By on July 14, 2014

BMW Spartanburg

Twenty years ago, BMW began building vehicles at its first North American factory in Spartanburg, S.C., a move that has paid off well for the German automaker, both against its rivals Mercedes and Audi, and as an example for the industry as a whole.

Bloomberg reports the factory is the largest exporter of U.S.-made vehicles to global markets outside of North America, besting the Detroit Three and the state of Michigan’s collective automotive production efforts as its capacity prepares to jump 50 percent to 450,000 annually as the latest member of the X Series, the full-size seven-passenger X7, comes into production.

The success of the Spartanburg facility is built upon lower labor costs — U.S. labor is 47 percent cheaper than German labor — its work flexibility, and its access to the port of Charleston, I-85 and GSP International Airport. An additional inland port in Greer, S.C., new production techniques — such as using robots and humans on the same assembly step — and massive export increases as the result of an upcoming free-trade agreement between the United States and the European Union will likely add more fuel to the plant’s continued success.

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36 Comments on “BMW’s Southern Strategy Pays Off For All Involved...”


  • avatar

    As long as my country has JOBS and factories it’s all good to me.

  • avatar
    hreardon

    This really is outstanding news and a model for many. I just wish the Great State of Ohio would get its act in gear and start attracting some of this foreign investment. Ironic that Honda was the first foreign transplant in the US, here in Marysville, OH, and yet we’ve had a hard time attracting anyone else to setup shop.

    I’ve got thousands of acres of cheap real estate up here in Cleveland….. ;-)

    But seriously – great to hear. I would caution on the optimism of the EU/US free trade agreement. The talks are still ongoing and there are a lot of opportunities for this to fall apart at the last minute. The big news as part of these talks is the potential for harmonization of regulations between the EU and US which would open the doors to a lot of Euro forbidden fruit here on our shores. Here’s to hoping!

    • 0 avatar
      bufguy

      Ironic that Honda was the first foreign transplant in the US, here in Marysville, OH, and yet we’ve had a hard time attracting anyone else to setup shop.

      Actually Volkswagen beat Honda by a couple years with their plant in Westmoreland County PA. Unfortunately they only lasted about 10 years. Starting in 1978 and gone by 1990.

  • avatar
    SCE to AUX

    “U.S. labor is 47 percent cheaper than German labor”

    “its capacity prepares to jump 50 percent”

    Sounds like their workers are underpaid and overworked.

    Discuss.

    • 0 avatar
      mkirk

      Depends on the cost of living. In my experience It doesn’t cost much to live in the Greenville-Spartenberg area. Charleston was the only area in South Carolina that was any sort of expensive to live in.

    • 0 avatar
      athoswhite

      I live in Upstate SC and work for another foreign transplant that makes tires. For the area, for the cost of living (which is relatively low), BMW pays very well. They do use the temp-to-perm hiring system–and the temp wages are not the best (nor the worst) in the area–but even when the economy is good BMW jobs are highly sought. The UAW can’t even knock on the door of this plant, and that’s usually one of the signs that the employees believe they are fairly paid. So guess again.

    • 0 avatar
      ect

      That part of SC has long been lower-income. Shortly before the plant opened, I recall reading (either WSJ or AJC) that BMW had started running courses for their new employees on how to avoid looking uppity to their friends and neighbours who didn’t have jobs at BMW wage rates – especially when they saw you driving a BMW they could never hope to afford.

  • avatar
    Vega

    One of the most important aspects is not mentioned: Protection against transactional currency exposure (i.e. production cost in Euro, US revenue in Dollar), which can eat up your earnings quickly whenever the Dollar is heading south.

    • 0 avatar
      Chicago Dude

      One of the main reasons for the large expansion is vehicles for export, so the production cost will be in USD and the revenue will be in EUR.

      The energy required to run the factory is significantly cheaper than it would be in Germany, the labor is cheaper while still be perfectly competent. Political stability, distribution infrastructure, etc. The US is a great place to build expensive stuff.

