625-003

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- $600 more to build that vehicle in Fremont than it would to build it in the Midwest and ship it to
California. 29 5,000 people lost their jobs with only three weeks’ notice. 30

The NUMMI Joint Venture

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Toyota and GM announced their intention to form a joint venture in February 1983, eleven months
after the GM-Fremont closure. GM contributed the Fremont plant, and Toyota agreed to manage it.
Toyota agreed to hire primarily the Fremont workforce and only go outside to hire skills that were not
available at the former GM plant. The NUMMI plant was going to incorporate a new metal stamping
facility, so that would mean new workers.

Joel Smith, the International Representative for the UAW and later the Chief UAW representative
at NUMMI, explained some of the unique aspects of the letter of intent in a speech at the 1986 Southern

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California Labor Law Symposium: 31

The foundation of the letter of intent, which reflects the uniqueness of the organization,
was that the parties were going to utilize mutual trust, cooperation and, indeed, a deep
sense of respect for each other, and that we agreed to minimize the traditionally
adversarial roles of the parties and to build and implement innovative labor relations. Of
course, nobody knew at that time what all that meant, but that's what we agreed to do.
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When General Motors operated Fremont, there were around 75 - 80 job classifications for
production line workers, which the parties agreed to reduce to one. 32 There were also approximately
18 skilled or craft trades in the plant, and they agreed to reduce those classifications to three to five.
“The union also agreed to assist in implementing the Toyota system of production in that plant and to
be concerned with and work toward higher productivity,” Smith continued. “In return, our
understanding, although we didn't have it in writing in terms of lifetime employment as you might get
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out of the Japanese industry, was that we would have at least long-term, stable employment with an
eye to never having any layoffs … Basically we would all pitch in together and try to get the job done
as quickly and as competitively as we could.” 33 The collective bargaining agreement of 1985 enshrined
this: 34

New United Motor Manufacturing, Inc. recognizes that job security is essential to an
employee’s well-being and acknowledges that it has a responsibility, with the cooperation
of the Union, to provide stable employment to its workers. The Union’s commitments in
No

Article II of this Agreement are a significant step towards the realization of stable
employment. Hence, the Company agrees that it will not lay off employees unless
compelled to do so by severe economic conditions that threaten the long-term viability of
the Company. The Company will take affirmative measures before laying off any
employees, including such measures as the reduction of salaries of its officers and
management, assigning previously subcontracted work to bargaining unit employees
capable of performing this work, seeking voluntary layoffs, and other cost saving
measures.
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Toyota would be responsible for managing the NUMMI corporate entity, and GM would be
responsible for marketing the output, a new model of the Chevrolet Nova. The parties agreed that
production would begin no later than December 1984.

Employment applications were mailed to around 5,000 former GM-Fremont workers, and about
3,000 were returned. 2,200 of those people were jointly hired by Toyota and the UAW. 35 The entire

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 625-003 Knowledge Transfer: Toyota, NUMMI, and GM

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previous union leadership and hierarchy at GM-Fremont were hired, including well-known plant
militants and activists. 36 Virtually all the GM-Fremont production workers and three-fourths of the
skilled trades craft workers rejoined. 37

Getting NUMMI Up and Running

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We all wore uniforms. Management right up to the president, we all wore uniforms. It was voluntary, you
didn't have to wear it. But the company provided it, and most team members wore them. Because you're basically
erasing as much as possible the hierarchy structure. You're saying loud and clear, I am very proud to be part of
this organization. And I'm not here to tell you who's the boss, we're in this as a team. And we're going to live
and die as a team.

— Gary Convis, Plant Manager, NUMMI

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Gary Convis was the assistant plant manager at Ford Motor Company in Kansas City when he was
recruited to be the first plant manager at NUMMI. After Tatsuro Toyoda picked him, Toyoda went
back to Japan for a few weeks. As Convis and other new hires started moving in, Toyoda had returned
to Fremont. “We had all moved from our different places in the world, and, and were setting up our
offices,” Convis recounted. He continued:

I had an office, and Tatsuro said something in Japanese, and we didn’t know what was
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going on. Later in the day, our interface (and translator) said Mr. Toyoda thinks we ought
to have an open office like they do in Japan. So we quickly moved all of our desks and set
them outside. It was not something that Westerners do exactly, but we bought into it very
quickly. And we're thankful for Tatsuro and his leadership, because it was just part of the
whole program. It said, hey, we're no different than anybody else.

