Auto Makers From Asia Flock to County
A decade ago, when Japanese auto executives came to Orange County, it was usually to give speeches--or to visit Disneyland.
Today they are coming to stay.
Three Asian auto makers have recently placed headquarters for their U.S. operations in Orange County, and a fourth is on the way.
“What you’ve got there,” said one New York auto industry analyst, “is the makings of a motor city without the motors--a mini Motown-on-the-Pacific.”
The Asian auto importers are settling in Orange County in pursuit of bigger profits for their shareholders and better life styles for their executives. So fast and furiously has this hub of auto import activity taken shape that auto industry analysts compare this phenomenon to northern New Jersey, where half a dozen European auto importers--including BMW, Mercedes-Benz and Volvo--long ago established their U.S. headquarters.
The difference, however, is that it took decades for the European importers to declare the New Jersey coast as their domestic corporate domain. A cadre of Asian auto importers have opened U.S. headquarters in Orange County--within the past five years.
It began when Mitsubishi Motor Sales of America placed its U.S. headquarters in Fountain Valley in 1983. Suzuki of America Automotive Corp. selected Brea last July. The Korean auto maker, Hyundai Motor America, tapped Garden Grove last year--and on Feb. 15 it began selling its first cars in the U.S. market. Next year, Mazda Motor of America Central Inc. is slated to move its headquarters to Irvine, across the street from where it already houses its U.S. distribution facility.
Role of Distributor
The role of a distributor is to purchase cars from its overseas parent, establish a network of U.S. dealers and ship the cars to those dealers. The distributor sets the suggested retail prices and is responsible for advertising and marketing the cars in the United States. Distributors are also responsible for supplying dealers with needed parts and service training.
The shift to Orange County is coming largely at the expense of the Los Angeles area.
Mazda selected its new Irvine home over locations in Long Beach, City of Industry and San Bernardino. Mitsubishi moved to Fountain Valley from Los Angeles three years ago.
But the Big Three of the Asian auto industry say they plan to keep their U.S. headquarters in Los Angeles County. Toyota Motor Sales U.S.A. Inc. is in Torrance; Nissan Motor Corp. U.S.A. is in Carson, and American Honda Motor Co. Inc. is in Gardena.
Some say the Orange County influx is long overdue. The U.S. headquarters for three major Japanese motorcycle manufacturers--Suzuki, Kawasaki and Yamaha--are already situated in Orange County. Analysts say the jump to Asian auto importers was inevitable.
Pack a Sales Wallop
Among them, the four Orange County auto importers pack the sales wallop of the county’s biggest company, Fluor Corp. The four are expected to post U.S. total car sales of about $4 billion in 1986--a tad less than the $4.2 billion in revenues that Fluor reported in 1985. And combined, they expect to sell slightly less than 600,000 vehicles in the U.S. in 1986, about the same number that rival Toyota sold last year.
By far the biggest of the Orange County auto importers is Mazda, which projects sales of 230,000 cars and 115,000 trucks in the United States in 1986. Mitsubishi and Hyundai say they will each sell about 100,000 vehicles this year. Suzuki, meanwhile, hopes U.S. sales of its Samurai, a Jeep-type vehicle, will reach 50,000 in 1986.
These numbers are a far cry from the 4.6 million vehicles that General Motors projects to sell in 1986. But the Japanese auto makers are expected to sell a total of 2.3 million units--about half as many vehicles as General Motors sold last year. When the largest Asian auto importers--Toyota, Nissan and Honda--came to California about 25 years ago, they mostly located in the Los Angeles area near the ports. But the latecomers have seen the good life in Orange County--the golf courses, planned housing and good schools--and they want to be a part of it.
Acceptance Important
“They want to be as American as Americans,” said John Wareham, president of John Wareham Associates, a New York executive recruiting firm with a number of Asian clients. “It won’t suit most Asian executives to move to Los Angeles or New York. They have to go somewhere where they can be fully absorbed into the community,” said Wareham, author of “Secrets of a Corporate Headhunter.”
“Orange County is ideal for that,” he said.
William Ouchi, author of “Theory Z: How to Meet the Japanese Challenge,” said that Japanese businessmen view Orange County as “uniquely open” to them. “What it boils down to,” said the professor of management at UCLA’s graduate school, “is that when they think of Southern California, they think of open arms, but when they think of the Midwest and East, they think of arms folded.”
Auto company executives also credit a myriad of other factors. The widely divergent but highly trained work force in Orange County--along with the wide variety of housing--helped persuade Mitsubishi to locate here. Suzuki and Hyundai were attracted to Orange County, in part, by the availability of large office and industrial space and relatively reasonable prices. Among other things, Mazda liked the county’s freeway access. Also, Suzuki and Mazda both had divisions already in the area.
