HYUNDAI DIGS DEEP INTO CALIFORNIA

HYUNDAI TO BUILD NEW ORANGE COUNTY, CA HEADQUARTERS Last week Hyundai announced it’s building a new headquarters for its U.S. operations, on the site of its current headquarters. At 400,000 square feet, the new digs will be twice as large at Hyundai’s current facility and have room for 1,400 employees, double the current headcount. Construction is scheduled to begin next year and be completed by the end of 2012. An interesting facet of the report: Hyundai is staying in So Cal, in contrast to Nissan, which five years ago moved its U.S. sales and marketing headquarters to Tennessee. At the time of Nissan’s move, Tom Freidman’s book, "The World is Flat" was atop the best-seller list, and Nissan’s management bragged that in a “flat world” location not only didn’t matter, but thinking location mattered represented old and “round” thinking. The world has gotten flat, but in this observer’s opinion, location still matters. Throughout history, economic benefits resulted from industry congregations. For thousands of years, every large city boasted numerous commercial districts, where human and material resources concentrated to produce goods made of leather, wood, steel, paper and other materials. The phenomenon continued to the industrial era, with tires made in Ohio, cattle yards in Chicago, advertising on Madison Avenue. In the auto industry in the U.S., manufacturers and suppliers have long congregated in Detroit and So Cal, though there are notable exceptions, particularly from the European makes. New Jersey is home to U.S. operations for BMW, Jaguar Land Rover, Maserati, Mercedes, Rolls-Royce, Subaru and Volvo, though collectively they don’t reach the critical mass of Michigan or California. A couple years ago VW moved its U.S. operations from Detroit to Washington, D.C. But Nashville for Nissan? I still don't get it. Rural areas throughout the world continue to lose population to cities -- because of the economic benefits of congregating resources and, especially, skills. Whether you need expertise in marketing or specialized skills in manufacturing, it makes sense for businesses to utilize a large labor pool. It also makes sense for individuals to join large labor pools. If Nissan, and others, carried their flat world logic to an extreme, they should question the benefits of having a headquarters. Hey, guys! The world is flat! Employees and suppliers can work from home and meet online! I don’t see takers for that offer. Someday I hope to read a case study comparing the performance of companies that moved their headquarters with companies that stayed put. We now have enough subjects to analyze. Not only have Nissan and VW moved recently, recall that a dozen years ago Ford moved its luxury brands to Irvine – Lincoln and Mercury from Detroit, and Jaguar, Land Rover, Aston Martin and Volvo from New Jersey – only to have all of them return a few years to their original locations back east. If location didn’t matter, it would make no sense for IT and finance, two of the flattest of industries, to congregate in Silicon Valley and on Wall Street. But they do, to great success. The same principles apply to automakers, including sales and marketing arms of non-U.S. companies. It makes sense to maintain a physical location where there are already manages and specialists needed for the business. It’s good to see Hyundai stay in So Cal. It's smart business. - BT Justice