There were a few other changes that Convis and his team quickly implemented. The former GM
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plant had three cafeterias – one for line workers, one for middle management, and an executive
cafeteria in a smaller room. “We converted the smaller rooms to meeting rooms, and then we all ate
together,” Convis explained. “We never, ever ate away from the team members, and we chose the time
to eat at the same times that they had lunch.” They also eliminated executive parking. These were all
ways to eliminate any barriers between departments or organizations so that team members could
walk in any day and say they had a problem. “We just tried to erase every aspect of we are better than
you,” Convis explained. “Tearing down the old structure and opening up a new structure of openness,
No

your problems are my problems, and let's work together to address them.”

Sending new NUMMI Team Members to Japan

Let's take everyone who was going to supervise anyone, even if you've supervised people before. You were
sent to Japan for two weeks, to see and feel and experience the system. Up close, and personal. So it wasn't just
an intellectual exercise, it wasn't just something being imposed on you at your work in the United States. You
would go there and see this very different environment.

— John Shook
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While Toyota began refitting the Fremont factory, it started sending newly hired team members to
Japan. Typically, this was in groups of 30, as that was a number that leaders in Fremont and Japan felt
they could handle at one time. “At the beginning, there was tremendous nervousness,” Shook
explained. There was a lot of skepticism early on because they were all long-time General Motors

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 Knowledge Transfer: Toyota, NUMMI, and GM 625-003

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workers. “Many people had never been outside the United States.,” Shook continued. “Many who
visited Japan for the first time didn't even have a passport before the opportunity came along.”

The two weeks of experience encompassed working alongside Japanese colleagues inside the
factory. The first three days generally started out slowly, with some lectures at headquarters, going to
museums, looking at cars, and hearing from senior management. It was a “soft landing” that allowed

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people to adjust to jet lag. “There was skepticism,” Shook explained. Many of these people had worked
for GM for many years, so there was a bit of “show me that this is really better.” Shook explained what
happened when they moved to the assembly line:

People were split up according to what their job was. If I'm going to be working on the
assembly line at NUMMI, and I'm going to own seatbelts installation, for example, then
my training job at Takaoka Plant (the “mother plant” for NUMMI in Toyota City) would
be installing seatbelts. Now my colleague who's going to be working on installing

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bumpers, they're over here. So each individual from NUMMI was on his or her own with
a Japanese team. And the Japanese team, well, no one on the team spoke English. We had
very quickly thrown together training materials so the Japanese production team would
have some visual aides to help them describe the job. It was enough. And also when you're
in a factory, you're doing something physical. The line starts running and we have to do
the job. So the Japanese trainers, actually they would use the old American World War
Two process of job instruction, to teach people how to do each job: I'm going to show you
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how to do it.

This was a bit of an experiment. The workers were immersed in an environment where there were
the technical tools like kanban and andon, but also a social environment where team members and
leaders engaged in collaborative problem solving. “Before the first experiment, we didn't really know,
it would work out exactly that way.” Shook explained. “There was a lot of nervousness on the part of
every one of how this is how this is going to go. Shook described what happened:
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It worked almost immediately. You're in an environment where the social and the
technical tools are both there. Either one of them alone would not have convinced anyone.
But you're immersed in it, it's an immersion of learning by doing, working together,
collaboratively, and that was very persuasive.

