Caterpillar, Boeing show headquarters don’t matter

The headquarters moves by Caterpillar Inc. and Boeing Co are a sign of how detached the corporate mailbox is becoming from industrial companies’ core manufacturing operations.
Caterpillar announced that it would move its global headquarters to an existing office in Irving, Texas — part of the Dallas-Fort Worth area — from its current location in the Chicago suburb of Deerfield, Illinois. It’s the second big manufacturing company to ditch Illinois in as many months, with Boeing announcing in May that it would move its headquarters to Arlington, Virginia, from Chicago.
What’s particularly striking about both moves is just how few jobs will be affected: In Caterpillar’s case, the headquarters shift involves about 230 employees. That compares with the more than 17,000 mostly manufacturing workers that will continue to operate in Illinois for now and Caterpillar’s total global workforce of more than 107,000. At Boeing, the office reshuffling is primarily about finding new desks for Chief Executive Officer Dave Calhoun and Chief Financial Officer Brian West. Asked how many jobs would move to Virginia, Calhoun said: “Almost none — like none.” Boeing isn’t planning any new buildings; the company will instead fill unused space at its existing defense campus in Arlington.
Headquarters moves tend to attract a lot of attention because corporate offices have historically represented attractive buckets of tax dollars for the local community. Amazon.com Inc infamously held a high-profile competition for the location of its second headquarters in 2018, leading to an embarrassing parade of investment promises and tax breaks as states and cities tried to one-up one another. It’s highly debatable whether throwing money at companies to move their headquarters around the continental US is a particularly effective or worthwhile strategy, but a theoretical argument could be made about the benefits of adding thousands or tens of thousands of jobs to the local community.
For a growing number of US manufacturing companies, however, the headquarters office simply doesn’t matter much anymore.
Caterpillar didn’t request and will not receive any incentives related to the
headquarters move, spokeswoman Kate Kenny said in an email. That’s good because any politician who offered financial rewards for fewer than 250 jobs would have a lot of explaining to do.
Raytheon Technologies Corp announced separately this month that it’s moving its headquarters to Arlington, Virginia, from Waltham, Massachusetts. In a statement, the company made a point of noting that it, too, neither sought nor accepted any financial incentives from any state or municipality related to the move. Raytheon employs about 130 corporate staff members in Arlington and doesn’t expect that number to increase significantly, a spokesperson said. There will be no impact to its headcount in Massachusetts.
The diminished importance and scale of the headquarters office to some extent reflects the rise of decentralised operating models and lean manufacturing philosophies. Glitzy, massive headquarters buildings make industrial investors nervous, particularly at global, diversified companies that tend to be better run when the people managing individual business units have more power than some remote executive. Whereas former General Electric Co CEO Jeff Immelt negotiated a $145 million package of incentives from state and city officials to support the company’s headquarters shift to Boston from Fairfield, Connecticut, in 2016, a key part of current CEO Larry Culp’s turnaround efforts has been a shrinking of the corporate office to push greater accountability down to the operating level. The changes to GE’s business model led the company to significantly scale down its ambitions in Boston and to repay a chunk of funds to Massachusetts.
The pandemic has also ushered in a realization that many office-based jobs can be conducted effectively from home, even in the traditionally hands-on industrial sector. “Seventy percent of my day no matter where I am is virtual anyway because I run a large distributed company,” Boeing CEO Calhoun said in comments reported by Reuters.
Raytheon announced in 2020 that it would get rid of as much as 25% of its office space square footage. “The fact that we had 31 million square feet of office space seems like a really big number to me,” CEO Greg Hayes said in October 2020. “As I’ve toured the country and visited facilities where we’ve got literally a handful of folks working there and everybody else is being efficient working remotely, it became very apparent: We don’t need all the space.”

—Bloomberg

Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. A former M&A reporter for Bloomberg News, she writes the Industrial Strength newsletter