Toyota Leaving California for Texas in Search of a Better Corporate Culture or Something

Wednesday, April 30, 2014

Toyota is moving its marketing and sales headquarters from Torrance in Los Angeles County to Plano, Texas, and transferring 3,000 positions to California's noisiest competition for jobs.

Texas Governor Rick Perry has boasted about his state's effort to undercut the economy of California—which Governor Jerry Brown called “barely a fart”—by offering the kinds of incentives corporations have trouble resisting. Upon the announcement of the move by Toyota Monday, Perry hailed his state's “employer-friendly combination of low taxes, fair courts, smart regulations and world-class workforce.”

That translates for some into fewer government services, corporate-friendly courts, little oversight of corporate behavior and a cheap, intimidated workforce. One could also add a lot lower workmen's compensation fees and lower insurance costs (and payouts). “Low taxes” includes no income taxes.

Texas also tossed in $40 million worth of incentives—corporate welfare, in some quarters—from the Texas Enterprise Fund, which Forbes writer Dale Buss called “chump change.” Tennessee recently offered Volkswagen $300 million if it would build a new assembly plant in the state after giving Nissan $182 million worth of incentives in 2005, when the company put its North American headquarters there. 

Toyota downplayed all of that and indicated the move was part of a larger change in the corporate culture to put sales and manufacturing in the same place as corporate operations. “If I can have supply and demand sitting next to each other, with information in real time, and collaborating with each other, that makes us a stronger player,” North American CEO Jim Lentz told Automotive News.

For now, Toyota is leaving about 2,300 engineers and designers in Torrance. Presumably corporate operations will want to hear something in the future from the people responsible for how their products work. That may not have been the case so much in the past, perhaps accounting for the sudden-acceleration scandal that has enveloped the company the past four years. Its cars careened out of control for want of a fairly cheap fix known about for years.

Last month, Toyota agreed to pay a $1.2-billion penalty after settling with the U.S. Department of Justice (DOJ) over accusations it covered up deadly safety problems to save a few dollars and then lied to everyone about it, including Congress. Although $1.2 billion is not chump change, the company has cash reserves of $59 billion. No one is going to jail.

Toyota is also bringing employees from New York City and Kentucky to Plano, about 19 miles north of Dallas. Although Toyota said corporate restructuring was the impetus behind the moves, it considered 100 cities, according to Forbes before narrowing its search to Texas, Denver, Atlanta and Charlotte.

The competition is stiff between the states to see who can expend the most public resources and otherwise accommodate corporations. A survey by the New York Times estimated that the states lose around $80 billion a year in corporate tax revenues alone while also granting cash, free use of public buildings, property tax exemptions and other inventive incentives. Jack Rasmus at Counterpunch said that annual largesse since 2009 has come while states cumulatively piled up $581 billion in budget shortfalls between 2008-2012.

The race to the bottom between states in competition for jobs mirrors the large globalization of markets that values a short-term bottom line over most any other consideration. It's a race that California competes in but, so far, without the intensity and singleness of purpose evidenced by states like Texas that drive down labor costs with right-to-work laws and eviscerate regulatory oversight.

–Ken Broder   


To Learn More:  

Toyota Withdrawal a Bombshell, Economic Blow to California City (by Tim Reid, Reuters)

Toyota to Move Jobs and Marketing Headquarters from Torrance to Texas (by Jerry Hirsch and David Undercoffler, Los Angeles Times)

Toyota’s Texas Shift Reignites Debate over California Business Climate (by Dale Kasler, Sacramento Bee)

It's Not About Incentives: Toyota's Texas Move Is a Corporate-Culture Gambit (by Dale Buss, Forbes)

As Companies Seek Tax Deals, Governments Pay High Price (by Louise Story, New York Times)

Race to the Bottom (by Jack Rasmus, Counterpunch)

Feds Hit Toyota with Car Industry Record Penalty for Hiding and Lying about Safety Problems (But No Jail Time for Anyone) (by Noel Brinkerhoff, AllGov)

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