Tuesday, November 15, 2005

Are There Political Lessons in Nissan's Move From La-La-Land to Tennessee?

It hasn't gotten much play in the mainstream media, but Nissan is moving most of its U.S. headquarters operation from Gardenia, California, to Franklin, a suburb of Tenneessee's capital, Nashville (and site of one of the most horrendous battles of the Civil War).

The move means relocation for 1,300 employees working in Nissan's marketing, sales and finance who will be united with the 6,700 manufacturing employees already in the Volunteer State.

Why the move? Essentially the cost of doing business in Tenneessee is much lower than it is in sunny California, plus Nissan already has a thriving assembly plant at nearby Smyrna, Tenneessee and the new location is within two hours of 60 percent of the Japanese automaker's American market.

Nissan executives expect to save millions, thanks to Tenneessee's lower real estate and employment costs, plus they expect to see as much as $240 million in profit from sale of the firm's 43-acre California campus. Only the North American design team will remain in California after the move is complete.

Daniel Gorrell, a Strategic Vision analyst, told Automotive News that he thinks the Nissan move could encourage other firms to consider similar decisions. "I don't there is anything magical about where your headquarters is. This will give other companies a reason to consider similar moves for cost savings themselves," Gorrell said.

Experts predict Nissan will lose half or more of its current employees in the California location, even though housing and other living costs in Tenneessee are significantly lower. Housing in California is among the nation's most expensive, with the median sales price for a Southern California home recently pegged by The Los Angeles Times at $475,000, compared to only $159,000 in the Nashville area.

Many of the employees who opt to stay in California could eventually be replaced by former executives leaving General Motors and Ford in Michigan.

Losing a major corporate headquarters can't help California's image as a high-cost place to do business, nor is it likely to boost Gov. Arnold Schwartzenagger currently sagging popularity ratings. But he may also cite the loss of Nissan as further evidence of the need for the kinds of pro-business reforms the Governator advocates.

Automotive News suggests Nissan could find downsides in the move as a result of no longer being where many of the nation's automotive trends and fads begin.