Toyota Motor Corp.'s move to Texas will mean the transfer of 3,000 marketing and finance jobs from its sprawling Torrance campus to a new North American headquarters.
The shift, announced Monday, is part of a strategy to consolidate corporate management on one campus near the company's Southern manufacturing hubs. It marks the second high-profile move of a major automaker from Southern California. Nissan moved its U.S. headquarters from Gardena to a Nashville suburb in 2006.
Some observers and California officials seized on the announcement to criticize what they said is California's business climate for high taxes and onerous regulations. But Toyota officials said the move to a Dallas suburb had nothing to do with cost-cutting and everything to do with fostering efficiency and collaboration.
"This is the most significant change we've made to our North American operations in the past 50 years," said Jim Lentz, chief executive of Toyota's North America region.
Toyota's announcement Monday surprised its workers.
"There's a lot of shock," said one employee, who declined to give his name. "They did a good job of keeping it secret.... My boss, a national manager, didn't even know."
A Southern California native and 23-year Toyota veteran, he was unsure whether he would move to Texas.
"People aren't angry," he said. "It's just a lot of sadness."
California officials were similarly taken off guard.
Toyota executives waited until Friday to tell Gov. Jerry Brown's administration of the planned exit, said Brook Taylor, deputy director of the governor's Office of Business and Economic Development. He declined to answer further questions on Toyota's departure.
Don Knabe, the Los Angeles County supervisor from the 4th District, which includes Torrance, said he first learned that Toyota might move over the weekend from rumors circulating on Facebook and Twitter. He emailed contacts at Toyota but said no one responded.
"I am very shocked," Knabe said. "Toyota is such a great corporate citizen."
He said state and local officials should conduct an "exit interview" with Toyota, to ask how California can better avoid "being a target for every other state."
The move will take place in phases over the next three years as the new headquarters is built at an office park in Plano, a Dallas suburb. All of Toyota's employees can transfer to the new office at their same salary and benefits. Toyota will pay for workers to visit Plano before they decide and will cover their relocation expenses.
The move affects about 4,000 employees nationally, including 2,000 at Toyota's sales and marketing arm and an additional 1,000 in its financial services operations, both in Torrance. Toyota will also close its engineering and manufacturing office in Erlanger, Ky., near the Cincinnati-area airport, and those workers will be offered jobs in Plano and other sites.
The car company will keep about 2,300 workers in California at its design studio in Newport Beach, a motor-racing division in Costa Mesa, a parts factory in Long Beach and at other facilities. But no Toyota workers will remain at the company's 2-million-square-foot office complex in Torrance. The company said it has not yet determined what it will do with the property.
The loss of thousands of well-paying jobs will be a big blow to Los Angeles County, which is still struggling to recover about 76,000 jobs lost during the recession, said Gary Toebben, chief executive of the Los Angeles Area Chamber of Commerce
"It's a very negative step back for the Los Angeles County economy," Toebben said. "If we lose another 3,000 jobs, that means 3,000 more jobs we have to recover."
The Toyota move will have a ripple effect on the Southern California economy as workers either hunt for other jobs or move out of California altogether, he said.
"My only hope is that this is a wake-up call for the state of California," he added. "We had this wake-up call when Nissan left, but I think everybody forgot."
The move of a big corporate headquarters feeds into the perception that California is unfriendly to businesses, said Esmael Adibi, a Chapman University economist.
"This has a very negative impact on the stigma that already exists about California," he said, "not just in terms of taxes but also regulations and labor laws."
Toyota's Lentz, however, told workers Monday that the move was driven by a desire to create an efficient management structure in a centralized headquarters.
In meetings with employees, Lentz described the move as a critical step in erasing divisions among Toyota's separate engineering, manufacturing, sales and financial operations. He said putting all those businesses on a single, state-of-the-art campus will improve communication and collaboration.
Toyota chose Plano because of its Central Time Zone location, proximity to airports serving all parts the U.S. and Japan, its cost of living, educational opportunities and cultural offerings, Lentz said.
Despite Toyota's pending departure, the auto industry remains well represented in California and an important source of jobs. Honda, which has its U.S. sales and marketing office, and 2,500 employees, in a complex not far from Toyota in Torrance, said it doesn't plan a move.
South Korean auto company Hyundai just moved into a new, $200-million North American headquarters in Fountain Valley and has about 2,200 Southern California employees. Kia, its sister company, and Japanese automaker Mazda have their U.S. headquarters in Irvine.
Other automakers including Volkswagen, Ford, General Motors, Tesla Motors and BMW have smaller footprints that include design studios, testing facilities and R&D centers in Southern California.
Toyota's move is an example of how big global corporations make location decisions, said James Rubenstein, an auto industry analyst and geography professor at Miami University in Oxford, Ohio. Companies that do business by the tens of billions of dollars annually make these type of moves for strategic reasons rather than tax incentives dangled by one state or another, he said.
"The world's largest corporations don't bend with the wind to the short-term political situation in any locality," he said.
Toyota did, however, collect on some of those incentives from Texas. The new headquarters will be a $300-million project, and the state will provide Toyota with $40 million in incentives, according to Gov. Rick Perry's office. Plano also is offering the automaker an incentive package that is likely to include property tax abatement, cash and waivers on building and construction fees. The details will be released next month.
Plano started talking with Toyota about three months ago, after Perry and other state officials started to court the automaker, said Mayor Harry LaRosiliere, the city's mayor.
The automaker doesn't plan layoffs, although it knows that not every worker will make the move. Only 42% of Nissan's Southern California employees moved when it relocated its U.S. headquarters to Tennessee in 2006.
A small contingent of Toyota workers will move to Plano this year, followed by hundreds next year. Most employees will go when the campus is completed in late 2016 or early 2017.
Those who make the move will be given a "retention" bonus. Those who decide not to move, but who stay with the company until the move is completed, will also receive a bonus.
The move will cement what Rubenstein called a "Southern strategy" for Toyota. It builds the Camry and Avalon in Kentucky, the Corolla in Mississippi and the Tundra and Tacoma pickup trucks in Texas. It also has a big engine plant in Alabama.
Although the company is successful at selling passenger cars in the U.S., it has never gained the traction in the truck market 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," Rubenstein said. "Texas is where they think they can learn more about what big-truck buyers want in their vehicles.... They already have California in its back pocket. Priuses are next to godliness in California."