BILL ANALYSIS                                                                                                                                                                                                    



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          SENATE THIRD READING
          SCR 53 (Corbett)
          As Amended  September 1, 2009
          Majority vote 

           SENATE VOTE  :38-0  
           
           ECONOMIC DEVELOPMENT    7-0                                     
           
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          |Ayes:|V. Manuel Perez, Logue,   |     |                          |
          |     |Beall,                    |     |                          |
          |     |Bill Berryhill, Block,    |     |                          |
          |     |Huber, Salas              |     |                          |
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           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  








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          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  








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          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

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