Toyota unveils plan to move U.S. headquarters to Plano; gets $40 million from Texas

Posted Monday, Apr. 28, 2014  comments  Print Reprints
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Toyota Motor Corp. plans to consolidate U.S. sales, engineering and finance operations in Plano, sending jobs and investment from California, New York and Kentucky to a new North American headquarters.

The automaker’s news release put no price tag on the shift. But Gov. Rick Perry’s office said it was more than $300 million and that the state-supported Texas Enterprise Fund has offered Toyota $40 million in exchange for the jobs and capital investment.

That would make it the second-largest award given by Texas, the biggest being $50 million given in 2005 to a biotechnology joint venture formed by Texas A&M University and Lexicon Pharmaceuticals.

A Toyota spokeswoman said the company wasn’t addressing the issue of tax incentives at this time.

The move will affect about 2,000 people at Toyota’s U.S. sales headquarters in Torrance, Calif.; 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.

“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.”

The move is a win for 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.

Putting a headquarters in suburban Dallas cements the company’s “Southern” strategy, an auto industry analyst said.

It builds the Camry and Avalon in Kentucky; the Corolla, in Mississippi; and the Tundra and Tacoma pickups in Texas. It also has a big engine plant in Alabama.

“They feel their future is in Dixie,” said James Rubenstein, an auto industry analyst and geography professor at Miami University in Oxford, Ohio. “They have figured out how to build vehicles in Dixie, but they haven’t figured out how to sell them there.”

Although the company is successful selling passenger cars in the U.S., it has never gained the traction in the truck market that it has hoped for, Rubenstein said. Toyota’s sales are also too heavily weighted to women, he added. “Texas is the most male, macho state in the country,” he said. “Texas is where they think they can learn more about what big truck buyers want in their vehicles.”

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 plants, is near Cincinnati.

While Texas is home to Toyota’s pickup plant in San Antonio and a General Motors 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 record net income when it releases fiscal year results next month.

The article includes reporting by the Los Angeles Times and staff writer Barry Shlachter.

aohnsman@bloomberg.net

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