Shook himself learned how TPS worked by working on the line right after he joined. That helped
him to have a deep understanding of the social system that backed all the tools. He explained:
No

When you are working on the line, the line presents you with a problem every 60
seconds. Your responsibility is to produce perfect quality for your customer. While the
final customer for that automobile might be thousands of miles and hundreds of hours
away from you, your customer is the following process. Thus, your job is to present perfect
quality to that following process. In a 60 second takt time, you can do perhaps 10 or 15,
different things. You can pick up a screw, pick up an air wrench, you can put these parts
together. And you could do those 10 or 15 things about 500 times over the course of a
typical day. That's about how many opportunities you have to succeed or fail.
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The technical system enables you to both be successful in doing that every time but
also to spot when you have any kind of problem. At which point the company makes a
promise. Every time you have a problem of any sort, we the company, the management,
will come support you to solve that problem within your job cycle. So when you see a
problem and you're taught what is success, now you can spot problems. So when you see

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 625-003 Knowledge Transfer: Toyota, NUMMI, and GM

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a problem, you simply call for help, and you pull the rope. That sends up a light and then
someone will come to help you immediately within your job cycle.

However, to make it work means that individual doing the work has to feel confident
that they can ordinarily do their job correctly. When they see something going wrong,
they know that something has happened that shouldn't be there, and I know exactly what

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to do. I know exactly what will happen, which is a human being will come and help me
solve my problem. And then when they come what actually occurred was that it became
a coaching opportunity between someone more experienced - a team leader or group
leader, who would come and help and coach you through solving the problem. If it is
something very simple, the team leader would simply pull the rope and reset the system,
so the line wouldn't even stop. But if the time went to the end of your workstation line,
then it would stop the work of 100 or so people. This was a big deal when you're thinking

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about former General Motors workers, where they were all taught to never stop the line.
If some problem occurs, don't worry about it, someone at the end of the line at the end of
the factory will fix it later, someone who's smarter and more highly paid than you will fix
it. You just keep working.

The TPS philosophy was that quality was owned by the people doing the work. That was made
clear not only by saying the words, but by the design of the technical system and the social system that
surrounded it, and by developing people to be able to solve problems collaboratively.
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At the end of every group’s Japan experience, the visiting team would be brought together in a
room. Toyota managers, executives, and Shook would all be present. Shook recounted:

We would ask them, of everything you've seen here, everything you've learned here,
what is it that you most want to be sure to take back with you to Fremont, California? And
almost invariably, they would say the same thing, which was a no blame problem-solving
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culture. That was invariably what they would say. So when we heard that we thought it
was a success. This is what we wanted this two-week experience to impart, and that's
exactly what we got, without prompting.

Working at NUMMI
In the contract that was written, we were not part of the UAW. As far as Detroit's big three, we were kind of
a standalone and the contract that was negotiated was about 20 pages long compared to the one in Detroit which
No

was well over 200. One of the key aspects was an agreement that we would have a no strike clause. So the union
couldn't strike. And our agreement, our part of it was a no layoff clause. You take the two conditions, and basically
management is saying, we're going to be here, and as long as we're here, we’re here together or we won't be here
at all. And if there's a problem with sales and we have to lay off people, we will not lay them off until management
takes its cuts or a substantial pay cut. And we bring in work from the outside to take care of those jobs, and we'll
have a long-term view of it.

— Gary Convis
Do

NUMMI used predominantly new production equipment, and was about 10-15% less automated
than a typical GM plant. 38 Crucially the team installed TPS tools as well as the supporting practices
that were so important. Key was a layer of team leaders and group leaders who could help team
members with frontline problem solving. Convis explained:

On a daily basis, you're building 60 cars an hour. You can't even count how many
problems are going on and, you know, every day, every minute, the team members are

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solving most of them by themselves. The team leaders are helping as needed and they
have a group leader who is helping … you just need to have solutions. You make
problems visible, and you give people the opportunity to fix them.

Meetings were kept to a minimum, and most of them were held on the plant floor. Convis
established the habit of walking the line and talking to the workers:

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Guys like me walked the line every day. We made ourselves accessible. And not only
saying, ‘Hi, how's your family? How was the weekend? How's your dog?’ When there's
that personal relationship, they feel comfortable to say, ‘Hey, let me show you something,
this piece of metal is interfering with this bolt that I got to shoot, and sometimes I get cross
threaded. Can you help me with that?’ You've got to be accessible and have the openness,
where people feel comfortable to give it to you.

