Toyota’s excellent Texas adventure

Andrew Harrer/Bloomberg/Getty

When Akio Toyoda charged Jim Lentz to make Toyota Motor “more self-reliant” in North America, he told his subordinate “not to think of the next three or four years but the next 50 years.”

Lentz, promoted to Toyota’s chief executive in North America a year ago, described the exchange shortly after announcing a new continental headquarters on Monday, to be built in Plano, a community just north of Dallas, Texas. The Japanese automaker over the next two years will close its sales and marketing complex in Torrance, Calif., as well as its corporate offices in New York City and its manufacturing headquarters in Erlanger, Kentucky.

The new Texas headquarters will enhance North America’s self-reliance, Lentz said, by locating Toyota (TM) executives and managers from disparate U.S. locations together, thereby encouraging quicker and more effective communication and decision making.

Though Lentz declined to say how much Toyota will spend to move thousands of employees and their families to Texas from offices in California, Kentucky and New York, he said “the number is big. I was more worried about the dollars than Akio was.”  Half the money, he said, will be spent as bonuses to make the move more palatable for Toyota associates, as they’re called, and for relocation costs.

Toyota began operations in the U.S. in 1957 as an importer of vehicles built in Japan and sold mostly on the west coast.  The company now sells cars throughout North America that are assembled in factories all over the U.S., though mostly in the south and midwest. Because Toyota builds 70 percent of the cars it sells in these plants, it wouldn’t make sense to consolidate manufacturing functions with all others on the west coast, Lentz said.

The Toyota executive acknowledged that he drew from the playbook of Ford Motor Company’s Alan Mulally, who spearheaded cultural reform at the automaker, using the slogan “One Ford.” Toyota, internally, is referring to the consolidation as “One Toyota.”

“I suppose we’ll have to pay Alan a royalty,” Lentz said.  The Toyota executive has no plan to print business cards proclaiming his slogan, as Mulally did.

Lentz did draw a distinction between Ford’s (F) initiative and Toyota’s.  “Alan was trying to get the members of his organization to work together well,” he said. Toyota associates already work together cooperatively, but their effectiveness will be improved by closer proximity.

A risk for Toyota will be the number of associates who decide to leave the company altogether rather than move to Plano.  Larry Dominique, Nissan’s former head of product planning, said the Japanese automaker lost 68 percent of its white-collar ranks when it decided in 2005 to consolidate white-collar personnel in a new headquarters in Nashville from offices in southern California. Nissan (NSANY) said that “just less than half” of its workers who were offered the chance to relocate accepted the offer.

“If [Toyota] lost two-thirds” of the company, “I wouldn’t be surprised,” said Dominique, who made the move to Tennessee. “I lived through it.”

Dominique said Nissan lost 30 or so workers in its product planning department, roughly 60 percent of the total, due to the move.  “People have families in California, they have two incomes and a lot of them love living in California,” he said. Perhaps proving his point, he is currently back in California as an executive with TrueCar, an on-line auto shopping service based in Santa Monica.

From the design of Toyota’s cars to the company’s corporate culture, Akio Toyoda, since taking over as president in 2009, has been pushing executives to think boldly and expansively as they chart the automaker’s future.  Lentz, following his lead, will move a handful of executives this year and hundreds more next year before opening the new Plano campus toward the end of 2016 or the beginning of 2017.

“I’ve been with the company for 30 years,” Lentz said. “This is the biggest thing to happen to Toyota since I got here.”

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