      • 0 avatar
        DenverMike

        That and Germany doesn’t have Mexico close by to build its parts.

        • 0 avatar
          hreardon

          No, but they do have lower cost countries like Hungary. Audi manufactures a good chunk of its engines in Gyor, Hungary and recently built an all new addition to manufacture the A3 Sedan. The Q7 and TT are also built outside of Germany.

          • 0 avatar
            DenverMike

            Most car buyers hardly consider or know where their car is made, much less where its parts are made for 4 Euros an hour.

      • 0 avatar
        Vega

        Agreed. However, one of the main incentives to go to the US in the first place was to build for the US market. That’s why they mainly build SUVs there…

    • 0 avatar
      Pch101

      All of BMW’s costs that are not in euro are converted to euro. Being in the US does not eliminate the company’s exchange rate risk.

      • 0 avatar
        Vega

        Producing locally does eliminate the transactional not the translational risk of selling cars in the Dollar region.

        As a simplified example, assume USD/EUR is 1:1. Selling price in the US is USD 20,000, production cost in the US are USD 10,000 and in Europe EUR 10,000. Profit in both cases is EUR 10,000

        If the USD devalues 20% vs. the EUR the calculation for US production is the following: Sales USD 20,000 equals EUR 16,000, cost USD 10,000 equals EUR 8,000 —> Profit has decreased by 20% from EUR 10,000 to EUR 8,000 following the devaluation

        For European production however the cost benefit of the devalued USD does not kick in. Sales are at the reduced level of EUR 16,000, European production cost however is still at EUR 10,000. —> Profit has decreased from EUR 10,000 to EUR 6,000 following devaluation.

        It is thus still beneficiary to produce locally if you want to sell in the USD region.

  • avatar
    Beelzebubba

    This couldn’t have been posted at a more appropriate time. My best friend and I have reservations to tour the BMW Factory Tour at the Spartanburg facility next Monday (7/21)! I didn’t realize until I was preparing for our trip that all X-series vehicles (except the X1) are built there for the entire world!

    I wonder how the Mercedes-Benz factory in Alabama compares? They build the C-class and the ML & GL-class SUVs.

    I wonder how many people driving around in a $80k BMW or M-B SUV realize that it was built in the Deep South and not Germany?

    • 0 avatar
      Lie2me

      “I wonder how many people driving around in a $80k BMW or M-B SUV realize that it was built in the Deep South and not Germany?”

      They know it, or they don’t care

      Enjoy your tour, I did it many years ago and it’s worth the effort

      • 0 avatar
        hreardon

        I agree: 99% of people don’t ever look at the country of origin sticker. They just see the roundel on the hood and that’s good enough for them.

      • 0 avatar
        Beelzebubba

        “Enjoy your tour, I did it many years ago and it’s worth the effort”

        Lie2me- The BMW Factory Tour was an amazing experience! I found out when we got there that they just resumed the tours on June 9th after a 10 month hiatus. They stopped the tours while they were getting the facility ready to build the new X4 “Sports Activity Coupe”. It shares a platform with the X3 and they are built on the same assembly line, but it has a sloping/fastback-style roof (looks like a mini-X6). They’ll stop doing tours again later this year when they begin construction on the assembly line for the 2016 X7.

        We toured the building (the ‘north’ plant, I think) where they assemble the X3 and X4. The body shop and paint shop are adjacent to the ‘south’ plant where the X5 and X6 are assembled. But the X3 and X4 are sent from one building to the other via a huge overhead conveyer, it was very cool. It was amazing watching them build two different models on the same line and they were a mix of right and left-hand-drive also. They export 70% of total production to varios markets around the world.

        I was very impressed by it all. It was a lot like the experience I had touring the Volvo Factory and Safety Center in Gothenburg back in 1994! My ex-wife ordered a new Volvo 850 and we did the European Delivery Program. We got to spend the day touring the facilities and even got to see a live crash test. Then we spent a few days wandering around Sweden and Norway and got lost trying to find the drop-off location to ship the car home! Once you leave the city in Sweden, it is dark and desolate…I almost drove into a fjord and as safe as Volvos are, I don’t think they float! But we finally made it.

