LOS ANGELES – Toyota Motor Corp. plans to consolidate U.S. sales, engineering and finance operations to suburban Dallas, sending 4,000 jobs from California, New York and Kentucky to a new North American headquarters.
The shift to Plano, Texas, affects about 2,000 people at Toyota’s U.S. sales headquarters in Torrance, California, 1,000 employees from its Kentucky engineering and manufacturing unit, and some staff from its holding company in New York, the carmaker said in a statement today. About 1,000 people from its finance company will also go to Texas by 2017, Toyota said. Headquarters construction is projected to be complete in late 2016 or early 2017.
“Toyota’s announced move to Texas is a shock since the automaker has been part of the Southern California community for decades, but it indicates that money -– and tax incentives –- talks when it comes to headquarters locations,” said Jack Nerad, senior industry analyst for Kelley Blue Book. “The dollar savings from the relocation should be fairly easy to quantify, but what’s much harder to quantify is the cost in business disruption and ‘brain-drain’ such a move can cause.”
The relocation is a win for Texas Governor Rick Perry’s campaign to lure California companies and a blow to the Golden State, the biggest U.S. auto market and proponent of the strictest clean-air rules. Toyota’s Prius hybrid has been California’s top-selling model for the past two years and helped secure a leading 22 percent market share. Perry has made repeated visits to California to entice businesses to his state with promises of lower taxes and easier regulations.
“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,” Jim Lentz, Toyota’s North American chief executive officer, said in the statement. “This, in turn, will strengthen our ability to put customers first and to continue making great products that exceed their expectations.”
Toyota’s average revenue per vehicle is $33,287 in North America, where it earns a 3.3 percent operating margin, while in Japan, Toyota gets $29,223 per vehicle and a 10.5 percent operating margin, according to Kevin Tynan, auto analyst with Bloomberg Industries.
The world’s largest carmaker, which is based in Toyota City, Japan, has more than 5,300 California employees, most at its Torrance campus near Los Angeles in sales, finance, marketing, engineering and product planning. Erlanger, which also manages Toyota’s North American factories, is near Cincinnati.
“Obviously, we are extremely disappointed by Toyota’s decision,” Kentucky Governor Steven Beshear, a Democrat, said in a statement. “We would have welcomed the opportunity to discuss options with Toyota, but we will now turn our attention to preparing for this transition.”
Toyota will keep its Georgetown manufacturing plant in Kentucky, supplier facilities, as well as some other units, according to a letter from the automaker’s executives to Beshear that was dated today.
“We are continuing to add good jobs at the Georgetown plant,” according to the letter. The site is adding assembly of Lexus ES 350 sedans to output of Toyota Camry mid-size cars and other models.
Nissan Motor Co. also left California in 2006, relocating its North American headquarters in lower-cost Tennessee. In Nissan’s case, only 42 percent of employees initially chose to relocate.
In February, Occidental Petroleum Corp. said it was splitting its operations, keeping a portion in California and setting up a new unit in Houston. Raytheon Co., a technology company that specializes in defense, last year moved its space and airborne systems unit to McKinney, Texas, from southern California. Last year, Tokyo-based security software company Trend Micro Inc. said it would move its U.S. headquarters from Cupertino, in Silicon Valley, to Irving, Texas, according to the Perry administration.
While Texas is home to Toyota’s pickup truck plant in San Antonio and a General Motors Co. factory in Arlington, the state traditionally hasn’t been a center of auto industry activity.
Toyota’s decision to scale back in California, where it established operations in 1957, comes as the company expects to report a record 1.87 trillion ($18.3 billion) of net income when it releases fiscal year results next month. Along with rising sales in North America and other international markets, Toyota’s earnings this year are benefiting from a decline in the value of the yen, which surged in 2011.
Since the company made that forecast, it agreed to a $1.2 billion fine to settle a U.S. Justice Department investigation into how it delayed recalling popular models after complaints of unintended acceleration.
Toyota’s American depositary receipts rose 0.4 percent to $106.93 at 2:58 p.m. and had fallen 13 percent this year before today.