City of Fremont prepares for NUMMI closure’s ripple effects

Friday, March 19, 2010

Silicon Valley / San Jose Business Journal - by David Goll

Media

Nina Moore realized it was a long shot when she and other members of a blue ribbon commission made a whirlwind trip to Japan in early March to persuade Toyota Motor Corp. officials to keep operating the New United Motor Manufacturing Inc. plant.

Toyota officials hadn’t wavered since first announcing Aug. 27 they would shut down the plant.

But the stakes were large for the Bay Area’s fourth-largest city. Losing a 5.3 million-square-foot facility that produces thousands of Toyota Corollas and Tacoma trucks will mean a $2 million drop in property tax revenue for Fremont. The layoffs of 4,700 plant employees and up to 25,000 at supplier companies statewide represents a loss of $1.4 billion in annual payroll and benefits.

“It was an 11th hour attempt to try to get the decision reversed,” said Moore, director of government and community affairs for the Fremont Chamber of Commerce.

NUMMI has been a unique, 25-year partnership between the Japanese auto giant and the industry’s former behemoth, General Motors Co. It all started to unravel in June 2009 when financially troubled GM pulled out of NUMMI.

“My message to Toyota was how related NUMMI is to our community and how much it has contributed to Fremont and our nonprofit organizations,” Moore said.

Up until last year, Moore said, the company has regularly made generous contributions to the Fremont Unified School District and Fremont Education Foundation, a nonprofit organization that provides supplemental funding for after-school programs, teacher grants and sports equipment for the 32,000-student K-12 district. Milt Werner, district superintendent, said for many years NUMMI funded a program to assist new teachers in the district with grants of $500 to $1,000 each.

The auto manufacturer also contributed $25,000 for the construction of the Ohlone College Newark Center for Health Sciences and Technology, which opened in 2008, according to Dave Smith, executive director of the Ohlone College Foundation. He said the company also made a $100,000 donation to help fund construction of a black box theater at the Gary Soren Smith Center for the Fine and Performing Arts at the Ohlone College campus in Fremont.

“NUMMI is ingrained here,” Moore said. “We’d like to see that continue, for the company to produce the Prius and electric plug-in vehicles. We have a growing cleantech business community in Fremont, with companies like (solar panel manufacturer) Solyndra. We’d like to have NUMMI, too.”

Other than property taxes, Moore said it’s tough at this point to quantify the entire cost to Fremont of losing NUMMI. It has yet to be factored into the 2010-11 budget for the city of 213,000, she said.

“Even businesses in other parts of town are going to be affected,” she said of the sprawling, 92-square-mile city.

She said two NUMMI employees who went along on the trip to Japan, a married couple, are preparing to put their San Jose house up for sale and move out of the area.

Christine Friday, economic development coordinator in neighboring Union City, has similar concerns. She said tahe plant closure’s effect on the already slumping local housing market is a major issue.

“Simply put, the closure will have a devastating impact on this area, both short-term and long-term,” Friday said. “We don’t see most NUMMI workers getting back into the work force immediately. That could have a major impact on the level of housing foreclosures because many of our residents who work at NUMMI are two-income families where both work at the plant.”

However, Friday said she doesn’t expect businesses in her city of 73,000 to suffer major impacts from NUMMI’s demise.

Terrence Grindall, community development director in Newark, said the Tri-City area should be competitive when it comes to drawing the cleantech industry, given the success of companies like Solyndra Inc.

“The challenge will be to match NUMMI workers with the new jobs,” Grindall said. “The emergence of the cleantech industry locally is a good sign, and NUMMI workers are the highest-skilled auto workers in the world. But, of course, I still have a lot of concerns about their futures.”

As does Lori Taylor, Fremont’s economic development director. The loss of thousands of jobs with average annual salaries of $65,000 during a recession is a big blow.

“It’s not good news during a time of tight budgets,” she said. “It’s a big loss to our city. We have really been proud to have such a major manufacturing plant.”

Tom Means, professor of economics at San Jose State University, is also worried about future prospects for NUMMI workers and what their loss in incomes will do to the local economy.

“Cities aren’t hiring and a lot of companies aren’t, either,” Means said. “When we’ve had downturns before, it still has been easier to find a job than it is today.”

Because manufacturing jobs are scarce and housing prices high, it will be tough for many NUMMI workers living locally to remain in Silicon Valley, Means said.

Socialized Medicine

The Associated Press, On Monday March 22, 2010, 10:54 am

Congress approved a major overhaul of the nation's health care system for President Barack Obama's signature. Here are some of the features of the legislation.

HOW MANY COVERED: 32 million uninsured. Major coverage expansion begins in 2014. When fully phased in, 95 percent of eligible Americans would have coverage, compared with 83 percent today.

COST: $940 billion over 10 years, according to the Congressional Budget Office.

INSURANCE MANDATE: Almost everyone is required to be insured or else pay a fine, which takes effect in 2014. There is an exemption for low-income people.

INSURANCE MARKET REFORMS: Starting this year, insurers would be forbidden from placing lifetime dollar limits on policies, from denying coverage to children because of pre-existing conditions, and from canceling policies because someone gets sick. Parents would be able to keep older kids on their coverage up to age 26. A new high-risk pool would offer coverage to uninsured people with medical problems until 2014, when the coverage expansion goes into high gear. Major consumer safeguards would also take effect in 2014. Insurers would be prohibited from denying coverage to people with medical problems or charging them more. Insurers could not charge women more.

