Toyota moving their headquaters from SoCal to Metro Dallas

[Mustangfan2003]

By Jerry Hirsch and David Undercoffler

April 27, 2014, 6:40 p.m.

Toyota Motor Corp. plans to move large numbers of jobs from its sales and marketing headquarters in Torrance to suburban Dallas, according to a person familiar with the automaker's plans.

The move, creating a new North American headquarters, would put management of Toyota's U.S. business close to where it builds most cars for this market.

North American Chief Executive Jim Lentz is expected to brief employees Monday, said the person, who was not authorized to speak publicly. Toyota declined to detail its plans. About 5,300 people work at Toyota's Torrance complex. It is unclear how many workers will be asked to move to Texas. The move is expected to take several years.

Toyota has long been a Southern California fixture. Its first U.S. office opened in a closed Rambler dealership in Hollywood in 1957. The site is now a Toyota dealership. In 1958, its first year of sales, Toyota sold just 288 vehicles — 287 Toyopet Crown sedans and one Land Cruiser. Last year, Toyota sold more than 2.2 million vehicles in the U.S.

The U.S. branch picked Los Angeles for its first headquarters because of proximity to the port complex — where it imported cars — and easy airline access to Tokyo. As Toyota grew, it opened its national sales and marketing headquarters in Torrance in 1982. The complex, built where its parts distribution warehouse was once located, now has 2 million square feet of office space.

But today, about 75% of the Toyota branded vehicles sold in the U.S. are built in America — many of them at plants in Texas, Mississippi and Kentucky.

The automaker won't be the first big company Texas has poached from California.

Occidental Petroleum Corp. said in February that it was relocating from Los Angeles to Houston, making it one of around 60 companies that have moved to Texas since July 2012, according to Texas Gov. Rick Perry.

Perry last month visited California to recruit companies. The group Americans for Economic Freedom also recently launched a $300,000 advertising campaign in which Perry contends 50 California companies have plans to expand or relocate in Texas because it offers a better business climate.

Like these other companies, Toyota could also save money in an environment of lower business taxes, real estate prices and cost of living.

Frank Scotto, Torrance's mayor, said he had no warning of Toyota's decision. He said he did know that the automaker planned a corporate announcement for Monday.

"When any major corporation is courted by another state, it's very difficult to combat that," Scotto said. "We don't have the tools we need to keep major corporations here."

The mayor said businesses bear higher costs in California for workers' compensation and liability insurance, among other expenses.

"A company can easily see where it would benefit by relocating someplace else," Scotto said.

Both New York and Texas have aggressively pursued major California corporations by promising a number of financial incentives to get them to relocate, he said.

Toyota's move to Texas comes in the wake of its crisis with sudden-acceleration incidents. Some accidents were linked to floor mats jamming the gas pedal, causing the car to accelerate out of control. Those problems started Toyota on the path to reorganization.

Toyota was slow to disclose and address the problems, but it eventually recalled millions of vehicles to fix the floor mat issue, along with another mechanical defect that caused sticking gas pedals. This year, Toyota paid a $1.2-billion federal fine for misleading consumers, regulators and Congress about the safety problems.

A special panel convened by the automaker concluded that Toyota's management responded slowly and ineffectually to the growing sudden-acceleration crisis because it was hampered by a top-down management style that gave short shrift to customer complaints. The panel also noted that Toyota had developed an adversarial relationship with federal safety regulators.

The automaker has worked to reorganize its management structure to address those problems and give more autonomy to its regional operations. Toyota named Lentz, a longtime U.S. sales executive, chief executive of its North American operations, in charge of manufacturing, research and development, sales and marketing.

Lentz is now overseeing the establishment of a new North American headquarters, close to its U.S. manufacturing hubs.
The company is well established in the South. Its primary factories are in Kentucky, where it builds the Camry and Avalon; Mississippi, where it builds the Corolla; and Texas, where it builds Tundra and Tacoma pickup trucks. It also has a big engine plant in Alabama. Toyota next year will launch assembly of its first U.S.-built Lexus, the automaker's luxury brand, in Kentucky.

