Toyota move to Texas is more about culture change than incentives

Toyota believes it can make faster decisions by being closer to factories in Texas.

May 1, 2014   by The Canadian Press

DETROIT — Toyota’s move from Los Angeles-area offices to a new US headquarters in Texas is likely about more than tax incentives.

The company has been criticized for turning out dull-looking cars with appliance-like handling. Some experts say Toyota is after people with fresh ideas to shake up its culture and reverse a five-year slide in market share.

“Texas is known for being bold. It’s not a subtle state,” says Art Wheaton, an auto industry expert at Cornell University.

Texas lured Toyota with $40 million in incentives. And the 3,000 employees moving just north of Dallas over the next two years will be closer to factories in Texas, where Toyota believes they can make faster decisions.

Toyota moving its US headquarters from California to Texas

Still, at least for the short term, the Japanese automaker’s US operations will remain heavily dependent on California, where it sells 22% of all cars, according to consulting firm IHS Automotive. Toyota had three of the top five bestselling vehicles in the state last year: the Toyota Prius hybrid, the midsize Camry and the compact Corolla.

Nationwide, however, Toyota’s market share has dropped almost four percentage points from 17.8% in August of 2009. Each market share point is worth about 160,000 vehicles.

When Toyota announced the move to Texas this week, some Internet wits joked that the Japanese automaker would finally discover America. That’s a stretch. Toyota has been selling cars in the US for almost 60 years, and it has factories all over the country. But it’s true that the freeways in Texas look a lot more like the rest of America than California’s freeways do.

In Texas – and the country as a whole – Ford’s F-Series and Chevrolet Silverado pickup trucks were the bestselling vehicles last year. Chrysler’s Ram pickup wasn’t far behind. The Toyota Camry and Nissan Altima were the only two cars among the top five in Texas last year.

Toyota sold 14% of the 1.4 million vehicles that moved off dealers’ lots in Texas, according to IHS. General Motors had the highest share in Texas at 20%.

Wheaton says Toyota has been stymied by mundane designs and lacklustre marketing for at least a decade. Since many workers won’t relocate, the company will get an influx of talent and new thinking.

“I think it’s saying ‘OK, we need a fresh start. Let’s have some new ideas,”’ he says.

When Nissan changed its US headquarters from California to Nashville in 2008, 68% of the workers refused to move. Toyota knows that number, Wheaton says, and figures on getting new engineering, marketing and other talent from Texas universities and its tech and aerospace industries.

Nissan changed after the move. Its top-selling car, the midsize Altima, got a bold design and crisper handling, and is “one of the vehicles that is eating Toyota’s lunch,” Wheaton says. The Altima’s share of the midsize car market rose by 0.5 percentage point to 8.9%, according to AutoData, while the Camry’s remained flat at 11.3%.

© 2014 The Canadian Press

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