Lessons from NUMMI, the Toyota-General Motors joint venture in Fremont, California in 1984
by Chad Harrington
10 September 2015
Here are 13 lessons I learned about business from how General Motors and Toyota worked together to rescue an auto manufacturing plant in Fremont, California.
These lessons are for all types of business leaders. Once you've read this blog you'll have over a dozen ways to make your company better no matter the industry. In fact, one of these lessons just might save your business.
At the time, according to Frank Langfitt from This American Life podcast, GM’s Fremont plant “was considered the worst workforce in the United States. Everything in the plant was a fight, strikes all the time, and chaos constantly." Listen to the full report here:
It got so bad for GM that they literally sent 30 of the Fremont employees to Japan to learn how to streamline their assembly line as a last ditch effort to save the plant.
True story. The new plant was called NUMMI (New United Motor Manufacturing, Inc.).
The journey of how NUMMI changed their assembly line is analogous for how to streamline your business processes as a whole across various industries. These are timeless principles (at least most of them), and the connections between NUMMI and business in general are profound.
The story starts with a deal GM struck a deal with Toyota wherein Toyota would teach them the "Toyota Production System” and GM would give them an opportunity to work with American workers outside of Toyota City.
So NUMMI opened in 1984 as a joint venture auto manufacturing company between GM and Toyota. It was the last chance for GM to redeem their plant before it was too late.
GM’s problem in the 80s and your concerns now
GM’s problem was an inefficient assembly line.
How does that happen? They never stopped the line even when a manufacturing problem occurred. They literally said to their employees: "You never stop the line." That was their problem: never stopping.
Because of their processes negligence, they ended up with a lot full of flawed cars. Literally. For example, one reporter said that they saw cars with backwards engines, cars without steering wheels or breaks, and cars that wouldn't even start.
That was bad news for everyone involved: customer, client, and employee alike.
Here’s how the NUMMI story applies to business in general
You, business owner, will face temptation to keep cruising when various problems arise, but you must learn to stop and streamline your processes. Because you don't want a metaphorical lot full of broken products, whatever that is in your industry.
So what can you learn from the NUMMI story? Here’s 13 lessons for business managers that I gleaned from how Toyota reshaped GM’s Fremont workforce.
Story summary: GM partnered with Toyota to revive the Fremont plant, calling it NUMMI. They did this by sending their workers over to Japan for a few weeks to learn Toyota's assembly line ethos. It radically changed (and saved) the Fremont plant, which lasted until 2010.
1. Accept the fact that the people are the process
When Toyota and GM restarted the plant and called it NUMMI, they had to hire. Big time. Neither company wanted to rehire the same employees, but the hiring manager (Bruce Lee), rehired most of them anyway. Lee hired 85 percent of the employees from the failed plant because he thought the problem was the process, not the people.
They soon learned that the people aren’t simply part of the process—the people are the process. After they took 30 people to Japan to learn the Toyota system, they realized how true it is. This graphic represents how people and process work together for success.
Take away: Focus on who you hire and train employees well, because the process will follow the way the people work.
2. Hire (metaphorically) short employees
Okay, employee height doesn't literally make a difference (unless your in auto manufacturing), but here's the transcendent lesson from NUMMI: the Japanese workers for Toyota were one to two inches shorter on average which gave them an advantage on streamlining the process. They could get in and out of the cars quicker, which made them 10-15 percent quicker than the Americans that came over. They had a literal advantage, so how can you leverage your team to streamline your business processes? It might not be height, but think, How can I make my processes shorter? Shorter is better.
Take away: Learn how your people can become metaphorically shorter. Which new shortcuts can you take without cheating customers and quality?
3. Show true humility by offering help, because you’ll need it to build a team
The NUMMI plant sent 30 American employees to Toyota’s plant in Japan for two weeks to learn their ways. The Americans wanted to show the Japanese workers what they could do in the same timeframe as the Japanese were doing it.
But they were slow.
While they were still in Japan, a Toyota worker would come over and say, "Do you want me to help?" This never happened at the GM plant. The Japanese knew how to work as a team, and that meant helping anyone who needed it.
Take away: No matter the industry, don’t be too proud to ask someone else, “Do you want me to help with that?”
4. Don’t be too proud to ask for help too
If there was a problem at Toyota that was slowing down the process, employees helped each other, even the new American trainees. Someone would come up to them and ask, "What are your ideas for improvement so we don't have the problem again?"
The Americans were shocked at the executive team’s responsiveness at Toyota, because they were not used to higher ups actually listening to them from the line.
For example, after they suggested a way to improve it, the worker would go away for a little while; soon the worker would come back with a new tool based on the suggestion. This was the biggest shocker for the GM workers who came from Fremont, the bane of GM’s existence.