Moving the U.S. corporate headquarters to Texas puts senior management closer to those factories.

Toyota isn't the first automaker to leave Southern California. In late 2005, Nissan announced it was moving its North American headquarters from Gardena to Franklin, Tenn., just outside of Nashville. About 550 employees left for Tennessee; an additional 750 left jobs at Nissan to stay in Southern California.

"The costs of doing business in Southern California are much higher than the costs of doing business in Tennessee," Nissan Chief Executive Carlos Ghosn said at the time. He cited cheaper real estate and lower business taxes as key reasons for the move.

Fritz Hitchcock, who owns several Toyota dealerships in Southern California, said Toyota's decision won't affect local car sales. But he said it represents an "indictment of California's business climate."

jerry.hirsch@latimes.com

http://www.latimes.com/business/autos/la-fi-toyota-texas-20140428,0,2881400.story#ixzz30CI06KFx

[SJ_GTI]

Interesting. that is a pretty massive corporate move. The one time relocation costs have got to be massive.

[Mustangfan2003]

I remember about 10 years ago Nissan moved from SoCal to Franklin, TN (which is just south of Nashville).  It makes sense economically since the cost will be lower in Texas but it does make geographical sense considering it sits in a nice central location.  I just wonder how many will actually move.  I figure those that can retire early might take that and some might stay if they can find other work.  Just wished our governor would go after things like this instead of patting his back for bringing another low paying factory. 

[Morris Minor]

Capital is always going to be attracted to lower cost environments; it goes where it's welcome. CA is a great place to live and work, has great schools etc. and yes there many, many factors in play. But state legislators should realize that they don't operate in a vacuum when it comes to imposing costs on corporate & individual citizens.

(PS. What on earth does the "sudden acceleration" thing have to do with this? Seem like there's a copy editor who needs to be relocated out of the LA Times.)

[Mustangfan2003]

Sounds like he might have been a bit butthurt about them moving.  I figure the car companies that still have offices there will likely be gone before the end of the decade.  Tesla took over the old Toyota/GM plant but that's it on the manufacturing side. 

[NomisR]

Nissan left in 2005?  I thought it was earlier than that.  I remember the Nissan logo was removed from that funky shaped building off the 110/405/91 in the early 2000s. 

Maybe Honda will be the next one to go.  All 3 manufacturer has their HQ in the same area.  Honda is literally right down the street from Toyota, but only about 1/4 the size.

[Mustangfan2003]

I think Nissan moved around that time or was atleast starting the process around that time.  They moved into the AT&T building in downtown Nashville while their new offices in Franklin were being built.  It's a pretty nice building they are in, from the outside atleast. 

[hotrodalex]

Toyota is moving about 1000 jobs out of Kentucky. Booo.

The move to Texas "to be closer to manufacturing" is BS. It's just cheaper to have an HQ there.

[2o6]

Nissan left in 2005?  I thought it was earlier than that.  I remember the Nissan logo was removed from that funky shaped building off the 110/405/91 in the early 2000s. 

Maybe Honda will be the next one to go.  All 3 manufacturer has their HQ in the same area.  Honda is literally right down the street from Toyota, but only about 1/4 the size.

Wouldn't be surprised if Honda moved here to Columbus/Marysville

[Byteme]

Ha, looks like that vast part of the country those on the East and West coast refer to as "flyover country" is a tad more important that they think.   

I suspect Texas and Dallas offered substantial tax incentives as an incentive for this move.  IIRC, Toyota got a real sweetheart deal to build it's truck plant in the San Antonio area.

If fact, from Forbes today:

Toyota's roots in California go back to 1957, but apparently the cost penalties of doing business in the Golden State contributed to Toyota's decision to pull up most of its stakes there.

"This is a great example of short- versus long-term thinking," said Karl Brauer, senior analyst for Kelley Blue Book's KBB.com. "In this instance, California state officials are collecting more tax dollars today, while creating a small tax base for tomorrow." He wondered "if we'll see similar moves by Honda, Hyundai and Kia."

