The Long Goodbye
By summer 2017, Toyota Motors Company will pack up the Prius and head to Plano, Texas, after 60 years in Southern California.
- Written byMichele Garber
It’s said that the only thing certain in life besides death and taxes is change. Change is inevitable. And so after almost six decades in Southern California, the time has come for Toyota to make a change. A big one … a Texas-size one. As the world’s largest automaker moves its operations to the Lone Star State, Torrance must bid sayonara to its largest employer, as thousands of South Bay residents pack up and move halfway across the country.
Rumors had been circulating for months, but the denials were consistently adamant and swift. Then on a seemingly average Friday afternoon in late April 2014, with no warning or fanfare, Torrance mayor Frank Scotto got the call.
The speculation was true. The following Monday, Toyota Motors North America would announce that the company was pulling up stakes and relocating its Toyota Motor Sales headquarters to the Dallas suburb of Plano, Texas. The stunning news sent shockwaves from the South Bay to Sacramento.
Toyota’s relocation is sure to have sweeping effects on the community in myriad ways. There are the obvious impacts: job losses and reductions in state and local tax revenues.
Then there less quantifiable, multiplier effects. Toyota’s departure will likely have a ripple effect throughout the community, potentially impacting the real estate market, local charities and countless local businesses— from office suppliers and ad agencies to hotels and restaurants.
Not all of the consequences of the move will necessarily be negative. There are potential upsides, perhaps even reasons for optimism. Regardless of the possible outcomes, when the issue is thoroughly distilled, this is a human story.
Toyota’s departure ultimately affects people: colleagues, families, friends. It is these real people, these souls who form the tapestry of our community, whose stories should be considered. Toyota’s move may tug on the thread of our communal fabric, but we do not have to unravel.
Toyota established its Southern California headquarters, Toyota Motor Sales USA, in Hollywood in 1957. Though it took a bit of time for the brand to catch on, within 10 years Toyota was the third best-selling import brand in the U.S.
In 1982 Toyota relocated its headquarters to its current campus in Torrance. The city’s proximity to LAX, the 405 and the twin ports of Long Beach and Los Angeles made Torrance an ideal location. Indeed many Japanese companies were attracted to the Southland by these conveniences as well as the region’s large population of Japanese-Americans, which provided them with a bilingual workforce.
Not long after Toyota moved in, Nissan, Honda and other Japanese companies followed suit. For years the big three Japanese automakers were all based in the area, until Nissan moved its Gardena headquarters to Tennessee in 2005.
Honda is still headquartered in Torrance and assures the community that it has no plans to leave, but rumblings of a move to Ohio persist—and many locals remain understandably skeptical. Southern California remains home to the headquarters of other notable Asian automakers including Mitsubishi, Mazda, Hyundai and Kia.
Over time Toyota’s reasons for staying in California have waned, while compelling reasons to relocate have mounted. It has become incredibly expensive to do business in California. High sales, property and corporate taxes, as well as high energy costs and a draconian regulatory system have prompted many businesses to flee the Golden State.
Texas, on the other hand, has hung its Lone Star on being business-friendly. Texas makes no secret of its efforts to lure businesses away from California and other high-tax states.
Yet financial considerations were not the primary motivator in Toyota’s decision to relocate. To be sure, Texas is giving Toyota generous financial incentives to move there, but it was not the highest bidder. North Carolina offered Toyota financial incentives double that of Texas, but Toyota still chose Plano over Charlotte, underscoring that the move is about more than money.
In fact Toyota is spending an unprecedented amount on construction, relocation and retention packages to support its relocation. Unlike Nissan, which left California specifically to cut operating costs, Toyota’s move was prompted by a desire to restructure its entire North American operation and overhaul its corporate culture.
For decades Toyota’s operations have been spread throughout the U.S., making it challenging to operate cohesively and efficiently as one company. According to Steven Curtis, VP of corporate communications, “We were looking at how to best position the company to succeed in the future. We were thinking about the next 50 years.”
By bringing together all of its operations in one location, Toyota hopes to create a more collaborative culture, improve communication and efficiency, and encourage an innovative, creative environment. Steven says the Toyota team looked at several locations in multiple states when determining where to move, while considering the practical nature of the business.
The ideal location needed to have an international airport with direct flights to Asia and Europe. It needed to be in a place with a friendly business environment, an educated and skilled workforce and ample housing. They also wanted to build a facility from the ground up that could be LEED Platinum-certified. So finding a large parcel of developable land was essential.