MEDICAID: Expands the federal-state Medicaid insurance program for the poor to cover people with incomes up to 133 percent of the federal poverty level, $29,327 a year for a family of four. Childless adults would be covered for the first time, starting in 2014. The federal government would pay 100 percent of costs for covering newly eligible individuals through 2016.

If the Senate approves a package of changes this week, a special deal that would have given Nebraska 100 percent federal financing for newly eligible Medicaid recipients in perpetuity would be eliminated. A different, one-time deal negotiated by Democratic Sen. Mary Landrieu for her state, Louisiana, worth as much as $300 million, remains.

TAXES: To make up for the lost revenue, the bill applies an increased Medicare payroll tax to the investment income and to the wages of individuals making more than $200,000, or married couples above $250,000. The tax on investment income would be 3.8 percent. If the Senate follows through, it would impose a 40 percent tax on high-cost insurance plans above the threshold of $10,200 for individuals and $27,500 for families. The tax would go into effect in 2018.

PRESCRIPTION DRUGS: Gradually closes the "doughnut hole" coverage gap in the Medicare prescription drug benefit that seniors fall into once they have spent $2,830. Seniors who hit the gap this year will receive a $250 rebate. Beginning in 2011, seniors in the gap receive a discount on brand name drugs, initially 50 percent off. When the gap is completely eliminated in 2020, seniors will still be responsible for 25 percent of the cost of their medications until Medicare's catastrophic coverage kicks in.

EMPLOYER RESPONSIBILITY: Employers are hit with a fee if the government subsidizes their workers' coverage. The $2,000-per-employee fee would be assessed on the company's entire work force, minus an allowance. Companies with 50 or fewer workers are exempt from the requirement. Part-time workers are included in the calculations, counting two part-timers as one full-time worker.

SUBSIDIES: The aid is available on a sliding scale for households making up to four times the federal poverty level, $88,200 for a family of four. Premiums for a family of four making $44,000 would be capped at around 6 percent of income.

HOW YOU CHOOSE YOUR HEALTH INSURANCE: Small businesses, the self-employed and the uninsured could pick a plan offered through new state-based purchasing pools called exchanges, opening for business in 2014. The exchanges would offer the same kind of purchasing power that employees of big companies benefit from. People working for medium-to-large firms would not see major changes. But if they lose their jobs or strike out on their own, they may be eligible for subsidized coverage through the exchange.

GOVERNMENT-RUN PLAN: No government-run insurance plan. People purchasing coverage through the new insurance exchanges would have the option of signing up for national plans overseen by the federal office that manages the health plans available to members of Congress. Those plans would be private, but one would have to be nonprofit.

ABORTION: The bill tries to maintain a strict separation between taxpayer dollars and private premiums that would pay for abortion coverage. No health plan would be required to offer coverage for abortion. In plans that do cover abortion, policyholders would have to pay for it separately, and that money would have to be kept in a separate account from taxpayer money. States could ban abortion coverage in plans offered through the exchange. Exceptions would be made for cases of rape, incest and danger to the life of the mother.

GOP HEALTH CARE SUMMIT IDEAS: Following a bipartisan health care summit last month, Obama announced he was open to incorporating several Republican ideas into his legislation. But two of the principle ones -- hiring investigators to pose as patients and search for fraud at hospitals and increasing spending for medical malpractice reform initiatives -- did not make it into the legislation. The legislation incorporates only one, an increase in payments to primary care physicians under Medicaid, an idea mentioned by Sen. Charles Grassley, R-Iowa.

U.S. post office looks to cut costs as mail drops

Tue Mar 2, 2010 2:26pm EST

* Price hike and service changes seen

WASHINGTON, March 2 (Reuters) - The U.S. Postal Service, faced with a dwindling number of customers and growing shortfalls, plans to raise prices, cut costs and ask for rule changes to make the struggling service more flexible, Postmaster General John Potter said on Tuesday.

Because of email and private delivery companies, mail volume is expected to be down about 10 billion pieces in 2010 with first class mail expected to drop 37 percent by 2020, leaving the service with a cumulative shortfall that could hit $238 billion by 2020, USPS said in a press release.

"A modest exigent price increase will be proposed, effective in 2011," it said.

USPS, which delivers nearly half of the world's mail, has posted net losses since 2007. It faces stiff competition from email as well as FedEx (FDX.N) and United Parcel Service (UPS.N).

Potter outlined a series of efforts to save money, including restructuring retiree health benefits, changing delivery schedules, and expanding efforts to sell stamps and provide other services online and at grocery stores and other retailers.

"If given the flexibility to respond to an evolving marketplace, the postal service will continue to be an integral part of the fabric of American life," Potter said in the release.

In February, USPS posted a loss of $297 million for the first quarter of its fiscal year, blaming the recession and the use of electronic mail.

The loss marked a slight improvement over the prior-year period due to cost cutting, but USPS warned the trend was worrisome.

Further, it warned it may not be able to meet obligations to make about $6.6 billion in cash payments in September and October to fund retiree health benefits and for its workers' compensation liability. Last year Congress restructured similar payments, but there is no assurance that similar adjustments will be made this year, USPS said.