There was no immediate disclosure of what financial incentives Texas may have offered.

"Money — and tax incentives — talks when it comes to headquarters locations of large corporations," noted Jack R. Nerad, also a KBB.com senior analyst. But he warned about the "cost in business disruption and 'brain drain' that such a move can cause."

[Mustangfan2003]

Toyota is moving about 1000 jobs out of Kentucky. Booo.

The move to Texas "to be closer to manufacturing" is BS. It's just cheaper to have an HQ there.

.  I've met people from KY that are working at the Toyota plant here and even a few from Canada.

[Rupert]

Ha, looks like that vast part of the country those on the East and West coast refer to as "flyover country" is a tad more important that they think.   

It's a real shame that the shitty places have the best bribes, isn't it?

[sparkplug]

California made an unpleasant tax situation for businesses.

[NomisR]

Yeah, even in the interview with the mayor of Torrance, he said just that.  And the problem is, there's not much they can do about it either.  I hope the state wise up because this is not sustainable.  But of course, these assholes are just there to get their votes and the voters are either hippies, self loathing white people, or ignorant.  So they'll be happy to jump at unsustainable policies to make themselves feel good.

[Yawn]

But then Hyundai just built a 200 million dollar hq in Fountain Valley and Kia opened in Irvine 2 years ago... Why was is good for Hyundai and Kia to build and Toyota to leave??

Too bad the Toyota complex is very nice..Do you think somene will move in or it will be torn down.. If a company would move it, who would it be?

[SJ_GTI]

FWIW, read a more in depth article and Toyota isn't actually "leaving" California, though clearly they are downsizing and moving some operations from California (and Kentucky and Michigan) to Texas.

Toyota will still have roughly 2,300 employees in California after all the moves are complete. The main function staying in California is the design studio.

[Xer0]

FWIW, read a more in depth article and Toyota isn't actually "leaving" California, though clearly they are downsizing and moving some operations from California (and Kentucky and Michigan) to Texas.

Toyota will still have roughly 2,300 employees in California after all the moves are complete. The main function staying in California is the design studio.

Do you have a link?  Most anything I've read amounts to a political circle jerk of either people yelling "ha! taxes are stupid" or "Toyota is a greedy company moving to the US equivalent of China".

I also suspect that while this move isn't everything, it will make a future move much easier and something that I'm sure Toyota has considered and potentially have a timeline on. 

[SJ_GTI]

Do you have a link?  Most anything I've read amounts to a political circle jerk of either people yelling "ha! taxes are stupid" or "Toyota is a greedy company moving to the US equivalent of China".

I also suspect that while this move isn't everything, it will make a future move much easier and something that I'm sure Toyota has considered and potentially have a timeline on.

http://money.msn.com/top-stocks/post--texas-to-pay-dollar10000-for-each-toyota-job

[Madman]

http://money.msn.com/top-stocks/post--texas-to-pay-dollar10000-for-each-toyota-job

The headline should read "Texas TAXPAYERS pay $10,000 for each Toyota job."

So now that Toyota is taking "government money", I wonder if right-wingers will boycott it just like they did with GM and Chrysler?

[Xer0]

http://money.msn.com/top-stocks/post--texas-to-pay-dollar10000-for-each-toyota-job

Leasing out space for 3 years while you build your massive new office/design/manufacturing/etc etc buildings sounds like its going to be expensive as shit.  I feel like Texas is pretty much paying for a good chunk of the relo costs.  Although, with Toyota needing needing mobile young people in the very near future, I should probably apply for an Accounting job 

[SJ_GTI]

Leasing out space for 3 years while you build your massive new office/design/manufacturing/etc etc buildings sounds like its going to be expensive as shit.  I feel like Texas is pretty much paying for a good chunk of the relo costs.  Although, with Toyota needing needing mobile young people in the very near future, I should probably apply for an Accounting job 

Actually, in my limited experience $10,000 per employee is only a small piece of what the relocation will cost. For 4,000 employees that is only $40,000,000. That might just barely cover the temporary office lease, but will be no where near the cost to build a new building. I would also guess Toyota will be offering relocation packages to many of its employees, and $10,000 per employee will not come close to covering just the normal reimbursement of moving expenses, much less a standard "disturbance allowance" that most companies offer. And BTW, relocation is generally cheaper than firing old employees and hiring new employees. If they actually decided to fire people in California and hire new people in Texas, you are probably talking double or triple relocation costs for existing employees.

