Nissan Motor Co. Ltd.’s decision to leave Southern California is unlikely to be followed by departures from the two biggest Asian-based carmakers Toyota Motor Corp. and Honda Motor Co. Ltd.
Even the smaller companies, including Mitsubishi Motors North America, Kia Motors America and Hyundai Motor America, say there are no plans to leave, even though some analysts say they might benefit from a move.
“If you want to be trendy, if you want to know what’s coming next, from a design and styling point, it’s vital for car companies to have people on the ground in Los Angeles,” said Brett Smith, an analyst at the Center for Automotive Research in Ann Arbor, Mich. “(But) every one of them would have some advantage in leaving California to cut costs.”
Concerned that Nissan’s move to Franklin, Tenn. affirms California’s reputation for being hostile to business, the Los Angeles County Economic Development Corp. is developing an outreach plan to hold onto local companies.
The development agency, which was a member of an ad hoc coalition formed to retain Nissan with an incentive package worth about $10 million, plans to cite the Nissan move to Tennessee in urging the governor and state legislature to lower corporate business taxes. “It’s to the point where we have to think of how to respond,” said Jack Kyser, LAEDC senior economist.
State of flux
Mitsubishi could draw some benefit from moving. It is the only unprofitable Japanese car maker and it’s struggling to recover from a disastrous couple of years that included two scandals involving covering up defects and unconventional car financing schemes that boosted sales but hurt profitability.
“Mitsubishi is in such a state of flux, anything could happen to them,” Smith said. “There were rumors that they would partner with another car company, so they could move to that company’s headquarters.”
The carmaker’s 25.5-acre campus in Cypress has housed its U.S. headquarters since 1988, and employs 480 workers in sales, marketing, financing and design activities. That’s about half the number of workers employed a year ago.
Spokesman Dan Irvin said Mitsubishi benefits from the concentration of businesses supporting the auto industry here, as well as close access to the ports, freeway, and rail systems and the automotive press. “That’s a tremendous advantage,” he said.
Another name mentioned is Hyundai, which recently opened its first U.S. plant in Montgomery, Ala., where it is assembling 2006 model Sonatas. While the company has an 18-acre Fountain Valley site, parent Hyundai Motor Co. owns a one-third interest in Kia Motors Corp., the parent of Kia Motors America, which is looking to build its first manufacturing plant in the United States.
The two companies share parts suppliers, and auto analysts say that Kia and Hyundai executives met with the Mississippi Development Authority in September to discuss opening a plant there. If that happens, it could make sense for both of them to maintain their front offices along the Gulf Coast.
“Their proximity to the Pacific ports has been important, because they imported all their cars,” Smith said. “(But) if Kia and Hyundai both have their manufacturing facilities in the U.S., then you might see some reason for them to move.”
Kia officials deny that they plan to move their U.S. corporate headquarters. The company broke ground in July on an $87 million campus in Irvine that will include a 236,000-square-foot headquarters building and a $17 million, 65,000-square-foot design studio.
Peter M. Butterfield, president and chief executive of Kia Motors America, said in a statement that, “our home has always been in Irvine (and) we’re now firmly planting ourselves on U.S. soil.”
Considered off the table for any move are Honda and Toyota, which both laud the advantages of being at the center of American car culture. “We’ve never considered moving out of California,” said Bob Pitts, group vice president of administrative services for Toyota Motor Sales USA, which has expanded its Torrance headquarters campus since establishing itself in the U.S. in 1957.
The company’s 130-acre campus has nearly 2 million square feet of office space housing marketing, advertising, sales and some research activities, as well as a 400,000-square-foot parts depot.
Toyota also has a port facility for cars and parts in Long Beach, a truck components factory in Long Beach, a joint venture manufacturing plant with General Motors Co. in Fremont, and a 900,000-square-foot parts warehouse in Ontario.
Honda has a 100-acre campus in Torrance that employs 3,500 and houses sales, parts distribution, and research and development labs.
“The California car culture leads the United States in terms of design, driving behavior, and new concepts,” said Honda spokesman Jeff Smith. “The entire nation looks to California for what’s next in auto design and technology. It’s the largest market. It’s important for us to be at that spot.”
