As first reported on Pando yesterday, Toyota will be relocating its North American headquarters from the Los Angeles area to the Dallas, Texas area. The company revealed additional details of the move today which will take approximately three years and will affect a total of 4,000 employees.
Toyota called it “a move designed to better serve customers and position Toyota for sustainable, long-term growth.” The reality is that this move is all about the Benjamins. California is among the most expensive and arduously-regulated states in the nation in which to operate a business.
As a result, Toyota becomes the third Japanese automaker to flee the state in search of more hospitable surroundings, with Nissan choosing Tennessee and Honda choosing Ohio, each within the last decade. In each case, tax incentives and state economic grants played a large role in the relocation decision. Expect to hear additional details around Texas’ Toyota recruitment package in the near future. Toyota announced that plans to construct “a single, state-of-the-art campus in Plano,” which will serve as the headquarters for its manufacturing, sales and marketing, and corporate operations.
The state of California will lose approximately 2,000 employees from Toyota Motor Sales, U.S.A., Inc. and another 1,000 from Toyota Financial Services. In addition, 1,000 employees of Kentucky-based Toyota Motor Engineering & Manufacturing North America, Inc. will make a similar move.
Toyota Financial services, in a separate announcement, noted that all relocated employees will be “offered an industry-leading relocation or retention package.” There was no mention of similar programs within other affected Toyota subsidiaries, however it would be customary to expect some form of assistance. Toyota will continue to have approximately 2,300 California employees and 8,200 in Kentucky, following the move.
The move won’t only cost Los Angeles the above mentioned 3,000 jobs, but also the ancillary economic activity associated with the countless vendors, service providers, hotels, restaurants, and other businesses that cater to the automotive – and particularly Japanese business – communities.
As we reported yesterday, Toyota has been particularly active in the local Los Angeles community, making the move painful one on numerous levels. In an effort to soften the blow for these local California and Texas communities, Toyota pledged a “$ 10 million philanthropic commitment to provide continued funding for local non-profits and community organizations in these states over a five-year period beginning in 2017, over and above existing commitments.”
Toyota North American Region CEO Jim Lentz said in a statement today:
With our major North American business affiliates and leaders together in one location for the first time, we will be better equipped to speed decision making, share best practices, and leverage the combined strength of our employees. This, in turn, will strengthen our ability to put customers first and to continue making great products that exceed their expectations. Ultimately, enabling greater collaboration and efficiencies across Toyota will help us become a more dynamic, innovative and successful organization in North America. This is the most significant change we’ve made to our North American operations in the past 50 years, and we are excited for what the future holds.
While many states were likely in the running to host the next generation of Toyota’s North American operations, California was apparently not one of them. According to state and local government sources speaking on the condition of anonymity, California’s incentive package was seen as sorely lacking and was eliminated from consideration early in the proceedings.
Sadly, for more and more corporations, it’s just good business not to operate in California.