Toyota Said to Plan U.S. Sales Move to Texas From California

Apr 28, 2014 11:50 am ET

(Updates with additional operations in seventh paragraph.)

April 28 (Bloomberg) -- Toyota Motor Corp. 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, people familiar with the matter said.

Employees will be informed of the plan today, said the people, who asked not to be identified disclosing private conversations. Steve Curtis, a Toyota spokesman, didn’t return a call on the matter.

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 fell 0.4 percent to 5,473 yen in Tokyo trading. The Toyota City, Japan-based company’s shares have dropped 15 percent this year. The automaker’s American depositary receipts rose 0.2 percent to $106.72 at 11:27 a.m. in New York.

Destination Texas

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 today, after the employee meeting. When Nissan Motor Co. moved its North American headquarters to lower-cost Tennessee in 2006, only 42 percent of employees initially chose to relocate.

Toyota’s former joint-venture plant in Fremont, operated for 25 years with the predecessor of General Motors Co., closed in 2010 and was sold to electric-car maker Tesla Motors Inc. Toyota also operates a small parts factory in Long Beach and has a large design studio, Calty, in Newport Beach.

The company’s new regional sales headquarters may be 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.

Lucy Nashed and Felix Browne, spokesmen for Perry, didn’t respond to e-mails on the matter.

Perry’s Commercials

Perry, in his final year as governor, began airing radio commercials in California during his March swing through the state that highlighted its high taxes.

“A year ago, I was here, in California, encouraging companies to look to Texas for expansion and relocation,” he said in the ad, paid for by a group called Americans for Economic Freedom. “Over the past year and a half, more than 50 California companies have announced plans to expand or relocate in Texas, creating more than 14,000 jobs.”

In February, Occidental Petroleum Corp. said it was splitting its operations, keeping a portion in California and setting up a new unit in Houston. Raytheon Co., a technology company that specializes in defense, last year moved its space and airborne systems unit to McKinney, Texas, from southern California.

Toyota Marketing

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 yesterday 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 ($18.3 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.

Earnings Outlook

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.

Auto Center

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 Motor Co., Hyundai Motor Co., Kia Motors Corp., Mazda Motor Corp. and Mitsubishi Motors Corp., 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 Co. also in Torrance, makes the region a hub of lending and loans for dealers and car buyers.

--With assistance from Darrell Preston in Dallas and Craig Trudell in Tokyo.