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Convis always carried a notebook with him, and every time someone approached him with a
problem, he would discuss it and write it done. Some days he barely got to his office. He typically spent
60 – 70% of his time on the floor, and he always took lots of notes on problems while talking to team
members. Then he would assign the problems to the appropriate people and follow up weekly. If they
decided that they couldn’t fix it, he made a point of going back and talking to the team member who
raised it to explain why. “I'm basically overhead … I can contribute to making great cars, and doing it
efficiently by providing an atmosphere in which our team members can count on every day, next year,
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and the year after that. And hopefully, their kids could have a job here in the future,” Convis explained.
“That was my role.”

“Mass Relief” was another difference in how NUMMI operated. Toyota’s way was to shut the entire
plant down at the same time, so that everybody had 15 minutes to use the restroom, get a snack, or do
a little bit of exercise. Then they would rotate people to a different job, which not only gave them a
chance to use some different muscles, but it also made the work more interesting. The cross-training
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also facilitated rebalancing the line if they needed to slow production for some reason.

A few years after GM launched the new Chevrolet Nova, sales were not keeping pace. Confronted
with perhaps 300 extra people and not enough work, Toyota decided to bring another vehicle to the
factory, a two-door hatchback for which most of the parts came from Japan. It took six months to get
that vehicle into production, so Convis’s team rebalanced the line and started a training program that
rotated people in and out of production jobs on the line. Convis also developed a quality control
training program that he taught the team leaders, and together they taught the entire workforce. This
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covered key aspects of quality control, how you run a factory - the body shop, stamping, paint,
assembly. “We did things like logistics, production control, how the sales organization worked, and
then how the sales orders come to us and how we scheduled all that.” Convis explained. “We basically
took the time to proactively further develop our team members in the bigger picture and understanding
how the company works, and their role in it. They really liked that.”

The gap lasted about a year and a half, and then the Corolla model change came in. Convis added,
“The GM guys told me many times, if we had a no layoff clause, we could get a whole lot done in our
plants as well, and that a lot of things you would do here would be possible.” He added:
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There's a substantial amount of trust, when you give people the ability to pull the cord
and stop the line. But on the other hand, I talked to every employee we ever hired, all the
years I was there. All teams, small groups, sometimes larger groups. And I said in this
company, there's only two ways you can get terminated. One is you don't come to work
when you say you're supposed to be here. And two is if you don't pull the cord when you

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 625-003 Knowledge Transfer: Toyota, NUMMI, and GM

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should. Otherwise, we will work with you. We will help you to be successful. And in
every way.

That's the commitment. That has to be very strong, and management has to live up to
it. You can't go down there and criticize somebody and yell at them because the line’s
down. You know, the lines down? Everybody knows there's a sense of urgency to get it

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running again. But it's the appreciation of the fact that there was something wrong and
how can we help you solve this problem?

Toyota also sent many trainers from Japan, mostly from the Takaoka plant in Toyota City where
they built the Corolla. Very few of them spoke English, yet they assimilated into the NUMMI workforce
in a way that Convis described as “hard to believe.” Their assignments ranged anywhere from six
months to as long as a year and a half. They brought along their families, who lived in temporary
housing. When it came time for these assignees to go back to Japan, Convis described what he saw:

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When it came time to go back to Japan, I saw these big burly auto workers, physically
hugging and crying at the plant, where they were loading up their suitcases. It was
beautiful, absolutely beautiful. And, you know, here he got people who couldn’t talk,
couldn’t communicate, but they communicated beautifully through their heart. I'm not
sure how Toyota picked these trainers, or made them aware of how to behave, and have
the sensitivity. But these people were terrific trainers, gentle, consistent, patient. The
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Americans of course knew how to build cars, they were good at it. And then you take all
the software structure that had been changed compared to the GM plant, and you then
add to that a caring trainer that helps you built in quality and take pride in the fact that
you do this every time.

How could GM Transfer the Learnings from NUMMI?

