Corporate Relocation Decisions: Headlines Don’t Tell the Whole Story
Headlines announcing corporate relocation stories boast both the positive (“City Gains 800 New Jobs”) and the negative (“1200 Jobs Moving to Mexico”) sides of a company’s decision to move from its current situation. However, headlines don’t always tell the whole story as multiple factors typically are driving the decision. As we move into 2017, let’s look at a few major relocations and analyze some of the factors that were involved in the companies’ decisions.
Driving Corporate Relocation
Headline: “The Big Reason Toyota is Moving 3,000 Jobs from California to Texas” (The Fiscal Times, December 15, 2015)
Toyota received positive headlines across the board. The big news for this company’s relocation is that 75% of the 4,000 workers reported wanting to move to Plano, Texas from locations in California, Kentucky, and New York. The reason? Cost of living. With Plano boasting a 30% less cost of living than Southern California, the Toyota workers seemed more than willing to pack it up and move to the new $300 million headquarters scheduled to open in 2017. However, another critical factor involved was likely the more favorable tax & regulatory environment in Texas. According to the Tax Foundation’s 2017 State Business Tax Climate, California was #48 in the United States with a corporate income tax rate of 8.84% in 2016. Texas ranked #14 for State Business Tax Climate with no corporate income taxes.
Headline: “Hundreds protest Carrier’s move to Mexico” (Indianapolis Star, March 24, 2016)
In the first presidential debate of 2016, GOP candidate Donald Trump thrust Carrier Corporation into the spotlight after its announcement to relocate production from Indianapolis to Mexico, affecting an estimated 1,400 people in Indianapolis and another 700 in the town of Huntington, Indiana. Reports attributed wage costs as the reason for the relocation. Wages in the U.S. average $20/hour and wages in Mexico average $3/hr. The project is not expected to be completed until 2019 and there are plans are to keep about 300 workers in Indianapolis. What was not reported was that a significant percentage of the components used in the HVAC industry are sourced from Northern Mexico, presenting a local supply base for Carrier and other HVAC manufacturers with production facilities in the area.
Headline: “General Electric to Move Headquarters to Boston” (The Wall Street Journal, January 13, 2016)
The subtitle: “GE set to get up to $145 million in incentives to leave Fairfield, Conn. Its home since 1974” pretty much sums this up. $145 million in incentives to bring 800 jobs to Massachusetts. For the affected employees, this didn’t seem to be of the same negative impact as the Carrier announcement in the Midwest. GE expects to bring about 200 of its Fairfield team and add another 600 when the project is expected to be completed in 2018.
Multiple sites were vying for this coveted project including New York, Rhode Island, Georgia, and Texas. Connecticut was working diligently to retain the iconic company, as well, even after company officials described the site as an inhospitable business climate after a state budget deal that raised corporate taxes in June 2016. But there were, as always, additional drivers for the relocation decisions. Underlying the GE decision was a long term plan. GE had been in an outdated facility in Fairfield and has its sights set on ensuring an urban, walkable location with mass transit access. The company stated wanting to be in an innovative environment, just the kind attractive to the next generation of tech talent it needs to ensure its future as a continued leader in the industry.
Headline: “NCR Corp. relocating to Midtown, bringing 3,500 to 4,000 jobs into city” (Atlanta Business Chronicle, January 14, 2016)
In 2009, Dayton, Ohio’s NCR Corporation rocked the local politicians when announcing its relocation of the city’s only Fortune 500 Company and 1,200 jobs to Duluth, Georgia. The negative headlines included callouts of NCR senior executives making unilateral decisions without further discussions with Ohio after a $30 million incentives package was offered. NCR cited numerous decision-making factors for the relocation, including available workforce, infrastructure, and tax structure as reasons for the move.
In January 2015, less than 6 years after its relocation from Ohio, NCR Corporation announced that it would build a new world headquarters in midtown Atlanta, but plans to keep a presence in the northern suburbs, where 1,650 employees are currently working. Driving this headquarters relocation decision is the proximity to Georgia Tech University and the potential for continued innovation and the attraction of an emerging talent base. This has been described as a culture shift for NCR as the area surrounding Georgia Tech is considered to be the epicenter of the creative class melded with a research university. The relocation shows a clear view of the future, much like that of the move GE is making in Boston. NCR is taking actions to create a space where the next workforce wants to be. A place that is walkable commute and has the bustle of an urban environment.
Corporate relocation decisions are never as fast and furious as the headlines may read and they are rarely, if ever, based upon only one or two driving factors. Long-term strategies are crafted through careful internal evaluation of the company culture and objectives. Additionally, when relying on a solid team of internal departments (from finance to real estate and human resources) and external consultants (from site selectors to engineers and architects), a company can help ensure that diligent and thorough information has been gathered to make informed site decisions that produce the intended outcome.