Once Toyota settled on Plano, they chose a property in Legacy West—currently the largest business development project in the U.S.—that is home to JCPenney and Frito-Lay. Liberty Mutual, JPMorgan Chase and FedEx Office will locate there soon. Legacy West also includes an urban village with retail; chefdriven restaurants; a 300-room Renaissance Hotel; and apartments, luxury condos and single-family homes.
The Toyota Motors North American headquarters should be completed by spring 2017. Relocations have already begun on a smaller scale with an advance team of approximately 500 already in the Dallas area. In May 2017 teams of Toyota employees who are making the move will begin moving in shifts. The goal is to maintain business continuity, so Toyota clients never notice there is a relocation underway.
The South Bay will likely begin to notice the effects throughout the summer of 2017. By the end of 2017 the relocation should be complete. As California remains an essential market for Toyota, the company will continue to employ 2,300 people in California even after full relocation is complete.
Jack Hollis, group vice president of marketing at Toyota, has been with the company since 1992. He is very excited about the relocation and especially inspired by the long-range investment Toyota is making in its future with an eye to the next 50 years.
As Jack explains, “With the move to Texas, the company is making an investment similar to what we did here (in California) 50 years ago. We made an investment in the community, in families, and it was very successful for the company. We’re doing that again, just in a new place. I’m excited about being at the start of something where I can help to create the best mark at the base. I can contribute to a company I believe in for the next 50 years. I’m looking forward to being a part of something new. I love change. I love new creation.”
The move itself brings with it mixed emotions for Jack and his family. Professionally, things couldn’t be better for him. “I’m very fortunate,” he shares. “The Toyota marketing team is about 160 members strong. It’s a great team. 100% of my leadership team is moving. It is quite a blessing for me as a team leader. I have my whole leadership and upper-level management team and 77% of my current staff moving with us.”
A South Bay native, Jack was born in Hawthorne, raised in Torrance, graduated from West High and lives with his wife, Jayne, and two of their four children in Palos Verdes Estates. The eldest two are in college. Jack’s parents still live in the Torrance home he lived in since fifth grade.
The Hollises are a close family who fondly call themselves Team Hollis. When the relocation was announced, they made the decision to move as a family.
“Quite honestly, we found it a difficult decision to make,” Jack explains. “Our whole family was involved; that’s how we make decisions. I grew up here. I’m proud to be a Southern Californian. I love it. To pick up and move from a place that’s been home is tough. My parents are still here, and I had to think about leaving them. They’re getting older, and I’m really close to both my folks. They’ve been married over 50 years. That’s a legacy that’s hard to leave behind.”
One of the founding families of The River Church of the South Bay, the Hollises have strong roots in their community, and their church has played a huge part in all their lives. “So to think about having to leave that was not an immediate decision,” says Jack. “We spent a lot of time talking and more time praying about it. But Jayne and I felt that we were called to go on a new adventure and move to Texas. Jayne and I love people. One of the things we talked about is the chance to meet new people and build new friendships. That is an exciting piece of this move.”
Their two college-age children will stay in California, as will their 17-year-old, who will graduate and head to college before the move. Jack and Jayne will go to Texas along with their 11-year-old, Amanda Joy, who will start seventh grade there.
“She’s the most excited about moving,” Jack shares. “Her older siblings all had the chance to move when they were younger, and now it’s her chance. She’s welcoming the opportunity to make new friends and have new experiences. My wife and I are both adventurers. We love to try new things. The move will provide that opportunity. But when you’re leaving home, there are still those elements that tug at your heart.”
The Hollis family plans to keep (and lease) their home in Palos Verdes. They’re planning to buy a home in Texas when they move next summer.
Steve Appelbaum, national engagement marketing manager at Toyota Motor Sales, is also a Southern California native, hailing from Whittier. He joined Toyota in 1986, the year they began manufacturing cars in the U.S. He was one of the original 800 customer relations representatives. His wife, Jennifer, is a Torrance native whose family has lived in the area for generations.
Jennifer also works for Toyota in retail markets development. In true rom-com form, the two met at the photocopier. As LA natives, theytoo had much to consider in choosing whether to relocate to Texas.
“It was a huge decision for us,” Steve explains. “Our kids are out of the house, and my wife also works at Toyota. But it was tough, really, due to our parents. But with both of us working for the company and a lot of our friends here it was a challenging but not insurmountable decision.”
