Economic giant BMW will reveal major expansion Friday
03/26/2014 11:08 PM
03/27/2014 10:22 AM
BMW has put $6.3 billion into manufacturing luxury cars in South Carolina’s Upstate, and it has put close to 8,000 people to work in the state in the past two decades.
The international carmaker has long-since exceeded public expectations – dwarfing the $600 million capital investment and 2,000 jobs it promised when it announced in 1992 it would open its only North American manufacturing plant in Greer.
The ripple effect of that announcement 22 years ago and the growth that has come have had a profound impact on the state’s economy, touching lives from the Upstate to the coast. BMW helped kick-start a vital shift in the state’s historically textile economy, transforming South Carolina into a manufacturing powerhouse and major exporter in the global economy.
And the German automaker isn’t finished making its mark on the Palmetto State yet.
On Friday, BMW, which has manufactured more than 2 million vehicles in South Carolina, is expected to unveil its next major expansion to manufacture what is widely speculated to be a new luxury X7 sports activity vehicle, larger than its existing, top-selling X5 model. The expansion could spur another $1 billion in investment and add a third factory on the plant’s 1,200-acre site.
The automaker has invited news media for a “significant economic and product announcement” at 1 p.m. at its sprawling 1,200-acre manufacturing plant in Spartanburg County, where U.S. Commerce Secretary Penny Pritzker and BMW Manufacturing president Manfred Erlacher and other dignitaries will attend.
‘a real economic development coup’
Headquartered in Munich, the capital of Bavaria in southern Germany, BMW has manufactured automobiles, motorcycles and engines since 1916, but touched off a tremendous competition between states when it decided in the early 1990s to locate a plant in the United States.
The Spartanburg plant, situated along Interstate 85 between Charlotte and Atlanta is the only BMW manufacturing plant in the United States.
It is solely responsible for the global construction and delivery so far of seven BMW X models that are shipped to more than 140 countries.
South Carolina ranked second in the U.S. in automobile exports in 2013, according to the S.C. Department of Commerce, and ranked second to California for all exports to Germany.
BMW, short for Bayerische Motoren Werke AG, produced 300,000 cars in Spartanburg last year alone, Commerce said, and exported 210,000 of them, or about 70 percent, through the Port of Charleston.
“Getting an automotive plant is a real economic development coup,” said S.C. Commerce Secretary Bobby Hitt, “and so it was for (the late) Gov. Carroll Campbell and the Department of Commerce when it occurred in 1992.”
Car manufacturing, Hitt said, is seen as “the pearl” of economic development because it has the greatest economic multiplier of any kind of manufacturing operation. “It’s considered to be a real wealth creator – every automobile plant – that’s why the competition for them is so great.”
A 2008 study by USC’s Moore School of Business set the broad annual economic impact of the BMW plant on South Carolina at more than $8.8 billion.
But Hitt, a Charleston native who worked at the BMW plant in Spartanburg as its corporate affairs manager before being tapped by Gov. Nikki Haley to lead the Commerce Department, often casts BMW’s greatest impact on South Carolina in non-monetary terms. BMW created an identity for South Carolina that didn’t exist before, he said.
“To my mind, it changed the way we thought about ourselves, that we could play on an international stage,” said Hitt, who drives a BMW. “I don’t know of a company that has had a profounder impact in South Carolina. I’m not sure of any company that’s ever had an effect on the psychology of the state that BMW did. It was a major change.”
Economics are prolific
It was Campbell, who served as governor until 1995 and died 10 years later, who set the stage for that shift. He saw a critical need in the state, said former Republican Gov. David Beasley, who succeeded Campbell for a term from 1995 to 1999.
“South Carolina’s economy was in a very serious state of transition,” said Beasley, now a Darlington businessman.
While the U.S. economy was growing strong, “South Carolina’s was on the brink of disaster,” he said. Its textile-based manufacturing economy was reeling, Beasley recalled, even as the state was under further threat from a severe round of U.S. military cuts in the form of base closings.
“BMW has been and still is extremely vital to South Carolina’s economic well-being,” Beasley said. For the company to make a significant economic announcement in the Palmetto State at this time of continued global economic turmoil, Beasley said, indicates that BMW, recognized for its commitment to excellence, feels that South Carolina has a seat at that table, too.
The economics of a powerhouse manufacturer such as BMW are prolific, though, and even more so in a largely rural economy like South Carolina’s.
“Their wages and fringe benefits produce a tidal wave of spending that lifts the incomes of approximately three more workers for each BMW worker employed,” said Bruce Yandle, a Clemson University economics professor emeritus.
