General Motors Breaks Off JV With Toyota; GM-Badged Prius Possibly in the Works

General Motors Breaks Off JV With Toyota; GM-Badged Prius Possibly in the Works

General Motors has announced its intention to abandon its 25-year-old California joint venture with Toyota -- a move the Japanese automaker said would add to its own financial woes -- and Bloomberg has reported that Toyota may produce a hybrid for GM.

Only two weeks ago, Bloomberg reported that GM and Toyota were considering possibly of building Prius hybrids together at an existing plant in Fremont, California.

But in a statement released Monday, GM said it will place its 50 percent ownership stake in New United Motor Manufacturing Inc. -- or NUMMI, the GM-Toyota joint venture that consists chiefly of the Fremont factory -- in the "old GM."

The "old GM" will contain parts of the company that will remain in bankruptcy after a "new GM" exits court protection.

GM filed for Chapter 11 protection on June 1 and plans for its profitable assets to emerge, possibly by the end of summer, as a "new GM" with about $50 billion in financing from the U.S. Treasury.

"After extensive analysis, GM and Toyota could not reach an agreement on a future product plan that made sense for all parties," Troy Clarke, GM's president of North American operations, said in statement.

"Accordingly, NUMMI will end production of vehicles for GM in August, and there are no future GM vehicles planned for the joint venture at this time."

Earlier this month, GM said that production of the Pontiac Vibe at the NUMMI plant would end in August as the Pontiac brand is being eliminated. Toyota builds the Corolla small car and the Tacoma pickup truck at the plant.

In a statement released Monday, Toyota said it was sorry GM was withdrawing from NUMMI, "ending a long, successful partnership spanning 25 years."

"Our hope was for the 50/50 joint venture to continue," the statement said. "While we respect this decision by GM, the economic and business environment surrounding Toyota is also extremely severe, and so this decision by GM makes the situation even more difficult for Toyota. We will consider alternatives by taking into account various factors."

According to a Bloomberg report published Monday before GM issued its statement, Toyota might offer GM a version of its hybrid Prius sedan.

The news service, citing two unnamed sources, said a GM-badged Prius would be among the options to fill unused NUMMI capacity. GM CEO Fritz Henderson and Toyota's new president, Akio Toyoda, are expected to discuss the proposal at a meeting in August, Bloomberg reported.

"Having a stronger lineup is an urgent matter for GM," Yoshihiro Okumura, who helps oversee the equivalent of $365 million at Tokyo-based Chiba-gin Asset Management Co., reportedly told Bloomberg. "Demand will continue to shift to small cars."

GM has eight hybrid models, two of which are Saturns, a brand that GM is selling to Penske Automotive Group Inc. Of GM's remaining six hybrids, only one, the Chevrolet Malibu, is a car rather than a truck.

Bloomberg reported earlier this month that Toyota was considering NUMMI for Prius production after putting aside plans to make the vehicle at a recently constructed plant in Mississippi. As we reported then, Toyota denied it had any intention of building Priuses at the California factory, where 271,202 Corollas and Tacomas for Toyota and 70,839 Vibes for Pontiac were manufactured last year.
 
And, as we reported then, Mike Goss, external affairs manager for Toyota Motor Engineering & Manufacturing, said there were no plans to build Priuses at NUMMI. On Monday, he denied having any knowledge of Toyota possibly producing a hybrid for GM.

Scott Doggett:  is an AutoObserver.com Associate Editor.