Toyota of Texas

Toyota dealership in McKinney, Texas

Toyota cars and trucks are sold at the Pat Lobb Toyota dealership January 23, 2008 in McKinney, Texas.

Toyota is moving its North American headquarters – all three of them. To Plano, Texas, just north of Dallas.

Right now the car company has its sales headquarters near Los Angeles, its manufacturing headquarters in Erlanger, Kentucky, and another headquarters in New York.

The move is part of reinvention at the company, says Columbia Graduate School of Business professor Rita Gunther McGrath.

"With the problems following on their latest recall and all the problems they had with unintended acceleration, they were in the process of rethinking a lot of things that had been taken for granted in that company, including things like location," she says.

Moving a large company offers a rare opportunity to alter a business's "social architecture" says McGrath. "It breaks through inertia, shakes up existing power relationships, and it changes the way people share information."

Old rationales for being located in different places were no longer as relevant as they were before. Los Angeles for example, where Toyota has its sales and marketing headquarters, no longer has the draw it once did.

"Once upon a time," says Kelley Blue Book analyst Karl Brauer, "the coast of California was the closest part of the mainland U.S. to Japan physically and that mattered," whether for transfer of people or cars. Now, the bulk of Toyotas in the U.S. are built in the U.S., from West Virginia to Indiana.

But why Plano, Texas?

It's closer to Toyotas plants, including its newest, most expensive one in San Antonio. Texas has tried to brand itself as a business-friendly place, and there were undoubtedly economic incentives offered by some constellation of state and or local governments.

But it's not just about the business. Toyota has to convince 4,000 people with families and hobbies and lives to move as well.

"This is difficult – this is a life event for a lot of people," says Dave Sullivan with Auto Pacific. People have to move their families, find new school districts, it's stressful. When Nissan moved to Nashville in 2005, many employees did not follow, creating significant challenges for the company.

Plano, part of greater Dallas, is more palatable than other options.

"Its mild climate, central location, transportation, quality of education – all of that is very desirable," says Kelley Blue Book's Brauer.

Texas also has no state income tax, which, when combined with the lower cost of living than Los Angeles or New York, is a powerful incentive in its own right.

Toyota says offices will move in stages and gradually, and that the move won't be complete until 2017.

About the author

Sabri Ben-Achour is a reporter for Marketplace, based in the New York City bureau. He covers Wall Street, finance, and anything New York and money related.

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