Toyota Announces Establishment Of New North American HQ in Texas – Forbes
Toyota announced that it will move most of its North American headquarters operations to Plano, Texas, from California, characterizing it as nothing less than a major strategic gambit aimed at reshaping the organization to compete more effectively in the U.S. market for decades to come.
Company engineering operations in Ann Arbor, Mich., also will gain from the reorganization. Some Toyota employees will remain at the company’s current Torrance, Calif., U.S. headquarters. Toyota already builds pick-up trucks in San Antonio.
Within the next three years, Toyota’s three separate North American headquarters for manufacturing, sales and marketing, and corporate operations will relocate to a single campus in North Dallas. The company’s finance arm also will move there. Altogether the moves will affect about 4,000 employees.
At the same time, Toyota will expand its technical center in Michigan to accommodate more product-development activity there as well as the relocation of North America direct procurement from the company’s Erlanger, Ky., complex to Ann Arbor.
“This is the most significant change we’ve made to our North American operations in the last 50 years, and we are excited for what the future holds,” Jim Lentz, who was named Toyota’s first CEO for the North America Region in 2013, said in a press release.
“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.”
Toyota expects the new cross-functional teams it will be creating in Plano to “identify and execute on ways to serve the broader North American organization,” the company said. Head count, especially among upper managers, may be reduced by attrition as some company veterans opt not to move to Texas — an easier way to streamline, Automotive News suggested, than layoffs.
According to the magazine, Lentz told employees in announcing the move, “Currently, we’re operating as multiple affiliates in a connected-but-independent way. In other words, we still have silos, and that’s slowing our decision-making process. Our goal is to become not a group of dedicated affiliates, but one company — One Toyota.”
Julie Hamp, Toyota’s chief communications officer, told Automotive News: “We believe the advantages will be better for our customers and dealers, the career development for our associates, and allow us to vastly increase our ability to compete.”
Ground will be broken in Plano this fall. In the meantime, California officials, presumably beginning with Gov. Jerry Brown, will be licking their wounds about losing yet another long-established operation to Texas and Gov. Rick Perry, who’s been aggressive in recruiting them.
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.”