UPDATED: 4/27/14 7:53 pm ET - adds HQ move, background
LOS ANGELES -- After 57 years of being based in the trend-setting Los Angeles area, Toyota Motor Sales U.S.A. is moving its sales and marketing headquarters to Plano, Texas, sources close to the matter said.
The move will occur in stages and take two years to complete, the people said. Most of Toyota's 5,000 Torrance-based headquarters management and employees will be affected, several Toyota insiders said.
The transition was announced to a small group of Toyota executives on Friday, and the rest of the staff will be told on Monday, the sources said.
Toyota chief spokeswoman Julie Hamp declined to comment on the matter, calling it “rumor and speculation.”
Calls and e-mails to Plano city officials were not returned.
The relocation would mark the second time a Japanese automaker has left a headquarters in California where U.S. sales operations were established in the 1950s. Nissan North America transferred to Nashville, Tenn., in 2006.
The automaker had been expected to announce details of a change in its marketing operations this week.
An overhaul was expected to go into effect on May 1, Automotive News reported in February. That report said 80 employees would be required to reapply for newly created positions or take a voluntary separation.
In February, Toyota said employee roles and responsibilities were being redefined to be more "integrated, flexible and efficient."
The automaker said those changes were necessary "in order to meet our future business needs, and support our dealers and guests more effectively."
At the time, Jack Hollis, vice president of marketing for the Toyota division, said the company's marketing ranks will likely grow in the near future.
But because the operating structure of the department would be changing, some current employees might not have skill sets that match the new organization, Toyota said.
Despite the deep, creative talent pool in greater Los Angeles, doing business in California has become more expensive for companies and their workers. The Los Angeles metropolitan area has been ranked ninth most-expensive in the United States by Expatistan; the greater Dallas area is 19th.
According to the Tax Foundation, California trails only New York and New Jersey as the worst for complex, non-neutral taxes with comparatively high rates. Esquire magazine ranked Los Angeles as the most-expensive city in America in which to live "well."
Forbes ranked Texas the seventh-best state for business, a measure that factored a No. 1 ranking for business climate and a 23rd-best ranking for business cost. California came in at 39th out of 50 states, with a 36th-place business climate and seventh-worst business cost.
As for employees, the cost of living is 39 percent higher in Torrance than in Plano, and housing costs are 63 percent cheaper in Plano, according to bestplaces.net. An equivalent $50,000 salary in Torrance would be $30,608 in Plano.
Plano has also ranked highly in “best places” and “safest cities” ratings conducted by CNN and Forbes.
Toyota doesn’t control the distribution of its own vehicles in Texas. Gulf States Toyota of Houston is the independent distributor for the region.
But Toyota already has a relationship with Texas with its $2.2 billion truck assembly complex near San Antonio. During the negotiations for the truck plant, several key Japanese Toyota executives became close with Texas state officials, a source close to Toyota said.
Southern California exodus
The move marks a continuing exodus of major automakers’ operations from Southern California. After nearly 50 years as Toyota’s neighbor down the street in Gardena, Nissan took 1,300 jobs to Nashville when it moved eight years ago. As much as $197 million in relocation assistance from Tennessee helped pave the way.
Ford Motor Co. moved U.S. operations for its Premier Automotive Group of brands -- Volvo, Jaguar, Land Rover and Aston Martin -- to Irvine, in south Orange County, in 2001.
But when Ford unloaded those brands, their U.S. operations returned back to New Jersey. The sales operations of American Isuzu closed in 2009, while American Suzuki left the U.S. market after its auto unit filed for bankruptcy protection in 2012.
Late last year, American Honda spawned talk of a company-wide move to Ohio when it restructured some of its core functions closer to its engineering and manufacturing base in that state.
The new Honda organization combined information systems, human resources, accounting, finance and other functions across to multiple Honda companies in North America into a firm called Honda North America Services.
The new organization also will “streamline coordination of Honda's r&d, manufacturing, purchasing and sales functions as they relate to the introduction of new products,” the company said in a statement at the time. Honda officials insisted that the move was not part of a larger framework to uproot the entire U.S. operations to Ohio.
After Nissan left Los Angeles, Toyota top executives insisted they would never leave the city.