BMWs made in S. Carolina surge as biggest US auto export – The Courier-Journal
In South Carolina’s Blue Ridge foothills, the Hans & Franz Biergarten serves Wiener schnitzel, German spaetzle and a concoction of sauerkraut, cream cheese, bacon and corned beef rolled in bread crumbs and fried.
The Bavarian-themed eatery in Greenville, like the annual Oktoberfest in nearby Greer, is a testament to the mark made by BMW in the area since the manufacturer started auto assembly there 20 years ago.
The impact has gone both ways. The factory in Spartanburg, a 10-minute drive from Hans & Franz, is integral to BMW’s efforts to protect profit margins and keep ahead of German luxury-car rivals Audi and Mercedes-Benz. The only auto plant in the rural state also serves as a model for the industry.
“The plant overcame qualms to show the world that good cars could be made at a reasonable cost in the U.S.,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “That led to a renaissance of carmaking, first in the Southern states and then in Detroit itself.”
Pushed by spiraling energy costs and tightening labor rules in Germany, Munich-based BMW will have poured $7.3 billion into the site once the latest expansion is completed in two years. That investment, more than seven times the amount Volkswagen spent on a new plant in Tennessee, will mean more BMWs are made in South Carolina than anywhere else.
The factory, which will employ 8,800 people by 2016, is already the biggest exporter of U.S.-made cars to markets outside North America, beating any facility run by General Motors, Ford or Chrysler as well as the entire state of Michigan.
That lead is likely to grow. BMW plans to increase capacity in Spartanburg 50 percent to as many as 450,000 cars a year. Almost all of BMW’s sport-utility vehicles, including the new top-of-the-line X7, are made there, and 70 percent are exported to more than 140 countries from what was BMW’s first test of full-scale auto production outside Germany.
“At the time, we thought 100,000 was a big number,” said Harald Krueger, BMW’s head of production, who worked at the plant when manufacturing started in 1994 with a target of building 50,000 cars a year. “If you look back, you realize how important this step turned out to be.”
Rising costs in Germany, along with the expense of developing cleaner cars, make South Carolina an attractive site. Auto workers in the United States are about 47 percent cheaper to employ than their counterparts in Germany, according to data from the Berlin-based VDA auto lobby.
“Spartanburg can compete with any German plant in terms of quality and efficiency now,” said Manfred Erlacher, who took over as factory chief in November after relocating from BMW’s plant in Leipzig, Germany. “One of the big advantages here is a pretty high flexibility when it comes to work times. There’s also very good know-how regarding products and processes that’s developed over the years.”
There are potential warning signs ahead. While flexible labor rules in the non-union South helped BMW boost productivity, the United Auto Workers is targeting foreign-owned plants and narrowly missed organizing Volkswagen’s new factory in Chattanooga, Tenn., this year.
BMW picked the South Carolina site after examining 200 locations worldwide. The key benefit was the access to the port of Charleston, 200 miles to the southeast, for deliveries of engines and transmissions from Germany and for exports of finished cars.
Exports are set to increase once a proposed free-trade agreement between the U.S. and the European Union goes into effect. South Carolina, with a potential 187 percent surge in sales to the EU, is poised to be the biggest beneficiary from the accord among the 50 U.S. states, according to a 2013 study by the U.S. Atlantic Council, the Bertelsmann Foundation and the British Embassy in Washington.
BMW also uses the factory to test new production methods, such as combining human and machine labor on the same assembly step. The flexible arms of silver and pale-blue robots help workers lock in plastic frames inside a door, relieving them of a task that can cause wrist injuries.
A cooperative approach was established early in the factory’s existence. Managers held soccer games to get to know their South Carolina colleagues. In return for partaking in the most popular sport in Germany, the group would head to a Krispy Kreme store to indulge in the glazed treats: winners got the creme-filled doughnuts, losers the plain-cake variety.
“BMW’s investment decision here has been a phenomenal success,” said Robert Hitt, South Carolina’s secretary of commerce. “Both sides have to benefit when you make a decision like that. Otherwise, it doesn’t work.”