[NomisR]

Actually, in my limited experience $10,000 per employee is only a small piece of what the relocation will cost. For 4,000 employees that is only $40,000,000. That might just barely cover the temporary office lease, but will be no where near the cost to build a new building. I would also guess Toyota will be offering relocation packages to many of its employees, and $10,000 per employee will not come close to covering just the normal reimbursement of moving expenses, much less a standard "disturbance allowance" that most companies offer. And BTW, relocation is generally cheaper than firing old employees and hiring new employees. If they actually decided to fire people in California and hire new people in Texas, you are probably talking double or triple relocation costs for existing employees.

Not to mention additional disruption of internal processes that won't go well already with the move, but when you add new people, it'll be even worse.  And since you'll likely take the same salary on top of moving and disturbance allowance to move, and then have same salary with lower CoL, it might be a good move for a lot of employees.

The only ones that may hesitate would be the ones with houses that are massively under water so they don't want to sell.

[Byteme]

Actually, in my limited experience $10,000 per employee is only a small piece of what the relocation will cost. For 4,000 employees that is only $40,000,000. That might just barely cover the temporary office lease, but will be no where near the cost to build a new building. I would also guess Toyota will be offering relocation packages to many of its employees, and $10,000 per employee will not come close to covering just the normal reimbursement of moving expenses, much less a standard "disturbance allowance" that most companies offer. And BTW, relocation is generally cheaper than firing old employees and hiring new employees. If they actually decided to fire people in California and hire new people in Texas, you are probably talking double or triple relocation costs for existing employees.

Some other factors:


Figure in the probable lower tax rates Toyota will pay the state and county. 

The cost of living is lower in Plano than in California which should in the long run should allow Toyota to pay less for the same quality of personnel. 

Toyota will pay less for services, ranging from building maintenance to landscaping to catering, etc.  All small stuff, but it adds up.

Lowered travel costs to other Toyota facilities.

That's just off the top of my head, I'm sure there area basket full of other benefits.  The $40,000,000 is simply one of many benefits accruing to Toyota from the move.    As much as I dislike Toyota's products I will admit they are pretty good businessmen.  I'm quite sure they have run the numbers and have determined this move makes sense from all angles.

[SJ_GTI]

Some other factors:


Figure in the probable lower tax rates Toyota will pay the state and county. 

The cost of living is lower in Plano than in California which should in the long run should allow Toyota to pay less for the same quality of personnel. 

Toyota will pay less for services, ranging from building maintenance to landscaping to catering, etc.  All small stuff, but it adds up.

Lowered travel costs to other Toyota facilities.

That's just off the top of my head, I'm sure there area basket full of other benefits.  The $40,000,000 is simply one of many benefits accruing to Toyota from the move.    As much as I dislike Toyota's products I will admit they are pretty good businessmen.  I'm quite sure they have run the numbers and have determined this move makes sense from all angles.

I understand all of that, my point was only that, while 10,000 per employee that Texas is "paying" for sounds like a lot, that money in an of itself was probably of minor consequence. More of a tie breaker, than anything else. I am sure Toyota had lots of good reasons to move. Companies do it all the time, even within a single state or even city.

[Byteme]

I understand all of that, my point was only that, while 10,000 per employee that Texas is "paying" for sounds like a lot, that money in an of itself was probably of minor consequence. More of a tie breaker, than anything else. I am sure Toyota had lots of good reasons to move. Companies do it all the time, even within a single state or even city.

I couldn't agree more.