The sting of moving away from their kids may be fortuitously softened. Their son-inlaw has been offered a position in Plano, so their daughter will likely move there later this year as well.
“It will be hard to leave California … the beaches, the weather. It’s a beautiful place,” shares Steve. “But leaving our parents was definitely the toughest part. But it’s only a 2½-hour flight, so if we need to come back, we’re here in no time. One thing I’m looking forward to is being located centrally in the country because I travel so much. It is really going to be a huge help for me personally. To get to New York you lose a whole day . So being in the Central Time Zone will really make a lot of difference.”
The Appelbaums bought a house in Texas back in December 2014, not knowing when they were going to move. “We love the new neighbors. They’re fantastic. They’re keeping an eye on our home like it’s theirs,” says Steve. “We just think it’s a great challenge— something new and different. The kids are gone. It’s going to be fun for both Jennifer and me. We’re probably going to be eating pounds of barbeque.”
Though their relocation plans are still in the works, the Appelbaums will probably move by May 2017. Like the Hollises, they also plan to keep their home in Rancho Palos Verdes and lease it. With both of their families still here, it makes sense to maintain a foothold … and given Southern California’s real estate climate, it’s a sound investment.
Steve adds, “When you talk about family, we really actually have two families. It’s not only our immediate family. It’s people I’ve worked with for 30 years. I spend as much time with them as our family. We’re all in this together. It’s going to be a challenge, but we think it’s going to be fun. We’re looking forward to it. I think you have to do something different once in a while. It will be a great opportunity.”
For Chef Michael Shafer of the Depot restaurant, Toyota’s departure reaches far beyond any potential business impact. The relocation is personal for the chef.
Toyota and I have been neighbors for 25 years,” he says. “I have seen them have children seen their children graduate. And now I’ve even had the pleasure of being part of their marriage ceremonies and catering their weddings. We’re family. They’re so imbedded in our community—both from a social aspect but also a philanthropic aspect.”
Chef Michael points to Toyota’s financial commitment to the community as something that will be greatly missed. “The ed foundations, the Pediatric Therapy Network, the hospice groups, the hospitals—all of these community services will no longer be endowed by their philanthropy,” he says. “Toyota has made a commitment to carry these for a five-year period, but then after that, what happens? We’re talking millions of dollars that they put into our community without anything more than a handshake, and this is something that has gone terribly wrong with the system … when something like this fails.”
The chef also points out the impact on local businesses, particularly with the absence of thousands of jobs in the area. “They support housing, schools, shops, movie theatres, restaurants, dry cleaners, car washes,” he explains. “It’s a huge domino effect that this community will feel. Eventually we’ll regain it because someone will take over that 130-acre, state-of-the-art facility that must be maintained. But in the long run it is going to affect the South Bay so dramatically from a personal and a financial standpoint.”
Although the move is still a year away, Chef You cannot do business in California—or anywhere— and not support local charities and local foundations. If you don’t, you won’t survive. You get back what you give. Michael can already feel the effects of the departure. “Some people have already left. I lost a manager who had been with me since she was 16 years old. Her husband was with Toyota, and they’ve already moved to Texas. Her daughter calls me ‘Grandpa Chef.’ These are the kind of relationships that I’ve had here. I have employees that have been with me for 20 years or more. People are pulling out. Everyone is talking about Toyota leaving. It’s on the lips of every single person.”
Twenty-five years ago when Michael said he was moving to Torrance after leaving a great job in the hotel industry, his colleagues told him he was “nuts.” However, he understood that many top companies had their North American headquarters—not just LA offices— located in the South Bay.
“It’s conducive for these major companies to do business here, and we need to keep these companies here,” he says. “It’s crucial to our survival.”
Looking on the bright side, the chef hopes to see civically-active companies come in to replace the really big one that’s leaving. “At least they will be hiring employees, adding money to the economy and supporting the community. You cannot do business in California—or anywhere— and not support local charities and local foundations. If you don’t, you won’t survive. You get back what you give.”
Fran Fulton is the Torrance economic development manager. She has been with city manager’s office for 11 years and the city of Torrance since 1998. On the fateful day when Torrance first learned of Toyota’s departure, Fran was a city first responder.