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The Japanese workplace management is successful because it is able to coordinate and direct the workforce to
higher levels of competitiveness. Now New United Motor is an example of the Japanese philosophy and
management style, and dispels the idea that the Asian culture itself creates a competitive advantage. The quality
of the product that we are building with the former Fremont workforce is equivalent to the product of Japanese
companies, and particularly to the Toyota automobile, which is considered the industry leader in quality. The
efficiency of our plant is twice that of any other U.S. auto plant. It is equivalent to that of the Japanese auto
industry. Our workers have renewed self-dignity far superior to that enjoyed in the former Fremont plant under
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the General Motors stewardship.

— William Childs, General Manager, Human Resources at NUMMI

Speaking at 1986 Southern California Labor Law Symposium 39

Fremont went from being the worst vehicle assembly plant in the GM system to by far the best,
using largely the same workers. For GM, the question was how to transfer what they had learned.

Many GM employees spent extended time at NUMMI. Most were supervisors, and some worked
the floor as well, training themselves. “That was respected by the workers,” Convis explained. “They
Do

would come in in blue jeans, and they would do the job. They would learn it here, the job of the
assembly worker, and a lot of them became group leaders too.”

The GM team had an office that supported all the activity. “They staffed that office with very smart
people who wrote excellent reports about why NUMMI was successful,” Convis recounted. “Their

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 Knowledge Transfer: Toyota, NUMMI, and GM 625-003

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writings were extremely accurate and well done … they knew more about the company than I did
because I was so busy running the plant.”

John Shook explained that senior GM management knew something unique was happening at
NUMMI, and that it was important to transfer the learnings:

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One of the chief senior executives that was involved from the GM side in the
negotiation with Toyota to establish the NUMMI joint venture was a senior manager
named Jack Smith. And Jack Smith was watching what was happening at NUMMI
throughout. He was watching what was happening as those people came back and were
scattered around at Harrison Radiator, and at numerous different factories around GM.
Jack Smith became CEO of GM in 1992.

What was the best way to take TPS to GM? The need for more efficiency was pervasive across the

yo
company. Should these experts who had spent time at NUMMI, who likely would go back to assistant
plant manager roles, be spread around, or should they be allowed to go to one factory and focus there?
What would be the most impactful to GM? What other factors should be considered and what actions
might be most effective?
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tC
No
Do

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 625-003 Knowledge Transfer: Toyota, NUMMI, and GM

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Exhibit 1 Basic Principles of Jidoka

Stop when an abnormality is detected Stop when completed

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Know that it is stopped

(Establish standands  Can identify abnormalities  Can see abnormalities

(Visual management)

Solve problems so they do not recur

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V V

Don’t make defective products Don’t use people to simply watch over
machines
V V

Enables building quality into Enables separation of work for people

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processes and work for machines
V V

Can make good products Can operate with fewer people

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Source: Adapted by casewriter from company document, [Link]

philosophy/production-system/

Exhibit 2 Andon Board and Andon Cord

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Source: Company photos.

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 Knowledge Transfer: Toyota, NUMMI, and GM 625-003

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Endnotes

1 Ohno, Taiichi, Toyota Production System: Beyond Large-scale Production. Productivity Press, 2019.

2 Ohno, Taiichi, ibid.

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3 Ohno, Taiichi, ibid.

4 Ohno, Taiichi, ibid., Bowen, H. Kent, and Steven Spear, "Decoding the DNA of the Toyota production system." Harvard
Business Review 99 (1999); Dillon, Andrew P. A study of the Toyota production system: From an Industrial Engineering Viewpoint.
Routledge, 2019.
5 Jamie Bonini, Toyota presentation at HBS, September 22, 2022.

6 Altshuler, Alan A. The future of the automobile: the report of MIT's international automobile program. MIT press, 1984.

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7 Altshuler, Alan A., ibid.

8 Altshuler, Alan A., ibid.

9 “Japan, U.S. Agree on Voluntary Restraints on Exports,” 75 Years of Toyota, [Link]

[Link]/company/history_of_toyota/75years/text/leaping_forward_as_a_global_corporation/chapter1/section1/item1.h
tml accessed June 6, 2024.
10 ibid.
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11 ibid.

