The move is likely to prompt widespread resignations, auto industry consultants predict, which will allow the Japanese automaker to hire new workers at lower pay with lesser benefits.
"Nissan constantly seeks ways to create value and improve performance," CEO Carlos Ghosn said in announcing the decision on November 10. "When we examined the long-term operational benefits of relocation and the possibilities for realizing greater operational synergies, the business decision made sense." The decision complements Nissan’s business plan, "which focuses on our company’s worldwide, profitable growth," Ghosn said.
The CEO acknowledges that the company could face a brain drain as some employees will be reluctant to move cross-country. He says the automaker could lose as much as half of its 1,300-person workforce at its Gardena facility near Los Angeles. The decision, he notes, was prompted by Tennessee’s lower taxes and cheaper real estate.
The real estate factor, at least, could be good for employees: The average home price in the Nashville area is $159,700, compared with $475,000 in the Los Angeles area.
Nevertheless, George Peterson, president of AutoPacific Inc., a research and consulting firm in Southern California, predicts that many employees won’t relocate. "And that may be part of the plan--to get less-experienced but less-costly employees," he says. "The cutting edge of auto trends is here."
California is home to all but one of the Asian automakers that do business in the U.S.
Finding replacement workers in Tennessee shouldn’t be difficult, Peterson says, because of all of the thousands autoworkers who are out of work in Detroit. Furthermore, Nissan’s new facility in Franklin, which is about 15 miles from Nashville, will put the company close to two plants where it already has about 8,000 workers. It will also be close to a substantial auto industry center: There are several auto parts companies in the region, and General Motors’ Saturn plant is nearby.
The Nissan move will probably be the biggest headquarters relocation since Mobile and Exxon moved from Texas to New Jersey in 2000, says Jan Raymond, vice president of client services for Primacy Relocation in Memphis, Tennessee.
But the relocation issues Nissan faces are becoming more common as the number of group moves rises because of mergers and acquisitions and cost-cutting consolidations and because of the large difference in salaries, taxes and business costs from one geographical area to another.
There are also corporate-culture issues to manage--and the terms can’t always be set by the company. Referring to rumors about the much-anticipated Nissan move before the official announcement, Raymond says that "when a story like this leaks out, the company is forced to communicate with the employee base about the move quicker than they want to. This can wreak havoc and have a demoralizing effect."
As with any major corporate move, relocation experts note that companies must focus on long-term strategies such as the kind of employees it will need, family considerations, cultural changes and where and how talent will be found--and lost.
Smooth flight for Boeing
For some lessons, Nissan could look to Boeing. The aircraft manufacturer, founded in Seattle in 1916, moved its corporate headquarters from the Pacific Northwest to Chicago in 2001.
The relocation was not primarily focused on cost savings, but it dovetailed with a major restructuring of the company. Boeing was elevating the leaders of the firm’s three largest business units to CEO, while giving them broader responsibility for improving performance and meeting growth objectives.
"We wanted to create a culture that was more diverse and focused on long-term strategies and the global marketplace rather than one or two business units," says Rich Hartnett, Boeing’s director of global staffing.
About 150 people made the move to Chicago. The company hired another 250 people locally. "We really thought through what kind of environment we wanted to create in the world headquarters, and structured the interviews to find those types of people," Hartnett says. It’s one thing to give people cash incentives, but "it’s another to find people who fit into the environment."
He says Boeing wanted to create a more diverse business that "looks more outside than inside, one that focused on the long-term strategies and global marketplace and less on performance of one or two business units." Chicago was thought to be more international, more centrally located and more pro-business.
Hartnett says Nissan’s relocation, which will begin in the spring, likely will pose a bigger cultural adjustment than Boeing’s move from Seattle to Chicago.
Relocation experts say companies that are considering a move tend to be very tight-lipped with their workforce until the last possible moment because they don’t want to give up leverage with the cities they are negotiating with.
"I am working on a relocation now that’s going to happen very soon, and I’m not even allowed to tell my own staff about it yet," says Jo Lay, vice president of relocation for Coldwell Banker Residential Brokerage’s Midwest region.
"We really thought through what
kind of environment we wanted to create in the world headquarters,
and structured the interviews to find those types of people."
--Rich Hartnett, Boeing
Getting into gear
Now that Nissan’s move is official, relocation insiders say the company will have to go into overdrive to complete the move as quickly and cost-effectively as possible. The automaker will have to assuage workers’ fears at a time when they already are stressed out with serious concerns about their future.
"The percentage which accepts depends on the market they are coming from and what job opportunities are there," Lay says.
If the company has a sufficient talent base in the new location, it might not offer most of its existing employees any incentives to make the move more attractive, Raymond notes. "If the company needs the people to go, we see the bonuses beefed up," she says. Such bonuses typically run from a flat fee of $10,000 to $20,000 to a percentage of salary, and can vary for different employees.
"In the Nissan situation, a lot of employees might find this move very attractive because the cost of living is a lot less in Tennessee," Raymond says. "The dynamics that keep people from making the move are the personal things--if they were born and bred in California, if they have kids in schools, if they can get jobs with the competition down the street."
The biggest expense in a corporate relocation is the employee’s home sale and purchase. Given California’s housing market, the cost of that for Nissan could be staggering. But there is no set formula for what costs a company picks up in a relocation.
Often, Raymond notes, employees are put into different tiers. A company may buy the homes of the top performers to encourage them to move. For second-tier employees, a company may only pay for the closing costs.
Allaying workers' fears
Still, the greatest stumbling blocks in a group move are not financial, but are in dealing with the human factors and the stress of uprooting workers.
Louisiana-Pacific Corp., a $2.8 billion supplier of building products, found that out in 2003 when it was pondering a move from Portland, Oregon, to three other cities before deciding on Nashville. Eventually, 60 percent of the employees who were offered the move accepted.
Once the relocation was announced, the company "had a huge communication plan with weekly updates for employees," spokeswoman Mary Cohn says. Information about Nashville was sent out in e-mails and put on the company’s intranet. "We gave them more information on Nashville than anyone would ever want, but people needed good information to make their decision," she says.
Louisiana-Pacific paid for employees to take two trips to Nashville with their spouses to decide whether they would move.
At Coldwell Banker, Lay says that normally within a day or two after a group move is announced, she makes a presentation about the new area to the affected employees. She provides maps and information about such things as commute times, recreational activities, medical facilities and taxes. When employees visit the area, she tries to begin with a group bus tour, then follows that by having real estate agents give individual tours to families.
"It’s like selling a house on steroids, and the agents have to be trained on how to deal with stressed-out people," she says, adding that "we’ve done more group moves this summer than I ever have before in my career."
Boeing’s Hartnett says his company did several things to make its move more successful, including providing three jets for the people who were moving from Seattle to Chicago to check out the new area.
"The camaraderie really grew, because all the spouses met each other and we had real conversations," says Jim Glickert, director of HR strategy development and measurement for Boeing. "Even the people who said no were really appreciative that we treated their families as a whole part of the move."
Don’t underestimate importance of work/life balance in an employee’s decision about whether they’ll relocate, Hartnett says. "We’ve been the beneficiary of poaching on good talent when other companies didn’t take that work/life balance in account and simply said, ‘Here’s your job--take it or leave it.’ "
Workforce Management, November 21, 2005, p. 1, 41-45 -- Subscribe Now!