BILL ANALYSIS
SCR 53
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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
FN: 0002730