Archive for the ‘Pharmaceuticals’ category

Another Fortune 500 Company Moves HQ Out of California & Legislators Couldn’t Care Less

September 8, 2018

As California legislators wrap up a year of passing laws to increase regulations and energy costs for businesses, raise housing costs for residents – and set the stage for higher taxes on everyone – they will continue to turn a blind eye toward company migrations out of the state.

The latest is San Francisco-based Core-Mark Holding Co. Inc. which will move its headquarters to Westlake, Texas, in the Dallas/Fort Worth metro area. While only a hundred or so jobs are involved, they are high paying jobs.

Company President and CEO Scott McPherson cited lower operating costs and taxes as the main reasons relocating the Fortune 500 company. He added that the new area is “employee friendly with a really high quality of life.”

The Dallas Morning News reports that “Companies are fleeing California’s taxes and regulations, which firms see as burdensome, and a soul-crushing freeway slog that detracts from the quality of life, said Joe Vranich [of Spectrum Location Solutions]. Texas beckons with a pro-business climate and a goodly supply of land.”

Also, Core-Mark was drawn to the natural beauty of the tree-dotted region along with “the talent and the ability for our employees to have a life balance.” The move is “not driven by incentives.”

According to Stephen Simpson, a financial writer at Seeking Alpha, in late 2017, margins had become a problem for Core-Mark along with costs at two of its West Coast locations, writing: “For a company that operates with razor-thin margins and virtually no room for mistakes, that was a serious problem that management had to address and there were already some signs of progress in the first quarter. Second quarter results showed another big step forward, along with some other expected improvements … the sharp upward move in the shares more than adequately reflects the improvements in the business.”

Significant cost savings on the horizon are certain considering the differences in the California versus Texas business environment – with Texas being the clear winner.

Time and again costs are a factor when companies relocate work out of California.

For example, 533 jobs will be lost through October, 2019 as Amneal Pharmaceuticals merges with Impax Laboratories and closes its facility in Hayward, which also is in the San Francisco Bay Area. Amneal expects to transfer products manufactured there to lower-cost facilities in the U.S. and India, but didn’t identify specific locations.

Don’t expect any of these developments to soften California’s business-hostile environment. Last year, one of Gov. Jerry Brown’s representatives met with a group of company owners objecting to new costly regulations. Although he listened a long time, he finally said, “Look, we don’t care.”

And they won’t care next year, or the year after that, and so on, as long as California’s electorate continues to put people in office who couldn’t care less about fairness to business interests.

One focus of this blog has been to address California’s perennially difficult business environment. Joseph Vranich, who helps companies throughout the United States find great locations in which to grow, is the Principal of Spectrum Location Solutions.

Advertisements