Bubble Watch: Another automaker moves its headquarters out of Southern California
“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.
Buzz: Another Japanese automaker is taking its U.S. corporate headquarters out of Southern California, the third to do so this century.
The trend
Mitsubishi Motors North America announced last month it would move its corporate headquarters from Cypress to Tennessee, a relocation impacting 200 office workers. This exit follows the Southern California departures of Toyota (2014, Torrance to Texas) and Nissan (2006, Gardena to Tennessee).
The dissection
Let’s be honest. It’s never good when any corporate headquarter leaves. Those are usually good-paying jobs. And HQ operations often support other jobs in and around the same industry.
Let’s also be honest about Mitsubishi Motors. Your first thought might have been, “They still sell cars here?”
Toyota and Nissan rank among the top five vehicle sellers in the U.S. At best, Mitsubishi has had a colorful auto history in the U.S.
The company broke into the auto market amid the gas shortages of the late 1970s in a partnership with Chrysler. (My first car was the very-fuel-efficient Dodge Colt, made by Mitsubishi.)
Next, they started selling their own branded vehicles with peak U.S. sales of 346,000 in 2002. Various challenges — including some corporate and car-quality scandals — slashed sales.
Last year, Mitsubishi sold 118,000 cars in the U.S. Yes, that’s more than double their mid-recession low, but it’s still less than 1% of the U.S. market. It’s even less than all the new cars sold last year by Orange County dealerships.
A key Mitsubishi challenge is its odd ownership structure. It’s 34% owned by Nissan, which is, in turn, 43% owned by French automaker Renault. This interlocking partnership is actually the largest selling “auto group” in the world.
But this threesome is by no means stable. The partnership’s top executive was recently ousted after he was charged with financial crimes. Renault tried to merge with the Fiat-Chrysler partnership, but that deal fell apart because the proposal reportedly got a chilly reception from Nissan.
And since Mitsubishi’s U.S. operations rely heavily on its auto-group partners, the corporate turmoil seems to have put the company in cost-cutting mode.
When you’re an executive pinching pennies in any industry, especially one with unease among ownership, California is not the ideal place to do business.
So I look at this move this way: Essentially, Mitsubishi is moving in with relatives, as its new home will be in the same metro area — Nashville — as Nissan’s new U.S. headquarters.
Quotable: Mitsubishi CEO Osamu Masuko recently told investors, “Instead of rushing to pursue expansion, I am convinced that pursuing a good balance between investment and healthy growth is the best option for us. This concept is characterized as ‘small but beautiful.’ We have redefined a future direction in which we will pursue strong profitability in spite of being a small player.”
How bubbly?
On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … ONE BUBBLE!
There’s rarely any economic upside to “moving out of state” headlines. However, it may sound harsh to say, but California isn’t for everybody.
Mitsubishi Motors is a tiny part of the Southern California corporate fabric. Toyota took 3,000 jobs from the region. Nissan took 1,300. Still, Southern California bosses have added 1 million jobs overall since the recession.
Plus, there’s a possible silver lining: The negative buzz the Mitsubishi move generated serves as a reminder to the people who nurture the region’s business climate — both politicians and corporate leaders — that success and innovation should never be taken for granted.