BILL ANALYSIS SCR 53 Page 1 SENATE THIRD READING SCR 53 (Corbett) As Amended September 1, 2009 Majority vote SENATE VOTE :38-0 ECONOMIC DEVELOPMENT 7-0 ----------------------------------------------------------------- |Ayes:|V. Manuel Perez, Logue, | | | | |Beall, | | | | |Bill Berryhill, Block, | | | | |Huber, Salas | | | ----------------------------------------------------------------- SUMMARY : Memorializes the Legislature's priority to take swift and decisive action to protect California workers and industries including doing everything in its power to keep the New United Motor Manufacturing Inc. (NUMMI) facility open. EXISTING LAW authorizes a variety of economic and workforce development incentives including, but not limited to: 1)Designating an area as an enterprise zone and other geographically targeted economic development area; 2)Designating an area as a Free Trade Zone; 3)Offering preferences for state procurement contracts; 4)Providing funding for workforce training; 5)Authorizing income tax credits; and, 6)Streamlining state permitting requirements. FISCAL EFFECT : None COMMENTS : The purpose of this resolution is to formally recognize the Legislature's intent to take action to retain the last auto manufacturing plant in California. Established more than 25 years ago in the City of Fremont, the NUMMI facility is capable of annually assembling 250,000 cars and 170,000 trucks SCR 53 Page 2 through the efforts of its 4,700 workers. Vehicles most recently produced at the facility have included the Pontiac Vibe, the Toyota Corolla and Toyota Tacoma. As a California corporation, NUMMI's privately held shares are evenly split between General Motors (GM) and Toyota Motor Corporation (Toyota). With GM's June 2009 bankruptcy, its shares in the NUMMI facility were transferred along with its other assets to Motors Liquidation Company (MLC). According to news reports, MLC does not intend to reorganize GM, rather it is in the process of selling GM's former assets with the intent of settling claims with GM creditors. Under these circumstances, Toyota has only one of two options; it must whether purchase GM's shares from MLC or agree to the dissolution of NUMMI. Due to the potentially large economic impact of closing NUMMI, the Governor established a "Red Team" coalition of over 50 stakeholders in July 2009. The Red Team's task was considered quite difficult given the current global economic situation, Toyota's reported $4.4 billion year-end loss, and its structural relationship with NUMMI as a vendor rather than as a parent company. It was reported that the cost of manufacturing a car at the NUMMI plant was higher than at Toyota's own manufacturing facilities in other states. In a hearing before the Assembly Committee on Jobs, Economic Development, and the Economy on August 25, 2009, the leader of the Red Team stated that California was proposing a five-point incentive package to help make production of cars at NUMMI more competitive with other United States assembly facilities. The package included: logistical improvements; reductions in energy costs; workforce training opportunities; subsidizes to offset plant and equipment improvements; and, help in meeting environmental compliance requirements. While the business incentive proposal was prepared, staff does not know whether the proposal was ever presented because on August 27, 2009, Toyota announced it had failed to reach a successful negotiation on share price with the liquidator and that Toyota would cease purchasing vehicles from NUMMI in March 2010. With the closure of NUMMI, thousands of workers will become unemployed at the facility and in the 3,600 supply houses that support the facility in North America. There are over 1,000 SCR 53 Page 3 NUMMI suppliers in California located in 35 counties. The California Manufacturing and Technology Association estimate that the NUMMI plant supports 18,800 related jobs in California. The combined impact of losing 4,700 jobs at NUMMI ($523 million in payroll) and the 18,800 indirect jobs in related businesses ($904 million) results in the likelihood of over 23,000 newly unemployed individuals with a combined loss of wages of over $1.4 billion to California workers. Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090 FN: 0002730