Toyota Leaving High-Tax California for Texas; Big Three Networks Ignore Development
Yesterday the Toyota Motor Corporation announced it would move its U.S. headquarters from Torrance, California, to Plano, Texas. Closing his report on the development, Tim Reid of Reuters noted the reaction of a Torrance business owner who doubtless counts many Toyota employees as loyal customers. "The taxes are lower in Texas. There are fewer regulations. It's cheaper for a company there. Why wouldn't they leave California?" shrugged Frank Portillo, the owner of a nearby Mexican restaurant.
While Toyota's forthcoming move is a huge economic and PR development for prospective 2016 presidential candidate Gov. Rick Perry (R-Texas) and a major embarrassment for liberal Democratic Gov. Jerry Brown (D-Calif.), a search of Nexis and our DVR recording system shows the Big Three networks -- ABC, CBS, and NBC -- ignored the story on both their April 28 evening newscasts and their April 29 morning news programs.
Writing at Forbes.com, contributor Dale Buss explained why the move was a no-brainer. It's not solely because of tax and regulatory regimes, but those things most certainly don't hurt (emphases mine):
A half-century ago, Toyota and other Japanese brands clustered in southern California when they began their assault on the U.S. market because California offered the single best market opportunity for Asian brands coming to America and because the state’s location closest to Japan made logistics easiest.
For most of the time since then, California’s justified reputation as America’s automotive, societal, cultural, and economic bellwether continued to ratify the Japanese brands’ focus there. Consider how Toyota was able to grow its Prius hybrid line into the segment’s dominant brand by starting with an emphasis in California.
But now Toyota and most of it Japanese rivals are treating North America like their domestic market — meaning that a California lens isn’t always the best one. Maybe a new headquarters in Flyover Country will be.
Toyota’s oldest U.S. manufacturing operations, for example, are in Georgetown, Ky. The company now is making Corollas in Mississippi and exporting them to Latin America. It produces vehicles from Indiana to Alabama. And Toyota performs much of its engineering work in Michigan.
Plano is closer to all of those places than Torrance is. And while there’s still a significant divide between Toyota’s engineering and manufacturing operations, and the sales and marketing folks, the changing nature of the auto business means they need to get closer all the time.
Nissan made the first such move anyway, leaving its U.S. sales headquarters in California and relocating Nissan North America to Nashville in 2006.
Besides, California’s business climate is becoming an even bigger downer. California has become infamous with business executives and owners there not only for high tax rates and complex taxing schemes but also for overzealous regulations and regulators that have managed to stifle the entrepreneurial energy of thousands of companies.
Even Hollywood movie studios have been souring about producing flicks in California, increasingly reckoning that the sweet tax breaks and assistance packages now offered by so many other states offset the legacy advantages and ideal production climate in California.
About the only vast remaining pocket of dynamism in the California economy is Silicon Valley, where the mastery of the global digital economy by companies ranging from Google GOOG +1.88% to Hewlett-Packard HPQ +2.33% has become so complete that they have been able to succeed despite the home-state business landscape.
In the annual Chief Executive magazine “Best States / Worst States” ranking that surveys CEOs for their opinions, Texas has been holding on to the No. 1 spot for a while; California seems permanently relegated to No. 50.
As Automotive News put it, “Despite the deep, creative talent pool in greater Los Angeles, doing business in California has become more expensive for companies and their workers.” Bestplaces.net said that the cost of living for employees is 39 percent higher in Torrance than in Plano, and housing costs are 63 percent lower in Plano.
Thus, over the last 10 years, the Lone Star State has stolen so many jobs from the paragon of the Pacific Coast that Toyota’s reported move should come as no big surprise.