In an earlier time it would be considered heresy: General Motors’ (GM) Cadillac is thinking about moving its sales and marketing operations from Detroit to—of all places—Manhattan. Cadillac, after all, is named after the founder of Detroit, which has been its home for 112 years, and some elements of its wreath-and-crest shield come from the city’s seal. Manhattan is better known as the home of the yellow taxi and the black Town Car.
But it has become a familiar trope: Change your outlook by changing your address. If Cadillac moves, it will be part of an effort to remake the brand’s image, attract some buyers who now fixate on German luxury cars, and broaden its appeal outside North America. Cadillac’s new boss Johan de Nysschen, is a serial offender. In his previous job running Infiniti, he led its move to Hong Kong in 2010 from Yokohama, Japan, home of Nissan, its corporate parent. De Nysschen learned from the best. His old boss Carlos Ghosn not only moved Nissan’s corporate headquarters from downtown Tokyo but also engineered the relocation of Nissan North America’s sales and marketing operation from the Los Angeles area to cleaner air and lower costs in Nashville.
Companies relocate their headquarters more often than you might think – and not just to save money. It isn’t a new phenomenon. Exxon (XOM) left midtown Manhattan for Texas oil country in 1990 and Boeing (BA) abandoned its ancestral Seattle home for a spot closer to the center of the country in Chicago in 2001.
Auto companies seem almost fly-by-night by comparison. In the last decade at least half a dozen have changed addresses for a variety of reasons. The latest is Toyota, which is uprooting some 4,000 employees from its over-crowded Torrance, Calif., campus and moving them to Plano, Texas. The move is seen as the latest in Toyota’s Southern strategy to locate its major facilities south of the Mason-Dixon line.
To be sure, moves are expensive, disruptive, and can result in the loss of prized employees. And as often as not, they do not produce the desired results. Ford (F) moved Lincoln to Southern California in 2000 in search of a personality transplant, but the brand got a return ticket two years later after a change in leadership. Whatever Lincoln learned about car-crazy California during its short stay has remained unclear, and it is currently undergoing the latest in what seems to be a never-ending series of turnarounds and revivals. SAAB moved its sales operation from the New Haven, Conn., area to more centrally located Atlanta at the peak of its sales success in 1991 but was never able to recapture its previous glory and was cast aside in GM’s 2009 bankruptcy.
The same applies to Volkswagen of America, which ankled its Detroit-area home for a headquarters further East in Virginia (and closer to the Wolfsburg mother ship) in 2007 as part of a plan to make the U.S. operation profitable. The new headquarters brought VW closer to its core customers and dovetailed with plans for a new U.S. assembly plant in Tennessee, but VW continues to struggle as its German leaders seek to understand the U.S. market.
On the other hand, Porsche North America has piled success on success after calling the movers. Porsche cars moved to Reno, Nev., in 1984, site of its national parts depot, after a distribution deal with VW ended, becoming the only European sales operation in the hinterland. Fourteen years later, Porsche packed up and moved again, this time to Atlanta. Reason: It was at a competitive disadvantage by not being in the Eastern time zone. Porsche has raced on by expanding into four-doors and SUVs, and U.S sales represent an ever larger share of its overall results.
The corporate relocation that has drawn the most scrutiny in recent years is Nissan’s 2006 move to Nashville. The culture shock was expected to be huge, and several high-ranking executives decided to stay home and look for another job or simply retire rather than make the move. Nissan is said to have lost roughly 60% of its 1,300 staffers in its Los Angeles headquarters. Inasmuch as the move was positioned as a cost-saving one, the high rate of attrition may have been part of the plan. If so, the savings were short-lived – but so was the impact on operations. Automotive News reports the headcount at Nashville has since grown to 1,700, and Nissan brand’s U.S. sales and market share have risen to record highs.
Toyota is said to be studying Nissan’s experience closely as it plans its Texas adventure, though it is hoping for a different outcome. Although the cost savings will be huge, cash-rich Toyota says it is looking for efficiency, not more profits. The Lone Star move will bring its sales and marketing together with manufacturing for the first time. “We will be better equipped to speed decision making, share best practices, and leverage the combined strength of our employees,” says North American CEO Jim Lentz.
Others have hoped to get a similar effect by moving across town. Chrysler, which had made its home in the inner city enclave of Highland Park since 1925, built a new engineering center 27 miles north in the outer suburb of Auburn Hills in 1991. After vowing that it had no plans to move its headquarters out to the same location, it did exactly that in 1995. In addition to giving Chrysler the most modern facility in the industry— and freeing it from Detroit’s woes—the Auburn hills complex helped restore faith in the future of a company that often found itself on the financial brink.
GM wasn’t so fortunate. Its decision to flee its historic building in the decaying New Center neighborhood for a location five miles away on the Detroit River in downtown Detroit in 1996 did little to revive its fortunes as it skidded toward bankruptcy.
GM spent $76 million acquiring the five-tower Renaissance Center, originally developed by Henry Ford II, and another $500 million making the architectural white elephant habitable. The changes helped solve the RenCen’s maze-like internal circulation and better connected it to the river and the city outside. But some executives remained unhappy and then-CEO Fritz Henderson proposed a Chrysler-like gambit in 2009: Moving corporate headquarters out to GM’s engineering center in the suburbs. Cooler heads realized that the move would drive a stake through Detroit’s economic heart and the idea was killed. Today, several thousand of GM’s white-collar workers continue to occupy space in the complex that Ford built. That is, unless Cadillac moves to Manhattan.