12 Lochmann, Michael William. "The Japanese voluntary restraint on automobile exports: An abandonment of the free trade
principles of the GATT and the free market principles of United States Antitrust laws." Harv. Int'l. LJ 27 (1986): 99.
13 Lochmann, Michael William, ibid.

14 Lochmann, Michael William, ibid.

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15 Japan, U.S. Agree on Voluntary Restraints on Exports,” 75 Years of Toyota, [Link]

[Link]/company/history_of_toyota/75years/text/leaping_forward_as_a_global_corporation/chapter1/section1/item1.h
tml accessed June 6, 2024.
16 19 USC Ch. 12: Trade Act of 1974, [Link]
accessed June 9, 2024.
17 Lochmann, Michael William, ibid.

18 Certain Motor Vehicles and Certain Chassis and Bodies Thereof, 45 Fed. Reg. 85,194 (1980) (Investigation No. TA-201-44, USITC
No

Pub. No. 1110 at A-43). at 85,194 (determination of no serious injury or threat thereof); 45 Fed. Reg. at 85,199 (opinion of
Chairman Alberger), 85,209 (opinion of Vice-Chairman Calhoun), 85,221-23 (opinion of Commissioner Stern), 85,229
(dissenting opinion of Commissioners Moore and Bedell).
19 Lochmann, Michael William, ibid.

20 Feenstra, Robert C. "Voluntary export restraint in US autos, 1980-81: Quality, employment, and welfare effects." In The
structure and evolution of recent US trade policy, pp. 35-66. University of Chicago Press, 1984.
21 See [Link]
chronology-1989;
[Link]
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0IN%201959&text=Production%20in%20Australia%20and%20Taiwan,Smyrna%2C%20Tennessee%2C%20in%201983, accessed
June 9, 2024.
22 Joel Smith speech at 1986 Southern California Labor Law Symposium, presented by the Labor Law Section of the Los
Angeles County Bar Association Forum: Labor Law Symposium Proceedings, reprinted in Smith, Joel, and William Childs.
"Imported from America: Cooperative Labor Relations at New United Motor Manufacturing, Inc." Industrial Relations Law
Journal, 9 (1987): 70.

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 625-003 Knowledge Transfer: Toyota, NUMMI, and GM

t
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23 Smith, Joel, and William Childs. "Imported from America: Cooperative Labor Relations at New United Motor
Manufacturing, Inc." Industrial Relations Law Journal, 9 (1987): 70.
24 Shook, John. "How to change a culture: Lessons from NUMMI." MIT Sloan Management Review (2010).

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25 Roser, Christoph. Faster, better, cheaper in the history of manufacturing: from the stone age to lean manufacturing and
beyond. Productivity Press, 2016.
26 Glass, I., 2010. “NUMMI.” This American Life. Radio broadcast from Public Radio International

27 Adler, Paul S. "The learning bureaucracy: New united motor manufacturing, inc." Research in organizational behavior 15 (1993):
111-111.
28 Smith, Joel, and William Childs, ibid.

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29 Smith, Joel, and William Childs, ibid.

30 Turner, Lowell. "NUMMI–Japanische Produktionskonzepte in den USA." (1990); Roser, Christoph, ibid.

31 Smith, Joel, and William Childs, ibid.

32 Smith, Joel, and William Childs, ibid.

33 Smith, Joel, and William Childs, ibid.

34 Adler, Paul S., ibid.

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35 Brown, Clair, and Michael Reich, ibid.

36 Brown, Clair, and Michael Reich, ibid.

37 Brown, Clair, and Michael Reich, ibid.

38 Adler, Paul S., ibid.

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39 William Childs speech at 1986 Southern California Labor Law Symposium, presented by the Labor Law Section of the Los
Angeles County Bar Association Forum: Labor Law Symposium Proceedings, reprinted in Smith, Joel, and William Childs.
"Imported from America: Cooperative Labor Relations at New United Motor Manufacturing, Inc." Industrial Relations Law
Journal, 9 (1987): 70.
No
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