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Toyota moving US base from California to Texas

Plano mayor says Toyota negotiations were nonstop
PLANO, Texas (AP) — The mayor of the Dallas suburb that will be the new home of Toyota's U.S. headquarters says negotiations with the company have been nonstop since February.

Plano Mayor Harry LaRosiliere said at a news conference Monday, "Obviously, something like this is years in the making but over the last three months, we've been a major part of the conversation."

Toyota announced Monday it would move its U.S. headquarters from California to the Texas city located about 25 miles north of Dallas.

Sally Bane, Plano's director of economic development, says when Toyota began to hone in on Texas, the city started an aggressive marketing campaign, including hiring a private consultant to help convince


Toyota to move to Plano.

Texas offered Toyota $40 million in incentives from the taxpayer-funded Texas Enterprise Fund.
Toyota shift is good for Texas 
By Alan Ohnsman
(c) 2014, Bloomberg News.
LOS ANGELES — Toyota is moving substantial parts of its U.S. headquarters in Torrance, California, to suburban Dallas as the world's largest automaker seeks savings from its U.S. sales unit,.

Employees were informed of the plan Tuesday. 

The surprise move is 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. It also represents a victory for Texas Governor Rick Perry, who's made repeated visits to California to lure businesses to his state with promises of lower taxes and easier regulations.

"It would be very consequential for Southern California," said Jack Nerad, executive market analyst for vehicle-price data service Kelley Blue Book in Irvine, California. "There might be some brain drain and tumult for employees, though it should be largely seamless to the consumer. This kind of thing can create some disruption of momentum."

Toyota has more than 5,300 California employees, most at its Torrance campus in sales, finance, marketing, engineering and product planning. Details on which functions will move and when may be announced as soon as Tuesday, after the employee meeting. When Nissan Motor Co.'s moved its North American headquarters to lower-cost Tennessee in 2006, only 42 percent of employees initially chose to relocate.

Toyota City, Japan-based Toyota may base its new regional sales headquarters in or near Plano, Texas, said three of the people who asked not to be named as the plan isn't yet public. The majority of Toyota's Torrance operations may move to Texas over a two-year period, the people said.

While Texas is home to Toyota's pickup truck plant in San Antonio and a General Motors Co. factory in Arlington, the state traditionally hasn't been a center of auto industry activity.

Separately, Toyota said it's restructuring the Torrance- based U.S. marketing organization as part of an efficiency push without detailing how many jobs may be eliminated. Some employees are being reassigned to other parts of the company and there is a "voluntary exit program" for people who choose to leave, Toyota said Monday in a statement. The revamped marketing unit will begin operating from May 1.

Toyota's decision to scale back in California, where it established operations in 1957, comes as the company expects to report a record 1.87 trillion ($18.9 billion) of net income when it releases fiscal year results next month. Along with rising sales in North America and other international markets, Toyota's earnings this year are benefiting from a decline in the value of the yen, which surged in 2011.

Since the company made that forecast, it agreed to a $1.2 billion fine to settle a U.S. Justice Department investigation into how it delayed recalling popular models after complaints of unintended acceleration.

U.S. sales for Toyota last year totaled 2.24 million cars and light trucks, off a record 2.62 million in 2007. Combined sales for the carmaker's three brands fell 1.6 percent to 520,997 in the year's first three months.

Toyota Motor Sales USA and Toyota Financial Services, based in Torrance, in suburban Los Angeles have more than 9,400 U.S. employees. Torrance is home to Toyota's Lexus and Scion lines, as well as its namesake brand.

Additional Toyota units in Torrance include parts and logistics operations to support dealers. The company's Toyota University training center is nearby.

Southern California rivals Michigan as a U.S. automotive center. While it lacks large-scale vehicle manufacturing, the region has U.S. sales and marketing headquarters for Honda, Hyundai, Kia, Mazda and Mitsubishi, along with Toyota. It is also the nation's top automotive design center with 14 major studios, the largest concentration in the U.S.

Toyota Financial Services, the biggest auto finance company in the U.S., and Honda's American Honda Finance also in Torrance, makes the region a hub of lending and loans for dealers and car buyers.

— With assistance from Darrell Preston in Dallas.

TORRANCE, Calif. (AP) — 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, 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 approximately 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, which is 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 approximately 250 parts procurement positions there from Georgetown, Ky., where the Camry and Avalon sedans are made. That will free up space for approximately 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," said Lentz.

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.

"Some people believe that with a big cultural shift like that, you shake up the tree, bring in new blood," he said. "But the negative side to that is that you lose centuries of institutional knowledge, and that's so hard to get back. It takes you back four or five years."

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. As part of that process, Lentz settled on the idea of a combined headquarters last April or May.

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.

Lentz said the company ultimately came up with a list of 100 possibilities that it whittled down to four.

"As we visited those four primary locations, it became quite clear that the Dallas metro area was far and above the best choice," Lentz said. He wouldn't disclose the other three finalists.

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.

Kentucky Gov. Steve Beshear said his state would have welcomed an opportunity to discuss options with Toyota.

"Obviously, we are extremely disappointed by Toyota's decision," he said.

Torrance Mayor Frank Scotto, who was informed of the move Monday morning, also said he was "saddened."

"We thought it was going to be part of Toyota, not everything," Scotto said at a press conference. "They didn't mislead us; they just didn't answer the questions."

Toyota said it will donate $10 million to nonprofits and community organizations in California and Kentucky on top of any existing commitments. Those funds will be distributed over five years starting in 2017.

Lentz said Toyota expects to keep more employees than Nissan did because of a generous package of benefits for those who stay. Any employee who wants to move will be given a relocation package and retention bonus, he said. The company is also offering to send employees and their spouses or partners to look around the new locations.

"Any one of our associates that raises their hand, they will have a job at the new location," he said. "Everything we are doing is encouraging people to go."

Lentz told employees about the changes Monday morning in a large conference room in Torrance. The announcement was broadcast elsewhere. He said it should help that most employees will have two or three years to plan their moves.

"They understand the business decision. It's a little bit of a shock in the beginning to people. They're trying to understand, what does this mean for me, what does this mean for my job," he said. "We made it very clear to them that we want them to come along with us."

Lentz said he didn't yet know when he will move to Plano, but it could be later this year or early next year. Lentz said he only spends three to four days per month in his California office.

"My time is all over the place. Where I live doesn't make a whole lot of difference," he said.

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. Plants in Mississippi, Texas and Indiana aren't affected by the moves.

Toyota has had a presence in California since 1957, when it opened its first U.S. headquarters in a former Rambler dealership in Hollywood. The following year — Toyota's first in the U.S. market — it sold 287 Toyopet Crown sedans and one Land Cruiser.

By 1975, Toyota had become the top import brand in the U.S. It opened its current U.S. headquarters in Torrance in 1982.

Toyota sold 2.2 million cars and trucks in the U.S. last year.

Dominique said the placement of the headquarters probably won't have much impact on Toyota's sales in California, which is a critical market for the automaker. The Toyota Prius hybrid was the best-selling vehicle in California last year, and Toyota controlled 22 percent of California's new car market.

"From a consumer's point of view there won't be much change," he said.


Associated Press writer Gillian Flaccus contributed from Torrance.

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