        At least with BMW I only had to drive three hours rather than fly for 14 hours! We’re planning to tour the Mercedes-Benz factory in Vance (Tuscaloosa), Alabama and the Honda factory in Tuscaloosa in a few months….

    • 0 avatar
      vvk

      I have been driving a 2003 BMW 325i that was built in South Africa. It has been superb. In fact, I had an identical 2003 325i that was built in Germany and it was very clearly inferior. I have long sold the German built 3er and hope to keep my beloved African 3er forever.

    • 0 avatar
      KevinC

      I used to work for a company based out of Greenville, and did a couple of driving events at the Performance Center during my employ. I already owned an E90 sedan at the time, but then I bought a new ’07 Z4 M Coupe, partly out of wanting to support the local economy (mostly because I loved the car, which I still own). I also currently own a Regensberg-built ’05 330Ci. There is no difference in quality between the 2 cars, and I wouldn’t hesitate to buy anything produced at Spartanburg. It’s a very advanced facility, always has been.

  • avatar
    APaGttH

    But even by BMW standards, aren’t the X vehicles black dot queens? Especially the X5.

  • avatar
    hachee

    I knew my X5 was built there, and I’m sure most people do as well. In fact, I was glad it was built there. I’ve had 3 X5s now, and they’ve been extremely well made and reliable. It doesn’t quite have that unique German BMW smell (in all seriousness), but that’s the biggest difference.

  • avatar

    From my used car dealer perspective, the later-model SC-built units seem to have fewer electrical gremlins and more typical domestic-build issues (headliner, trim fitment) than their continental counterparts – and I’m far more willing to accept a shoddy cupholder or drooping headliner than DSC module issues.

  • avatar
    haroldingpatrick

    I live less than 10 miles from the factory and folks around here love BMW. There days of the middle class “job” are over except for places like BMW in our country and never existed down here to begin with – ask anyone who worked in a textile factory. I hear they run a tight ship, as they should. Average people in SC are astounded by what unionized labor makes up north. Many people with real trades and professions or a small family business feel the same as they work hard with real responsibility and make the same or less than a guy with a union “job” up north, hence one of the reasons for support of the GOP by even poor people down here.

    Cost of living is not bad as far as housing prices, but be prepared to buy your way into the right school district or shell out for private school at 10-20K/yr per kid. The Old South Establishment has always educated their children privately so you will never see SC schools be great across the board. They are funded by local property taxes, so wealthy school districts have much better schools in general. You see a lot of new BMW’s leased by employees parked by mobile homes here too. Many people with “jobs” in SC simply cannot afford stick built middle class housing in a good school district. The mobile homes are a step up from the shacks/cabins of old, so remember that when you pass comment on southerners. A poor but proud people.

    • 0 avatar
      MrGrieves

      Very similar situation to the Honda factory in Talladega County Alabama. People generally are proud of the factory and working for Honda. A lot of pride in seeing Odysseys, Pilots going down the road. Ridgelines… not so much (that’s a joke, sorry.)

  • avatar
    bufguy

    I’ve never owned an “American” car yet the vast majority of the “foreign” cars I’ve owned have been built in the US. My 1986 and 88 GTIs were built in Pennsylvania, my 2 Honda Elements were built in Ohio and my BMW Z4 was built in South Carolina

  • avatar
    bugmen0t

    BMW’s “Southern Strategy” is paying handsomely for the parent company’s executives, but not so much for its workers. VW line workers, for a comparable example, earn over $67/hour in Germany, less than $20/hour in the US (That’s $135,000/year, vs $40,000).

    Not only that, but in Germany all workers get a month off with full pay every year, another several weeks of floating holidays, and cheap universal healthcare. And with all of that, Germany’s unemployment rate is far lower than ours.

    American workers have no idea how lousy a deal we really have, compared with workers in the civilized world.

  • avatar

    are they still making bmws spartanburg sc?


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