FRANKFORT — Toyota is shutting down its engineering and manufacturing headquarters in Erlanger, affecting about 1,550 workers, in a nationwide consolidation of its corporate operations.
The Japanese automotive giant announced Monday that it would move about 300 production engineering positions at its Erlanger campus in Kenton County to its huge manufacturing plant in Georgetown.
Gov. Steve Beshear was told in a letter Monday from Jim Lentz, CEO for Toyota North America, and Osamu Nagata, president and CEO for Toyota Motor Engineering and Manufacturing North America Inc., that the company would keep its Georgetown plant and supplier plants and other Kentucky-based business units in Kentucky.
About 250 direct procurement jobs in Erlanger will move to the Toyota Technical Center in York Township, Mich., near Ann Arbor, and about 1,000 administrative positions in Erlanger will go to Plano, Texas.
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Plano, a suburb of Dallas, will be the new site for Toyota's corporate headquarters in Kentucky, California and New York.
Carri Chandler, a Toyota spokeswoman in Erlanger, said the 300 workers moving to Georgetown from Erlanger would be part of a phased relocation before the beginning of 2017. The Erlanger offices will not be closed until the end of 2016 or beginning of 2017, she said.
Erlanger has been the site of Toyota's North American engineering and manufacturing headquarters since 1996.
Toyota Motor Sales U.S.A. Inc. and Toyota Financial Services have been in Torrance, Calif., a suburb of Los Angeles. Toyota Motor North America has been in New York.
More than 4,000 workers nationwide will be affected by Toyota's decision to establish a shared North American headquarters in Plano. Texas has no state income tax, and Plano is close to Dallas and its international airport.
Announcement was sudden
Beshear, in a news release, said he was "extremely disappointed" by Toyota's decision.
"We would have welcomed the opportunity to discuss options with Toyota, but we will now turn our attention to preparing for this transition," he said.
"We also are disappointed that the lives of hundreds of Kentuckians will be disrupted, and we pledge to assist those families however we possibly can," Beshear said. "This transition will take two to three years to achieve, and Toyota has assured us that the company plans to offer industry-leading programs and packages to its people."
No one in state government knew Toyota's intentions until Monday morning, said Joe Hall, a spokesman for the Kentucky Economic Development Cabinet.
"We found out at 8 o'clock this morning," Hall said. "We're disappointed in the fact that it's going to impact the lives of Kentuckians. ... Toyota has been a great corporate partner and will continue to be."
Regarding timing of Toyota's notice to Kentucky government that the Erlanger offices would be shuttered, David Adkisson, president and CEO of the Kentucky Chamber of Commerce, said that "in the economic development arena, job announcements are often tightly held."
"Clearly this is not welcome news to the commonwealth," Adkisson said Monday afternoon. "We just have to redouble our efforts to move forward and to create more jobs faster in Northern Kentucky."
James Rubenstein, an auto industry analyst and geography professor at Miami University in Oxford, Ohio, said one of the reasons the automaker decided to leave Erlanger was the perceived weakness of the Cincinnati/Northern Kentucky International Airport, near Erlanger, which is no longer a major hub for Delta Air Lines.
Still, he said, "This part of the world, we're still auto alley." He added that Toyota must have had strong business reasons for what he called an "eccentric" decision — "not going with the flow and the pattern" by picking up roots and moving to a different area of the country.
During the past 30 years, Toyota has invested about $6 billion in Kentucky. With 300 jobs moving from Erlanger to Georgetown and 750 more jobs being added to support production of the Lexus ES 350, there will be about 8,200 Toyota employees in Kentucky after the move.
Beshear said Toyota leaders had assured him that a continued strong presence in Kentucky was central to Toyota's success.
"Kentucky remains a powerful force in auto manufacturing, and we will do everything possible to maintain and strengthen Kentucky's position as one of the top states for the auto industry," he said.
The Toyota leaders told Beshear in their letter that bringing Toyota's North American business affiliates together in a geographically central place in the United States "will allow us to speed decision-making, share best practices and leverage the combined strength of our work force.
"This, in turn, will allow us to serve customers better and position the company for sustainable, long-term growth."
The transition will "not take place in earnest for another two to three years, so our people, our businesses and our communities will have the time needed to ensure a smooth transition," the Toyota executives said.
"This is the most significant change we've made to our North American operations in the past 50 years," Lentz said in a statement released by Toyota on Monday.
Commitment in Erlanger
Toyota said it would offer "industry-leading programs and packages" to its Erlanger employees, regardless of whether they elected to move.
The company said it also had pledged a $10 million "philanthropic commitment" in addition to its existing donations to "ensure continued funding for local nonprofits and community organizations in California and Kentucky beginning in 2017."
Japan-based Toyota opened its first U.S. headquarters in 1957 in Hollywood, Calif. In 1958, the automaker sold 287 Toyopet Crown sedans and one Land Cruiser. By 1975, Toyota had become the top import brand in the United States. It opened its U.S. headquarters in Torrance, Calif., in 1982.
In 1986, the automaker broke ground in Georgetown for what would become its flagship manufacturing plant in North America.
The Erlanger offices were opened in 1996 to house its North American manufacturing, engineering and research and development operations.
Toyota sold 2.2 million cars and trucks in the United States last year.
N. Ky. rejected for size
Lentz, who became Toyota's first CEO for the North America region in 2013, told The Associated Press that Toyota president Akio Toyoda encouraged Lentz to think of ways to make North American operations more self-reliant. Lentz said he began working on the idea of a combined headquarters last April or May.
The company decided not to locate in California because it was too far from its plants in the Midwest. Kentucky was rejected because Erlanger is not big enough, and Ann Arbor was eliminated because it is too close to Detroit rivals including General Motors and Ford.
Lentz said the company ultimately came up with a list of 100 possibilities that it whittled down to four.
"As we visited those four primary locations, it became quite clear that the Dallas metro area was far and above the best choice," Lentz said. He wouldn't disclose the other three finalists.
Texas Gov. Rick Perry said the state offered Toyota some $40 million in incentives from the taxpayer-funded Texas Enterprise Fund. Perry, who made two visits to California to lure Toyota, said Texas expected Toyota to invest $300 million in the new headquarters.
Business climate blamed
Kentucky Senate Majority Leader Damon Thayer, R-Georgetown, blamed the loss of Toyota jobs in Northern Kentucky on the state's business climate.
He has long advocated making Kentucky a right-to-work state, which would allow an employee to opt out of joining a labor union, and putting an end to a prevailing wage, which local governments must pay for public works project.
"It's time for us to hold Democratic legislators responsible for these lost jobs and make them address the issues driving our corporations away," Thayer said.
State House Labor and Industry chairman Rick Nelson, D-Middlesboro, said it was unfortunate that Thayer was trying to make Toyota's decision political.
"I've read Toyota's statements and never saw any mention of right-to-work or prevailing wage," Nelson said. "It's just the same old song and dance we've heard for years from people who want to keep people down."
Thayer, whose district includes parts of Kenton County, said he remained thankful to Toyota for its investment in Georgetown.