“We were blindsided,” she recalls. “Mayor Scotto got a call on the Friday before. So on the Sunday night before we decided to do a press conference Monday, which we had never done before. Toyota didn’t want to do one in front of their campus, so we did it here at City Hall. We wanted to convey optimism and let people know that Torrance is open for business. It was a big, unwelcome surprise to us. Toyota has been a great partner, and we’re sorry to see them go. But change has happened in our city before.”
Fran pushed back on the notion that the city knew of the departure in advance, insisting they had no warning and little to no opportunity to persuade them to stay. “There are always rumors, and we asked them,” she says. “They said, ‘No.’ There have been rumors about Honda too. We tried to keep a good relationship with Toyota. They would say everything is fine. And they were still buying buildings, doing renovations, adding on. There was no solid clue that anything was happening. If we knew, why would we not do anything?”
She continues: “Most of our attention is focused on retaining businesses here, though we do some business attraction. If we know of open spots, we’ll market them and bring businesses in to fill them. Or if we know a company is faced with downsizing, we’re able to assist them, bring in the workforce board to work with employees that are going to be affected, help them find other jobs, get the training they might need. Or even if a company is struggling and needs some help, we can come in and see what we can do to help them.”
Though retention is a primary focus of the city manager’s team, in reality there was nothing the city of Torrance or even the governor’s office could have done to keep Toyota here. Toyota—in its desire to create a centralized, consolidated headquarters—wanted a facility with attributes that California simply could not provide.
In light of Toyota’s imminent departure, Torrance city officials are proactively addressing potential concerns that may arise once Toyota has gone. Potential lost revenue is certainly cause for concern.
More importantly, the city is concerned about two main issues: What will replace Toyota on its extensive campus? What will happen to the approximately 1,000 employees not relocating with the company?
Toyota owns the 130-acre Torrance property, with 1.5 million square feet of office space. Since Toyota announced its move, city officials have met with Toyota team members and development consultants to review the future of the campus. After the relocation is complete, likely at the end of 2017, serious decisions will need to be made to determine what happens with the property
Though Toyota is clearly considering options, they haven’t hired a company to handle the property yet. Fran believes Toyota genuinely wants to leave Torrance in good shape and not simply walk away, leaving the property abandoned. The city plans to work closely with Toyota to consider various development scenarios.
“We’ll need to determine what type of office space is available. Is it Class A or B?” Fran explains. “The area is zoned for light industrial, so manufacturing could go in. Mixed use with housing, retail and service is also a possibility. There is a dearth of mixed use in this area. However, housing can be a dirty word because of traffic concerns. Other possible uses are a tech center, R&D, perhaps some kind of educational satellite campus, even biotech. Since the day Toyota’s move was announced, we’ve received dozens of inquiries.”
She feels it is critical that Toyota maintain open communication with the city. “It would be helpful for us to know what they want, what they’re doing, what their plans are. We check in with them periodically to get updates. Is the timeline the same? When we get inquiries, how do they want us to handle them? It’s their property … they own it, so ultimately it’s up to them. We’d like to be consulted and asked what we’d like to see. We want to work with them and make it as easy as possible for them.”
Toyota’s departure will have a direct fiscal effect on the city. Hundreds of vanishing jobs will likely translate into diminished spending and loss of sales taxes. There will also be lost property and utility tax revenues, as well as city license fees. (Toyota currently holds 23 licenses in Torrance, totaling $300,000 in annual fees.)
One potential fiscal upside is that if the Toyota property is sold, that could lead to a substantial increase in property taxes.
At the time Toyota announced the move to Texas, they launched onetoyotafamily.com, a website devoted to addressing the needs of the thousands of employees and their families impacted by the relocation. Toyota anticipates that approximately 75% of their team will move to Texas.
For the 25% of Toyota employees not relocating, the company is offering generous retention packages. These packages require employees to remain in their position through a specified date. Some employees are retiring rather than moving. For those not going, the city of Torrance is coordinating with the South Bay Workforce Investment Board and other related entities to tailor plans for Toyota employees that will address their needs once their job ends.
Fran’s team has successfully helped businesses such as Pelican Products and L-3 address issues they were having that could have led to them leaving California. Rather than just moving, they came to Torrance first and worked with the city to address their issues. Through their collaborative efforts, both companies were ultimately able to remain here.
When asked what could be done to avoid future departures like Toyota’s, Fran responds, “Innovation starts in California. From the local level to the county and state level, there is a lot we can do. There are opportunities for us to work much better together.”
More than a pipe dream.