Take away: Improve systems by listening to the feet on the ground. If sales improvement, listen to sales reps; if marketing improvement, ask social media interns; if website improvement, ask remote employees who are working internationally.
5. Learn Kaizen, the Japanese principle of continuous improvement
If the assembly line stopped at GM, executives believed the workers would take advantage of the company, but this simply didn't happen.
According to Frank Langfitt’s story on TAL, this belief goes back to Henry Ford's philosophy to get the product out the door and let someone worry about quality later. But that causes major problems down the line.
Toyota was different: they believed in Kaizen, the principle of continuous improvement, something in which GM did not believe.
Toyota’s goal was to streamline their processes down to the second for the quickest automotive manufacturing system in the world. So they made mats to stand on, cushions to kneeling on, shelves to organize with—whatever it took to make an efficient process. The philosophy behind this is called Kaizen, the Japanese principle of continuous improvement.
Take away: Learn Kaizen and always look for ways to improve your business processes. This requires humility, so be ready to swallow your pride as you improve.
6. Incentivize employees with cash
If a worker at Toyota made a suggestion that improved the process, the company gave them a few hundred dollars as a reward.
Take away: Don’t be afraid to reward your employees with cash. It will save you money in the long-run by maximizing employee efficiency. That saves you time, and saving time saves money.
7. Always emphasize quality, not quantity
Toyota’s solution to making great cars was to install a thin nylon rope by every stage in the assembly line. This was how they put quality first, not quantity.
The thin nylon rope symbolized what made the Japanese system work so well. Whenever something wrong, someone pulls down on the rope, a song sounds, and the production line stops. The first time a problem occurs, it doesn't stop—someone comes over to help. If they can't fix it immediately, they pull it down again, and it stops.
For example, if a bolt was put on incorrectly, they'd stop the line, put the bolt on correctly, and start the line again. This is what convinced Rick Madrid (who used to drink OJ and vodka at work) to change his ways.
Take away: Install metaphorical nylon ropes at every station of your process, so when problems arise, you can stop, fix the problem, and keep going. Thus, you are putting quality first.
8. Emotions matter, so let the tears flow
When the first group of employees left Japan to go back to Fremont, everyone cried because of the progress they had made. The eyes of Japanese and American workers alike flowed with tears in happiness.
Take away: Remember that your employees take their work personally, and that’s a good thing. Improving your business has the power to make people cry… in a good way.
9. Learn from your competitors more than from your friends
The beauty of the NUMMI story is that GM was willing to learn from their competitor, Toyota, and it saved their plant in Fremont, maybe even the entire town (because it was one of the major business around). Although the plant closed in 2010, they operated for over two decades longer than they would have without Toyota's intervention. In summary:
Take away: Keep your competitors close in whatever way that means for you. GM literally went to live with their competitor for two weeks in Toyota City. For you, this could mean taking them to lunch, interviewing them for your podcast, or just studying their practices intently.
10. Build trust among team members
The key to implementing change in your business is establishing trust between workers and management. At NUMMI, the workers had to trust the management to implement their suggestions. The management had to trust the workers to not take advantage of the freedom to stop when problems arose. They found a way to build trust among their team members.
Take away: Take the time to establish trust on all levels of your team because any type of suspicion will destroy you. That is if it festers long enough. It takes time, care, and attention to build trust, and it’s worth it all because building trust is vital to every kind of business success.
11. Embrace the fact that methods matter a lot
Moral of the NUMMI story?
Methods matter, and this recap of the NUMMI story shows just that: People are the process, so whether short or tall, learn to work together as a team. This will create an environment of Kaizen (continuous improvement), where people give help and take help, earn extra cash, and produce quality products. The tears will surely flow as you learn from your competitors, all the while building trust among your team members.
Take away: Remember the NUMMI story about how methods matter.
12. Make a long-term plan for organic, franchise-wide change
Without getting too deep into it, the NUMMI success did not spread very far from Fremont. While their plant was very successful, they tried to bring change without bringing employees to Japan for training, but failed. Employees at other GM plants just didn’t get it.
They thought, Why change our process so dramatically?
The problem was that they didn’t have the Fremont story of near ruin, sending workers to Toyota City, and experiencing the new methods first hand. GM trainers for other plants tried to tell them about better practices, and it didn’t work. The changes didn’t really affect GM as a whole.
NUMMI was NUMMI, and that was that.
Take away: Make franchise-wide changes by giving everyone a first-hand experience of the solution. This will look different in every industry, so find what works for yours.
13. Buy from Toyota if you’re going to buy a car from the 1980s :)
Take away: Trust me, it’s a good decision, whether buying for your business or for your personal garage.
How do these lessons apply to your industry?
Share your story in a comment below.
Image credit for header photo: Flickr / Creative Commons.