Toyota Motor Corp. will consolidate its far-flung U.S. operations at a 70-acre campus in Plano, bringing up to 4,000 employees to North Texas.
The announcement Monday confirmed a weeklong rumor that Toyota’s U.S. sales and marketing operations would leave Torrance, Calif., for a new campus-style facility in Plano.
The Japanese automaker added to that, however, with news that its engineering and manufacturing division in Erlanger, Ky., will also move to Plano.
The employees — many of them longtime, well-paid workers — will begin arriving this year and come in waves through 2017.
“With our major North American business affiliates and leaders together in one location for the first time, we will be better equipped to speed decision-making, share best practices and leverage the combined strength of our employees,” Jim Lentz, CEO of Toyota North America, said in a statement.
The move will affect 2,000 employees at Toyota Motor Sales in Torrance, 1,000 at Toyota Motor Engineering & Manufacturing in Erlanger and 1,000 at Toyota Financial Services in Torrance, the automaker said, plus employees from Toyota’s New York office.
One incentive for Toyota — besides consolidating in an Apple-style campus in Legacy business park — was a $40 million cash incentive from the Texas Enterprise Fund.
The company will break ground for its facility this fall and expects to complete it in two years.
Although Toyota did not specify the cost of the project, Gov. Rick Perry said the automaker will make a $300 million capital investment in the project.
Perry, who earlier went to California to tout the state’s pro-business environment, noted in his announcement of the move Monday that Texas “can help businesses of any size succeed and thrive.”
Toyota already has a pickup truck plant in San Antonio that employs 2,900 people.
“We’re proud that both the Tundra and Tacoma [pickups] bear the words ‘Made in Texas,’ and we’re excited our state will be the nexus for Toyota’s North American operations moving forward,” Perry said.
Mike Rosa of the Dallas Regional Chamber said in a statement that business executives such as oilman Ray Hunt and Sean Donahue, chief executive of Dallas/Fort Worth International Airport, worked for months on the effort, even though they were unaware of the company’s identity.
The move will have a huge impact on area housing as well as retail, restaurants and service businesses.
But it will also pump up sales at Toyota dealerships throughout North Texas, said Pat Lobb, owner of Pat Lobb Toyota in McKinney and one of the area’s largest auto retailers.
“We’re doing the happy dance over here,” Lobb said. “You’ve got thousands of people and their families moving here, most of them presumably driving Toyotas. There will be a tremendous market-share gain with this.”
Somehow, analysts said, Toyota managed to keep the move quiet until just a few days ago.
It was disclosed to a small group of Toyota executives on Friday and to all employees on Monday, stunning many of them.
Toyota started its U.S. operations in California in 1957 and has long seemed an integral part of the state.
But while the automaker is still highly profitable, it needs to cut costs, analysts said, and California is a tough place to economize.
Toyota’s U.S. sales fell 1.6 percent in the first quarter. And while it sold almost 2.24 million vehicles last year, that was down more than 14 percent from the company’s U.S. peak in 2007.
Jack Nerad, a senior analyst at Kelley Blue Book in Irvine, Calif., said the move has to make great economic sense to Toyota, a “very conservative” company.
But it has the potential to be disruptive, particularly if large numbers of employees refuse to leave California.
When Nissan left California for new quarters in Tennessee in 2006, only 42 percent of its employees agreed to move.
Some Toyota employees might have the option to stay since Mazda, Honda, Hyundai and Kia all have significant operations in Southern California.
“There is a real potential disruption and brain drain,” Nerad said. “A lot of people at Toyota are considering their options, as opposed to doing real work right now. There’s a real or perceived culture change between Torrance and Plano, and people will have to decide whether they go or stay.”
Toyota will offer full-time employees and their spouses an expense-paid visit to Plano as well as a lump-sum payment if they choose to relocate, according to Automotive News.
Texas landed Toyota because it has no state income tax, lower housing costs, a strong pro-business stance and solid quality-of-life ratings, analysts said.
The cost of living in Plano, for example, is 31 percent lower than in the Los Angeles-Long Beach area, which includes Torrance.
At a news conference Monday, Plano Mayor Harry LaRosiliere hailed Toyota’s move as a “great day for the state of Texas, a terrific day for Collin County and the Dallas-Fort Worth region, but a fantastic day for the city of Plano.”
LaRosiliere said Perry, Lt. Gov. David Dewhurst, House Speaker Joe Straus and the Dallas Regional Chamber “brought this project to fruition.” Plano officials became involved in the discussions three months ago.
While the Texas Enterprise Fund offered Toyota $40 million, the mayor declined to discuss the incentives Plano is offering until May 12, when the City Council is to vote on the package.
Over 10 years, the project will generate more than $70 million in property tax revenue and more than $70 million in sales tax revenue, LaRosiliere said.
Jesse Toprak, chief analyst at Cars.com, said he thinks cost-cutting might have been secondary in Toyota’s decision to move, “though I doubt anyone at Toyota would admit it.”
The automaker sells well on the West and East coasts but is not as strong in the middle of the U.S.
“Nothing is more American than Texas, and Toyota wants to establish itself as a heartland company, particularly since it’s already conquered both coasts,” Toprak said. “I think there were some strategic considerations here.”
The move also puts Toyota closer to most of its manufacturing plants, analysts said.
The company has factories in Tupelo, Miss.; Georgetown, Ky.; San Antonio; Princeton, Ind.; Huntsville, Ala.; and Buffalo, W.Va.
The relocation will not affect Gulf States Toyota in Houston, which has been the Southwest regional distributor of new Toyota vehicles since 1969 .
Gulf States is responsible for taking dealer orders for vehicles, getting them filled and delivering the vehicles.
“We’re excited about their coming to one of the biggest states we serve,” said Marty Collins, president and general manager of Gulf States. “Dealers are just overwhelmed with the prospect of Toyota coming into the area, and it gives us an enormous footprint in the Dallas-Fort Worth area.”
Staff writer Wendy Hundley contributed to this report.
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