It Makes Sense For Toyota To Leave California For Texas – Forbes
For Japanese auto brands, the logic of keeping their U.S. sales and administrative arms in California is breaking down under the outrageous penalties of conducting business in the Golden State and the changing dynamics of the North American automotive industry. So Toyota is leaving, according to Automotive News.
And where is Japan’s biggest automaker relocating its sales and marketing operations in America? Why, North Texas, of course. The move move to Plano, Texas, will involve most of the 5,000 managers and employees at Toyota’s current Torrance, Calif., headquarters, the magazine said.
Texas Gov. Rick Perry apparently didn’t even have to make a recruiting trip to southern California to get Toyota to do this, although he has helped lure plenty of companies with that gambit over the last several years.
And yet Texas has scored one of the biggest prizes so far in its very focused, state-on-state battle with the administration of Gov. Jerry Brown to get plum companies now headquartered in California to abandon the bluest state for the reddest one.
Clearly, Perry caressed a trump card in the fact that Toyota has enjoyed a deep relationship with Texas through its $2.2-billion truck-assembly complex near San Antonio.
Plus, the fact is that, as Toyota has become a more U.S.-centric company with important assets all over the country, it makes sense for the Japanese market leader to distribute its operations in a new way. Toyota’s 14 North American manufacturing facilities now build 71 percent of the vehicles the company sells in the United States, up from 55 percent in 2008.
A half-century ago, Toyota and other Japanese brands clustered in southern California when they began their assault on the U.S. market because California offered the single best market opportunity for Asian brands coming to America and because the state’s location closest to Japan made logistics easiest.
For most of the time since then, California’s justified reputation as America’s automotive, societal, cultural, and economic bellwether continued to ratify the Japanese brands’ focus there. Consider how Toyota was able to grow its Prius hybrid line into the segment’s dominant brand by starting with an emphasis in California.
But now Toyota and most of it Japanese rivals are treating North America like their domestic market — meaning that a California lens isn’t always the best one. Maybe a new headquarters in Flyover Country will be.
Toyota’s oldest U.S. manufacturing operations, for example, are in Georgetown, Ky. The company now is making Corollas in Mississippi and exporting them to Latin America. It produces vehicles from Indiana to Alabama. And Toyota performs much of its engineering work in Michigan.
Plano is closer to all of those places than Torrance is. And while there’s still a significant divide between Toyota’s engineering and manufacturing operations, and the sales and marketing folks, the changing nature of the auto business means they need to get closer all the time.
Nissan made the first such move anyway, leaving its U.S. sales headquarters in California and relocating Nissan North America to Nashville in 2006.
Besides, California’s business climate is becoming an even bigger downer. California has become infamous with business executives and owners there not only for high tax rates and complex taxing schemes but also for overzealous regulations and regulators that have managed to stifle the entrepreneurial energy of thousands of companies.
Even Hollywood movie studios have been souring about producing flicks in California, increasingly reckoning that the sweet tax breaks and assistance packages now offered by so many other states offset the legacy advantages and ideal production climate in California.
About the only vast remaining pocket of dynamism in the California economy is Silicon Valley, where the mastery of the global digital economy by companies ranging from Google Google to Hewlett-Packard Hewlett-Packard has become so complete that they have been able to succeed despite the home-state business landscape.