Then one has to consider the second- and third-tier suppliers who produce components used in the assembly of the BMW vehicles, Yandle said. Forty of the company’s suppliers are located in South Carolina, employing more than 20,000 people.
“Spread across the region, these employers add a sizable ripple effect that supplements BMW’s direct impact,” Yandle said.
Finally, Yandle said, there is the not-so-insignificant value of branding. “BMW is known throughout the world for producing ‘the ultimate driving machine,’” Yandle said, “with unstinting attention paid to quality and performance.
“Their reputation has now been affixed to South Carolina’s brand. Industrialists worldwide know that South Carolina workers, suppliers, and supporting government agencies have passed the BMW test.”
South Carolina Department of Commerce Secretary Bobby Hitt sat down with The State to talk about BMW’s impact:
South Carolina is the No. 1 tire producer in the United States for the third straight year. Did the tire plants locate here in part because of BMW? Michelin was one of the first major international companies to come here. They make a great product. They make one of the world’s finest tires. We are blessed now to have three tire manufacturers here. Michelin has been here for more than 30 years, so they were absolutely a pioneer in international manufacturing coming to South Carolina in a big way. BMW punctuated that 10 years later. The two companies, by the way, get along real well.
How else does BMW’s identity affect South Carolina? How many parts suppliers have located here because of BMW and how many jobs have they created? BMW has attracted 40 companies to join it as part of its supplier system, which employs more than 20,000 people. So BMW is employing some 8,000 directly and some 22,000 in their supplier system right now, and that’s the in-state supplier system. They have also got suppliers all around the country and all around the world. But 40 of them are here in South Carolina and they are scattered across 11 counties.
How has BMW Manufacturing grown over the years? The first year we produced cars in full in the Upstate at BMW, we produced about 28,000 units. That’s 2,100 or 2,200 units (cars) a month, 400 to 500 a week. We thought we were really hot stuff. But today they are making 1,200 a day. Doing the math, (they’re) doing almost as much in a month as we did in the first year. The plant has matured. The labor force has matured. The people there are expert car builders and they’re building the finest – because it’s the largest selling – premium-brand automobile in the world, in South Carolina by South Carolinians. Let me punctuate it one other way: It is the most complex consumer product made.
How has the automotive industry in South Carolina grown? Remember, roughly 20 years ago we were a textile state. Today, we are an aerospace and automotive state. That’s a remarkable difference from where we were. In the two decades since BMW first arrived here in South Carolina, the state’s automotive industry has more than quadrupled. Today, South Carolina is home to more than 250 automobile-related companies and suppliers. The state’s automotive industry employs over 45,000 people. Automotive-related companies are in 36 of the state’s 46 counties today.
How big has the role of incentives been in BMW expansion in the state? The incentives have been ones that had impact for the whole state, in my opinion. Some of the (2001) incentive money was used to help development of ICAR, an alternate training concept to build up the automobile industry and help provide services that were not otherwise provided, No. 1. No. 2, $50 million of it went to a major interstate exchange in the Upstate to provide another ground logistics to the plant. We were filled up with our ground logistics (roadways); if we did not have more ways to manage this site, the plant would not grow. We were at 4,000 people back then. So the plant has grown from 4,000 to 8,000 and now we’re waiting for Friday to see what comes next.
BMW’s major SC expansions
1992: BMW Manufacturing said it would invest $600 million in new facilities for a 1.5 million-square-foot assembly plant in Greer, hiring up to 2,000 workers by the year 2000
1994: September, first North American-made BMW 318i produced
1995: BMW Z3 begins production
1997: M Roadster begins production
1998: Z3 and M Coupe begin production; plant expands for X5 production
1999: X5 production begins
2000: $300 million investment announcement
2002: Z4 Roadster production begins; $400 million additional investment
2003: X5 (2004 model) production begins
2004: X5 4.8is production begins
2006: Updated Z4 Roadster begins; Z4 Coupe, M Coupe begins; “Next Generation X5 begins; $50 million investment announced
2007: X6 Sports Activity Coupe begins
2008: $750 million investment to add 1.5 million square feet more to the factory, bringing 500 new jobs and increasing production capacity to 240,000 vehicles by 2012
2010: BMW XS (2011) begins; X3 (2011) Sports Activity Vehicle; BMW X3 begins
2012: $900 million investment in Spartanburg plant expected to generate 300 new jobs as company prepares to expand X-model family; also celebrates its 2 millionth vehicle since production began in 1994 and 7,500 employees in 4.4 million-square-foot factory
2014: It is speculated BMW will announce plans to build an X7 model vehicle, described as the company’s largest ever – a full-size version of the top-selling X5 sports activity vehicle. The plan could spur another $1 billion in investment in Greer and add a third factory on the plant’s 1,200-acre site.
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