Huffpost Politics
THE BLOG

Featuring fresh takes and real-time analysis from HuffPost's signature lineup of contributors

Greg LeRoy Headshot

Toyota Won't Sing Rick Perry's Tax-Break Tune

Posted: Updated:
Print

Somebody forgot to send Toyota the memo -- and it's messing with Rick Perry's script.

When a politician gives your company a large sum of taxpayer money in the name of jobs, you're supposed to give him lots of credit -- even if, as is almost always the case, the subsidies had little or nothing to do with your decision. It's a critical element of America's corporate-dominated economic development system, key to creating public misbelief about cause and effect.

At the very least, you're supposed to make warm, grateful statements about the politician and let your real calculus remain in the corporate black box.

But instead of crediting Gov. Perry for the $40 million he is giving the company to consolidate 4,000 U.S. management jobs in a Dallas suburb, and claiming it was the decisive clincher that won the deal, Toyota executives are making it clear that business basics -- not subsidies -- were what actually mattered. Most of the jobs will come from the Los Angeles suburb of Torrance.

It's the kind of high-profile gaffe that must drive ambitious governors, site location consultants and subsidy-commission lawyers crazy. Here's the world's #1 automaker consolidating its North American headquarters -- a trophy deal extraordinaire -- and the company is blowing The Official Line at the expense of Perry, who is clearly preparing another presidential run.

"Toyota says $40 million incentive not a deciding factor in move" blared the April 30 headline in the Houston Chronicle. The $40 million Texas Enterprise Fund grant "wasn't one of the major reasons [in] deciding to go to Texas," a company spokeswoman said. Instead, she cited "geography [Toyota assembles vehicles in Texas, Indiana, Kentucky, and Mississippi], time zone [besides being closer to assembly operations, most headquarters functions will now be only one time zone from engineering in Michigan and finance in New York] and quality of life."

Autoblog.com, citing Toyota's North American CEO Jim Lentz (headline: "HQ move based on study, not pitch from Gov. Perry, Toyota says") reported "Plano was chosen by an internal process ... [and] helped by its proximity to the company's massive pickup factory in San Antonio rather than any wrangling from the governor."

Lentz then gave a remarkably explicit interview to the Los Angeles Times, saying it all came down to functional consolidation and proximity to its assembly plants. "It doesn't make sense to have oversight of manufacturing 2,000 miles away from where the cars were made," the Times quoted Lentz. "Geography is the reason not to have our headquarters in California."

Lentz even pooh-poohed the war among states drama that Perry has tried to ride: "It may seem like a juicy story to have this confrontation between California and Texas, but that was not the case," Lentz said. Earlier, Lentz had emailed the Wall Street Journal that: "The business environment had nothing to do with the decision to leave California."

He also made it clear that California -- and the other incumbent states of Kentucky and Michigan -- had no chance because he was determined to show no favoritism towards any division, to minimize post-relocation friction among managers. (Other reports suggest Toyota is over-staffed in high management positions and will use the attrition resulting when some employees decline to move to cut head count).

The management jobs being consolidated in Plano, Texas will move from Torrance, New York City, and Erlanger, Kentucky. Jobs from Erlanger will also be moved to Ann Arbor, Michigan and Georgetown, Kentucky.

When Lentz took over Toyota's North American operations in 2013, he began planning to save money by rationalizing the company's fractured structure: research and engineering, sales and marketing, and manufacturing were separate units. Denver, Atlanta and Charlotte were the other finalist locations, the Wall Street Journal reported; it also said that Jones Lang LaSalle conducted the search for Toyota.

Toyota's candor didn't stop Perry's partisans from crowing. "It's a walk-off home run for Perry," a Republican strategist told the Associated Press, "His jobs and economy narrative is now complete and real." As Good Jobs First documented last fall, California and New York are two of the six states that Perry has aggressively sought to pirate jobs from. The $40 million gift to Toyota will come from the Texas Enterprise Fund, the "deal-closing fund" created at Perry's urging that has been the repeated subject of critical investigations.

Actually, it's the second time Toyota has gone off-script in the Lone Star State. In 2003, when it chose San Antonio for its pickup truck assembly plant, Toyota reportedly took the far-smallest of four competing states' subsidy offers; one was reportedly almost four times larger than the $133 million it accepted in Texas. It even volunteered to pay $34 million to the school district and refused to seek property tax abatements from other local taxing bodies.

Toyota's senior vice president in charge of site selection in North America at the time said: "If you pull too many incentives out of the community in the beginning you pay the price down the road. It's a pennywise but dollar-foolish thing to do. We believe it is in our best business interest to be a good corporate citizen and contribute to the community right away."

I assume Perry and his advocates will continue to spin the Toyota news to justify spending $40 million of taxpayer money to pay the company to do what it clearly would have done anyway. But it's a teachable moment for public officials and taxpayers everywhere about Site Location 101: business basics rule.


Greg LeRoy directs Good Jobs First and is the author of The Great American Jobs Scam.