Toyota may move key headquarters functions, including product development, out of California. They could land in Michigan or Kentucky.

Is Toyota ready to walk out on California?

Rumors have been swirling for some time that the giant maker, now facing increased pressures to curb costs, may be ready to move at least some of its U.S. headquarter operations out of the Golden State.  Some jobs may be heading to either Michigan or Kentucky.

Those two states would make sense for a move.  Kentucky is ground zero for Toyota’s core “transplant” assembly operations, while Michigan – though home to its Big Three rivals – has become a critical technical center for the Japanese maker.  Toyota recently opened a major engineering facility in the fringe western suburbs of Detroit that included a new test track.

If a move does take place, it wouldn’t be the first.  Nissan moved its entire U.S. headquarters operations out of California, several years ago, and last year opened up a permanent new facility outside Nashville, Tennessee.

The financial impact of such a move could be significant, especially for budget-constrained California.  Though the state has been seeing a continuing influx of migrants, it has been struggling to hang onto jobs.  That’s particularly true in the automotive sector.  Not only did Nissan move, but Toyota recently announced that it would close the NUMMI assembly plant, near San Francisco, that it had been operating as part of a joint venture with General Motors for nearly a quarter century.  GM pulled out of the partnership in the wake of its bankruptcy.

A report by the Bloomberg news service suggests that product planning, accounting, travel and data services would be among the departments Toyota would move.  It’s unclear how many jobs would be impacted, though a source told TheDetroitBureau.com that could amount to 1,000 or more, a sizable share of the workforce currently centered in the Los Angeles suburb of Torrance.

The maker claims an investment of $17 billion in its various U.S. operations.  In all, Toyota directly employs around 35,000 people in the United States, though a significant portion of that workforce is scattered across the country, primarily at Toyota’s 10 production facilities, which are based not only in Kentucky, but Alabama, California, Indiana, Missouri, Tennessee, Texas and West Virginia.  (The opening of yet another assembly plant, in Tupelo, Mississippi, has been put on indefinite hold, though the exterior of the building has been completed.)

Another 115,000 people are employed by Toyota’s U.S. dealers.  And there have been tens of thousands of additional jobs created by its suppliers.

If the decision to relocate is made, Michigan would have the seeming advantage in attracting technical employees, especially after the company’s opening of the engineering facility, near Ann Arbor.  There had been discussions about building an assembly plant in the western part of the state, but Toyota has long been wary of the powerful United Auto Workers Union.  With the imminent demise of NUMMI, the carmaker will operate no unionized plants in the U.S.  The Michigan engineering center has not been organized.

Toyota officials were unable to comment on the reported move of California staffers.  But there’s no question the company is looking at a variety of ways to shave costs.  Toyota has been hit unexpectedly hard by the global economic downturn, especially in the States, a core market.  The automaker expects to report a worldwide loss that could exceed $2 billion for the current fiscal year, which wraps up on March 31, 2010.