California City of Torrance Grapples With Toyota Relocation to Texas
Giant Auto Maker Is Moving 3,000 Jobs to New North American Headquarters


By TAMARA AUDI and MIKE RAMSEY CONNECT
April 30, 2014 8:37 p.m. ET
A car rides past Toyota's campus in Torrance, Calif. Orange County Register/Zuma Press
Five weeks ago, Torrance, Calif., Mayor Frank Scotto was celebrating the opening of the city's new athletic fields with officials of Toyota Motor Corp. 7203.TO +2.23% The city's biggest employer and a prime benefactor had given a half-million dollars toward the project.

This week, Mr. Scotto has had a less pleasant duty to perform: Figuring out how Torrance can fill the 101-acre hole the giant auto maker will leave behind when it vacates its sprawling campus and moves 3,000 jobs to a new North American headquarters in Texas.

Toyota's decision to consolidate much of its U.S. operations in Plano, Texas, by 2017, officially announced Monday, caught Mr. Scotto by surprise. Toyota's own employees in Torrance were informed just minutes after the mayor got a courtesy call. State of California officials, too, had been in the dark about the move, which Toyota had been exploring for the past year.

"It was a shock," Mr. Scotto said, though he had heard reports rumoring the move. "We didn't realize the magnitude of what it was."

Torrance Mayor Frank Scotto speaks with reporters after the auto maker announces it is relocating its North America headquarters to Texas. Reuters
Toyota kept its search for a new North America headquarters quiet, according to people familiar with the matter. Even some top-tier executives at the company had no idea the move was coming until just a day before it was announced.

California was never considered in the search for a new headquarters site, these people said, but its location—far from Toyota's other operations in the U.S.—was a bigger factor than its business climate, which has been criticized by some for its high taxes and myriad regulations.

In an email Wednesday, Jim Lentz, chief executive of Toyota's North American operations, said: "The business environment had nothing to do with the decision to leave California."

Mr. Lentz also said he didn't want to have the new headquarters in any location where there already was a divisional headquarters, which put California, Michigan and Kentucky out of the running.

People familiar with the search for the new U.S. headquarters said each of the final locations considered—Atlanta, Charlotte., N.C., Denver and suburban Dallas—had factors the company required: a major airport, good quality of life, relative proximity to Toyota's other U.S. operations, and not in the shadow of Detroit, where America's Big Three auto makers are headquartered.

Another factor: the site had to be near affordable housing and high-quality schools.

Dallas's two airports—particularly Dallas/Fort Worth International Airport—were a key influencer in the final decision, the people said. They will give Toyota employees direct-flight capability to any of its U.S. plants and Japan, while remaining closer to families in California than other hubs like Atlanta and Charlotte.

Mr. Lentz has cited Texas' business-friendly climate, as well as no personal income tax. He also said California wasn't offered an opportunity to counter Texas' offer, saying to do so would have been "disingenuous" since the decision to leave that state had been made.

Neither Gov. Jerry Brown's office nor his office of business and economic development would comment on whether any effort was or would have been made to persuade the company to stay. While Mr. Brown acknowledged some of the challenges businesses face in his state in comments this week, his administration pointed to a number of companies, including Amazon.com AMZN +1.24% and Genentech, that are expanding operations there.

Some critics have said that the decision by Toyota should serve as a wake-up call and urged California to stem corporate departures, attract more businesses, and reduce the cost of living.

"While we are not certain why Toyota is moving jobs, in California, excessive litigation, overregulation, and high taxes are factors for both the employer and the employees in making location decisions," Allan Zaremberg, president and CEO of the California Chamber of Commerce, said in a statement.

Toyota's U.S. sales unit has been based in Southern California since 1957, where it located to be close to the Port of Long Beach, where its cars arrived from Japan. Proximity to Japan was also key because most of its employees then were Japanese. It moved to its 101-acre Torrance campus in 1982.

Toyota has been an integral part of this city of about 150,000 people south of Los Angeles ever since, active in both its philanthropies and schools. One of the city's most popular venues for wedding and birthdays is the Toyota Meeting Hall, a ballroom that is part of the city's cultural center.

City officials are still working to grasp the full impact of the loss, said Fran Fulton, the economic development manager for the city.

According to its latest business-license filing, the auto maker employs 3,929 people in Torrance, and the company pays $1.2 million annually in taxes and fees. Torrance's next-largest employer is rival auto maker Honda Motor Co. 7267.TO +1.60% , with 1,615 employees.

Toyota said it plans to keep about 2,300 workers in other Southern California facilities, working in divisions including design, motor-racing and a parts factory.

The city's first order of business will be to find tenants for the huge Toyota campus, Mr. Scotto said. A list of talking points that the city quickly worked up after the announcement is topped with: "TORRANCE IS A BUSINESS FRIENDLY CITY."

Toyota's U.S. sales unit has been based in Southern California since 1957, where it located to be close to the Port of Long Beach, where its cars arrived from Japan. Proximity to Japan was also key because most of its employees then were Japanese. It moved to its 101-acre Torrance campus in 1982.