Life Style Plays Central Role
But life style seems to always play a central role. Two Asian auto firms, Mazda and Mitsubishi, have turned to Hergenrather & Co. for executive placement. Edmund Hergenrather, chairman of the Los Angeles search firm, said that Asian auto executives long to live and work in the “same strata” as their American counterparts. A home and job in Orange County shines as a symbol of that success, he said.
And Orange County--with its growing Asian population--certainly figures as a more accommodating spot than the Motor City. “They know they wouldn’t be welcomed in Detroit,” said John David Power, a Westlake Village-based auto industry consultant. “And they really do think about their employees’ life styles. They’re going to Orange County to get decent housing and schooling.”
“In Tokyo, people don’t even know who is living next door to them,” said Toshiyuki Arai, president of Suzuki of America Automotive Corp., which recently set up headquarters in Brea. “But in Orange County there is beautiful scenery, the air is good and people talk to each other. This is more like the countryside.”
Quality of Life
Mitsubishi had the entire West Coast to choose from--but it selected Orange County. “The weather in Los Angeles is the same as in Orange County,” said Richard Recchia, executive vice president and chief operating officer of Mitsubishi U.S.A., which moved to Fountain Valley from Los Angeles in 1983. “But there’s another kind of climate--like the quality of life--that attracted us to Orange County.”
“Planned communities coincide with our corporate image,” said William Zornek, who is facility planning manager for Mazda’s new headquarters facility under construction in one of the nation’s most carefully planned communities--Irvine. Mazda’s new, $15-million facility is scheduled to be completed in mid-1987. Its distribution arm moved to Irvine from Compton last year.
Auto companies suddenly rank among Orange County’s fastest-growing employers. Thanks to the growing number of auto distributors, the “wholesale trade” employment niche posted the highest percentage gain of any major industry job division in Orange County last year. The growth rate in that sector is 6.2%, nearly three times the 2.3% of all other local industries last year, reports the California Employment Development Department.
‘A Lot of Positives’
“You’ve got a lot of positives coming at you in Orange County,” said Joseph Phillipi, first vice president of research at E.F. Hutton in New York. “It wouldn’t surprise me if other importers ended up there, too.”
Two small Asian auto makers--Daewoo Corp. of Korea and Daihatsu Motor of Japan--will both eventually seek U.S. distribution bases. Spokesmen for both companies said Orange County could be considered.
Importers already situated in Orange County admit to stealing a number of their employees from the ready-made labor pool of Los Angeles auto importers. An estimated 5,000 workers are employed by the three big Japanese car distributors in Los Angeles County. Executives at Orange County car import firms say that snatching these workers doesn’t always require promotions or higher salaries.
Many are enticed by the simple fact that if they work for an Orange County auto importer, they can put an end to the long commutes to Los Angeles. Nearly half of the workers already live in Orange County, said Power, the auto industry consultant.
Trained Labor Pool
“If you put your headquarters in Seattle, you’d have to relocate a bunch of people,” said Jack Collins, director of marketing at Hyundai, which commissioned a costly study before locating its headquarters in Garden Grove last year. “But if you locate in Orange County, you have a trained labor pool of personnel.”
As a result, within a few years, more than 1,000 workers will be employed by Orange County’s Asian auto importers. A decade ago, these jobs did not exist.
The work force at Hyundai is expected to jump from 200 workers now to more than 300 by the end of the year. Mitsubishi, which started in Los Angeles with seven workers in 1982, now has 260 in Fountain Valley, and expects to see its work force jump to more than 300 when it moves its headquarters to Cypress in two years. Suzuki, meanwhile, employs 45 workers and envisions a payroll of 200 within a few years. And Mazda expects its payroll of 260 workers to expand to 330 within a few years.
These are not typical auto workers, however. They are marketing experts and administrative employees whose companies placed them here to lay the groundwork for U.S. expansion. “They don’t work on production lines. They are all relatively highly paid, highly skilled and they bring in a need for support services,” said Power, the auto industry consultant. Mitsubishi, for example, boasts an annual $37-million advertising budget, and Hyundai will spend $45 million on advertising this year.
Big Growth Predicted
Industry analysts foresee big growth for all of Orange County’s Asian auto companies.
Hyundai is the “fastest-growing importer ever in the car business,” Power said. Hyundai’s “Excel” is already the best-selling import in Canada, and the company expects to sell 100,000 units in the United States this year.
Already, Hyundai cars are available in 51 markets in 31 states. Industry analysts say Hyundai has amassed a surprisingly potent dealer network for such a comparative latecomer into the market.
Customers began placing orders for Hyundai’s $5,500 Excels a year ago, yet the company just began shipping them to the United States this month.
Rita Histen, a homemaker in Braintree, Mass., was the first to order an Excel. She heard about the car while watching ABC’s “Good Morning America” nearly one year ago. Histen was so impressed with the price tag that she immediately placed an order.
Her car is due any day.
“I told them to ship me any color but red because someone might steal a red one,” she said.
