Capital Runs

Carls Junior / Hardees corporate HQ flees California for Tennessee.

Yes, we know that CKE’s official line is that the firm is relocating because it has less need for office space as it consolidates operations. But the company executives say this with a wink. Tax savings are a big factor, as is the stifling regulatory environment on the left coast, where businesses are treated like villains and rich people as cash dispensers for big government programs. It’s not a coincidence that CKE’s CEO Andy Puzder has been one of the leading critics of high taxes and onerous rules in Washington D.C. and Sacramento.

The next time some liberal hamster asks “what’s the matter with Kansas?”, one might respond “the usual.  What’s the matter with California?”

The state legislative group ALEC finds in its latest “Rich States, Poor States” rating of the states on business climate that California ranks 44th of all the states in business competitiveness.  California has lost roughly 9,000 companies over the last decade, with most of them moving to Texas, Florida, and Tennessee. Last year, in a major loss, Toyota moved its North American headquarters from the Golden State to North Texas.

And that’s just the headquarters – although with many small-to-medium companies, the HQ and the production/distribution/retail is all under one roof.

But with bigger companies?

Minnesota liberals love to hide behind the fact that the Twin Cities is home to a lot of Fortune 1000 companies.  The part they omit (or don’t understand) is that the Headquarters  – with its staffs of senior executives and high-level technocrats, with their taste for the lifestyle and ameniities and central location of major metro hubs like the Twin cities – is a small part of the organization.

Quick – when was the last time 3M or Ecolab built a manufacturing or distribution facility in Minnesota?

(Don’t use Target for an example; it manufactures nothing. It’s employees are all white-collar headquarters workers, and red-collar service employees out in the retail world).

But when things get bad enough?   Even the headquarters staff can move – or, as 3M did during the tax-happy Perpich and Carlson eras, start thinning out the central HQ and moving people to Austin.

12 thoughts on “Capital Runs

  1. The list is long, on why its hard to employ people in the US:
    -Retail/fast food…gov’t says you have to treat salary managers like hourly employees
    -Employment lawyers are the lower than the slip and fall lawyers
    -Fed’l gov’t now says franchises are really a chain (its complex, but read some articles on this)
    -Mandates on things like health care and paid time off.
    -Compliance requirements forces you to employ a lot of people just to assemble reports for the gov’t
    -Random lawsuits from the justice department (see Cargill in Arkansas)

  2. If you know your Adam Smith (or even your Marx), you know that firms are driven to increase profits. If there is no overall economic growth — if revenue is flat, and investment in growth will not increase revenue — then you have to increase profits by cost cutting. Instead of investing in growth to increase share price, you invest in reducing costs. Costs are primarily human resources. Ugh.

  3. In what was one of the biggest business economic blows to Cali ever, Toyota left Cali and moved to Texas, I think last year. They didn’t hide behind cutesy excuses like we need less office space. They said it was due to the favorable economic climate in TX.

  4. I saw where Gov. JimBeam was praising the new R&D center at Mother M. What he didn’t say is that no new jobs were created, it just moved the staff to new digs.

    We’re getting all those sweet tax dollars from 3M down here in God’s country.

  5. How’s that state investment in embryonic stem cell research doing? Private equity would be expecting a healthy ROI by nor.

  6. I know that this topic has come up before on this blog. As I have said previously, I believe that every company in this state, has an exit strategy. Every company here has established or is contemplating establishing a facility in another state that could become their corporate HQ.

    Democraps are fooling themselves if they really think companies won’t move.

  7. In the ’00’s the company I work for relocated distribution & light manufacturing from Los Angeles to Reno. The Tax on Inventory savings alone paid for the move in less than three years. They wound up re-opening a small distribution facility in the Inland Empire (60 miles East of LA), mainly because time to market (specifically NM & TX) and higher transport costs when oil was >$100 barrel was costing the business sales.
    Interesting that TV/movie HQ stays in LA while the well paid actors and production staff makes ‘entertainment’ elsewhere to take advantage of tax breaks. Democrats gotta Democrat!

  8. And where will CKE go when they need to lower costs again? Overseas? Automate and outsource what they can? CKE is owned by an investment company. All they care about is the bottom line.
    Good anti-protectionist essay by libertarian Richard Epstein here:
    Good discussion in the comments as well.
    I don’t agree with Epstein. I think that he has a tendency to put on his libertarian purist hat when he writes about economics (rather than the law). Epstein, and some others, ignore the fact that shit flows downhill unnoticed until the sewers back up (I don’t think that is a mixed metaphor!). Globalization brings pain and it brings wealth. One of the benefits of wealth is that you get to push the pain down to the less wealthy, and the least wealthy are workers with little or no capital.
    My stepfather was as a plumber. Not a contractor, a plumber paid by the hour. Forty years ago he owned a home in the suburbs (monthly mortgage payment < $100), a small fishing cabin on a lake an hour's drive from the Twin Cities, a boat, of course, and two newish cars. He was forty years old, and he did not come from a wealthy family. His only post high school education was two years at Dunwoody. How easy is that kind of modest success to achieve today?
    The standard response to this kind of talk from the GOP is that things are different now, the world has changed.
    My questions is: how is this any different than the crap Carter pushed in 1978? That your lifestyle would necessarily decline, that you would not have it as good as your parents did?

  9. re “Bento Guzman” reply

    We have to stop with statist inflationism. It sort of worked for 100 years. Now it’s killing us.

    Everyone’s standard of living goes up in a deflationary economy, but the government and the financial system loses power so this will never happen.

  10. Why is the government running out of money? Why do they want wealth taxes? Is means testing Medicare and SS a wealth tax?

  11. I can’t figure out whether the move of Carl’s Jr. HQ or the Toyota move is a bigger blow. Toyota basically told California that they didn’t care that the shipping lines were 5000 miles shorter to California, their tax and regulatory structure means they had to do this from Texas. Carl’s is, along with In-n-out Burger, a quintessentially CA company that is saying that the disadvantages of doing marketing and such from Tennessee are outweighed by the tax and regulatory structure. Either qualifies as a kick in the nuts to Sacramento.

    Now if they close Warren Air Force Base (the procurement depot that serves companies like Hughes and Northrup Grumman), watch all Hell break loose as the defense sector heads for the hills.

  12. I may have posted this before, but….I used to work for a company that had retail outlets in California. It was worthwhile because there is so much money (in aggregate) and so many people in California. But the costs to run these outlets was amazingly high due to California being so anti-business. Its like a 20 year old gender and environmental studies major from Macalester runs the whole state.

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