BMW moves into fast lane on US freeway

Guardian ^ | October 27, 2003 | David Gow

[Prodigal Son]

Just over 10 years ago, when the US economy was in recession and Germany suffering from the post-unification surge of its currency, BMW startled itself - and the world - by opting to become the first European carmaker to produce vehicles on American soil. It chose to build its first non-German assembly plant in the bible-belt of the south, at Spartanburg, South Carolina, now the hub of a region that produces more cars than the "rustbelt" heartland of the US auto industry, around Detroit.

After doubling output in the past three years and jobs in the past five, the German luxury carmaker is considering plans to expand production even further to boost its share of the US market and reduce its exposure to volatile currency markets.

Its plans, outlined by senior executives here, contrast sharply with those of the bigger American "volume" manufacturers which, faced with dramatic over-capacity and a squeeze on earnings, are slashing jobs and closing plants, even as they pile on consumer incentives to increase sales.

The US this year has become BMW's biggest market, outpacing Germany, but its share of a market that includes light trucks is a mere 1.5%. Last year its global sales were just over 1m and Helmut Panke, chief executive, wants to boost these to 1.4m by 2008.

Tom Purves, chief executive, BMW North America, said sales had more than quadrupled since 1991, when the group first decided on a US plant, to 232,000 last year and, including the Mini, they should go beyond 300,000 this year, with the same level of BMW-only sales by 2005.

He doubts whether the group will ever sell 500,000 in the US because that would be a 3% market share, but points to significant shifts in consumer demand that work in BMW's favour. While Asian manufacturers are dominating the small-car market, the Big Three - General Motors, Ford and Chrysler - are in a dogfight in the middle-size sector that has become so intense one of them could drop out.

BMW, already second in the luxury segment, behind Lexus, is in a market that is likely to grow disproportionately, Mr Purves said. But, after enjoying the sales boost of a relatively weak euro, the company is now hedging against the strength of the single currency.

Spartanburg, which will produce 168,000 units this year and exports about 45% of its output, is a crucial hedge. The 1,045 acre site, built alongside Interstate 85, is only half-occupied and Mr Purves said: "We have a lot of land in Spartanburg and we can substantially increase the facility further. It certainly is our intention to do that."

The plant, which employs 4,700 people, is sole producer of the revamped X5 sports utility vehicle (450 units a day) and the new Z4 roadster (220). "We are building world models here," said Helmut Leube, the plant's director, who insists it is becoming a bench-mark for other BMW factories, including the Leipzig plant opening in 2005.

About 80% of its production is to customer orders (which can be changed up to six days before a car is built) while the body shop for the X5 is 75% automated and that of the Z4 95%. Development of the Z4 took 30 months, compared with 39 for its Z3 predecessor, and Mr Leube and his team hope to cut this to 27 or less.

But there are constraints on its expansion despite a $2.5bn (£1.6bn) investment so far. Locally, it has 39 suppliers, of which 32 are newcomers to the state and, according to Professor Douglas Woodward of the Moore School of Business, these and the plant support 17,000 jobs in an area where manufacturing was being seriously eroded. But BMW wants to raise local content of its cars, now about 60%, to cut currency and logistics costs.

The plant is non-unionised (like most of those in the south) but BMW says it pays $22.35 an hour, just $1 below the union rate in the north. The skilled workforce, of whom 30% are black and 25% women, is said to be as productive as at the German plants but BMW sees the need for higher engineering skills.

So it is putting some $10m towards a new graduate engineering school at nearby Clemson University, where the state is building a research park. BMW is about to announce that it will establish a new R&D facility there which will become a group-wide centre for systems integration, or "mechatronics" - the fusion of mechanics, hydraulics and electronics in future cars.

This, allied with a new design works and technology centre in California, gives the US business an initial but crucial role in the development of BMW's new model range. It is premature or unwise to talk of the "Americanisation" of the group but, as a global player, BMW is drawing increasingly on the potential of its US business.

"We're the obnoxious American cousin and always pushing for things," said Bobby Hitt, chief spokesman. "We're seeing two cultures coming together, with the Americans paying more attention to detail and the Germans coming to faster decisions - a blending of US can-do spirit and German studied engineering orientation."

[Prodigal Son]

Something you might be interested in here. More jobs expected to come to South Carolina.

[Redbob]

"Spartanburg, South Carolina, now the hub of a region that produces more cars than the "rustbelt" heartland of the US auto industry, around Detroit."

Has someone changed the meaning of the word "hub" while I wasn't looking?
If I'm not mistaken, between the Saturn and Nissan plants in Tennessee and the Corvette/Cadillac plant in Bowling Green, Nashville is closer to being an automotive hub than any other city in the U.S.

[ImaGraftedBranch]

Alabama has had many car-companies start production lines here after getting massive tax breaks from the state. In fact, my cozy little state is now getting too many people! Might be time to move to Wyoming.

[csistrueblue]

Sorry Redbob - the data is in the - The Upstate of South Carolina is clearly the winner here!

[Eric in the Ozarks]

Change the color up to 6 days before your car is built ? Try three months from Detroit.

[1Old Pro]

Of course BMW is successful, they make the best cars.

[DCBryan1]

Of course they are the best cars of the planet.

Here is my toy:)

Anyone stopping buy Little Rock, AR who wants to go nearly 200 mph, give me a call.

.... nuff said.

Conforti Chips,
Dinan Tranny Chip
Extrude honed Intake and Exhaust Manifold,
Racing Dynamic Head, polished, ported, balanced,
SuperSprint straight pipe Exhaust,
Bilstein suspension,
Euro Brembo Brakes, .......

....and the $10,000,000.00 (literally) picture!
8-Series Left-Coast Fest OCT 2003
My car is furthest left, 2nd row.
Biggest 8-fest ever (only the BMW factory in Munich saw 78 cars)

[DCBryan1]

Vrooom PING!

[Hillary's Folly]

Merecedes, Honda, and Hyunda now have plants less than 100 miles from Birmingham as well.

[Sir Gawain]

Give me a few years to get that Porsche I want and we'll race. hehe

[1Old Pro]

Sweet! I've owned BMW's for the past 2 decades.

[1rudeboy]

Spartanburg, which will produce 168,000 units this year and exports about 45% of its output, is a crucial hedge.

But I thought we build nothing, and export nothing (but jobs).

[Prodigal Son]

It's one of them crazy things inn't it?

[razorback-bert]

Ok, next time I am up there.

Past owner of a 633i, 528e, and a 528e.

[razorback-bert]

Oh #$*~^, make that a 325e, not another 528e.