TORRANCE, Calif. – Toyota is moving its U.S. headquarters from California to Texas to get closer to its Midwest assembly plants and improve communication between units now spread over several states.
Toyota will break ground this year on a new environmentally friendly headquarters in Plano, Texas, about 25 miles north of Dallas. Small groups of employees will start moving to temporary office space there this year, but most will not move until late 2016 or early 2017 when a new headquarters is completed.
The new campus will bring together about 4,000 employees from sales, marketing, engineering, manufacturing and finance. That includes 2,000 employees at the current headquarters in Torrance, Calif.; 1,000 employees at Toyota Financial Services, also in California; and 1,000 employees from Toyota’s engineering and manufacturing center in Erlanger, Ky.
Toyota also plans to expand its technical center near Ann Arbor, Mich., and move about 250 parts procurement positions there from Georgetown, Ky., where the Camry and Avalon sedans are made. That will free up space for about 300 production engineers to move from Erlanger to Georgetown.
Jim Lentz, Toyota’s CEO for North America, said the new headquarters will enable faster decision making. It’s one of the most significant changes in Toyota’s 57-year history in the U.S., Lentz told the Associated Press.
“We needed to be much more collaborative,” Lentz said.
Larry Dominique, the president of ALG, an automotive consulting and forecasting firm, said Texas is a cheaper place to do business than California, which has higher corporate taxes and more onerous work rules like paid family leave. But, he said, Toyota could be hurt by a brain drain if employees choose not to go.
Dominique, a former executive with fellow Japanese automaker Nissan Motor Co., said Nissan lost 68 percent of its workforce when it moved from California to Tennessee in 2008. The disruption can also cause the company to lose momentum, Dominique said.
Lentz said the cost of doing business in California wasn’t a factor in Toyota’s decision. Lentz, who became Toyota’s first CEO for the North America region in 2013, said Toyota President Akio Toyoda encouraged him to think of ways to make North America more self-reliant. Lentz settled on the idea of a combined headquarters last spring.
The company decided not to locate in California because it was too far from its plants in Kentucky, Indiana, Mississippi and San Antonio, Texas. Kentucky was rejected because Erlanger wasn’t big enough, and Ann Arbor was rejected because it was too close to Detroit rivals like General Motors and Ford.
Texas Gov. Rick Perry said the state offered Toyota $40 million in incentives from the taxpayer-funded Texas Enterprise Fund. Perry, who made two visits to California to lure Toyota, said Texas expects Toyota to invest $300 million in the new headquarters.
Toyota will continue to have about 2,300 employees in California and 8,200 employees in Kentucky after the moves are complete. The company will also maintain offices in New York and Washington, D.C. Plants in Mississippi, Texas and Indiana aren’t affected by the moves.