Volvo's $500-million Berkeley County facility, the company's first American factory, will extend South Carolina's reach in the automotive world.
But its ripple effect likely will extend to the Upstate, creating more business for existing automotive suppliers and putting upward pressure on wages for any new workers, state officials and economists said.
South Carolina Commerce Secretary Bobby Hitt said auto suppliers in the Upstate and elsewhere in the state will have an advantage in securing business from Volvo and the expanding Mercedes van plant in North Charleston because of their proximity to the factories and the lower transportation costs that would mean.
"The cost of doing business is going to be key and obviously from 150 miles away, which is about (how far Upstate suppliers) would be from (Volvo), is a very competitive distance compared to other states in the United States and other parts of the world," Hitt said. "The whole state benefits from this."
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Hitt said South Carolina's existing base of auto suppliers and its future potential were attractions for Volvo.
One Upstate supplier, Greenville-based Sage Automotive Interiors, is already thinking about making a sales pitch to Volvo, said Dirk Pieper, its chief executive.
If Sage did land business from Volvo, he said, it would mean new work for its factory in the northern Greenville County community of Marietta.
Sage would bring unfinished fabric that it makes in Italy to the Marietta plant for dyeing and treating, Pieper said.
He said Upstate suppliers would have an advantage in customer service, as well as transportation costs, if they sought to supply Volvo.
"Because if somebody from the plant in the Upstate has to go down and answer some questions, it's a lot easier than somebody coming from Mexico, or Tennessee or Detroit," Pieper said.
"Guy makes a drive and here's there. By the way, they like it when somebody can get there quicker, if there's an issue."
"There are existing suppliers in the Upstate that are definitely going to have the opportunity to supply Volvo as the supply chain develops," Pieper said.
Sage, the world's No. 2 maker of fabric for vehicle interiors, is based at Clemson University's International Center for Automotive Research.
The Volvo plant presents no immediate opportunity for new business at another Upstate auto supplier, the ZF transmission plant in Laurens County.
Bryan Johnson, a spokesman for ZF North America, said he wasn't aware that ZF makes any transmissions for Volvo currently.
"Somewhere down the line it may be possible, but at this point there is not real impact for us," he said.
Companies in the automotive sector tend to pay higher wages than state average for other industries, said Joey Von Nessen, a research economist at the University of South Carolina's Moore School of Business.
"The automotive cluster really does have a unique ability to scale up employment in South Carolina, which is one of the primary reasons why this announcement is such a big deal," he said.
"It enhances an already thriving automotive cluster that has a strong economic footprint in our state and really continues to move the ball forward."
Sujit CanagaRetna, fiscal policy manager for the Council of State Governments in Atlanta, said Volvo's announcement "speaks volumes for the impressive advancements the state has made in creating an environment for the automobile industry to thrive."
Volvo, which has been importing cars to the U.S. since 1955, crossed an important threshold Monday, going from an automotive importer to a domestic manufacturer.
Located in northwestern Berkeley County on a portion of the Camp Hall site, the factory will manufacture latest-generation Volvo models for sale in the United States and for export, although the models to be built haven't been disclosed.
Volvo said it initially will build up to 100,000 cars annually at the factory outside of Charleston. Construction is expected to begin in fall of 2015.
Volvo said the first cars built will be available in 2018. The factory will employ up to 2,000 people over the next decade and up to 4,000 people in the longer term, perhaps by 2030, according to Volvo and state officials.
The new U.S. factory forms part of Volvo's expansion plan to double global sales, boost market share and lift profitability.
When construction is complete, the car maker will be building vehicles on three continents; Europe and China are each home to two factories.
Citing an economic impact analysis by Frank Hefner at the College of Charleston, Volvo estimated more than 8,000 jobs would be created as a result of the project and the plant would contribute approximately $4.8 billion in total economic output annually.
"BMW proudly welcomes Volvo Car Corporation to the Palmetto State," said Sky Foster, manager of corporate communications for BMW Manufacturing. "Today's announcement is another strong signal of the strength of South Carolina's manufacturing competitiveness and steadfast commitment to helping businesses grow and prosper."
When BMW announced it would build its first full manufacturing plant outside of Germany, the company pledged to invest $600 million, employ 2,000 workers by the year 2000, and attract at least nine suppliers to the state. Currently, there are more than 8,000 jobs on site and the company has invested nearly $7 billion in South Carolina.
The Greer plant produces more than 1,300 cars per day. It opened for production in 1994.
In March 2014, the BMW Group announced the largest single investment for the plant: an additional $1 billion, a new model (BMW X7), and an additional 800 new jobs by the end of 2016.
Also, the plant's production capacity will be increased to 450,000 units per year.
Mercedes-Benz Vans, a division of Daimler, said in March the company planned to invest around half a billion dollars to establish a new, full van manufacturing plant in Charleston County. The new production plant will supply the North American market with the next-generation Sprinter, creating 1,300 new jobs over the next several years.
State officials said Volvo's decision resulted from access to international ports and infrastructure, a trained labor force and experience in the high-tech manufacturing sector.
South Carolina is in the process of assisting Volvo with recruiting and training via the state's readySC program, which is part of the state's technical college system and helps manufacturers find and train employees.
The level of worker skills is a critical component for companies looking at South Carolina to locate or expand, Von Nessen said.
"That is one of the most important issues when thinking about economic development for our state," he said. "If we can't supply a workforce here that companies can use, that puts us at a major disadvantage."
Von Nessen said South Carolina is succeeding and "Volvo is a perfect example of that because that's one of the reasons they're here."
Volvo's selection of the Palmetto State underscores the success of South Carolina's automobile industry, state officials said. The state is home to more than 250 automotive-related companies and suppliers and, as a result, leads the nation in the export of both tires and automobiles.
South Carolina's automotive industry dates back to the early 1900s with Milliken & Company manufacturing fabric seats and roofs for Henry Ford's cars, according to South Carolina Department of Commerce officials.
Companies with ties to automotive manufacturing now employ more than 57,000 people in South Carolina and the industry has a $27.1 billion impact on the state, the officials said.
Von Nessen said the Volvo announcement, combined with Boeing's presence in North Charleston, doesn't mean the economic torch in South Carolina is being passed from the Upstate to the Lowcountry.
"No, I don't think so," he said. "Charleston's certainly been doing well in recent years. But so has the Upstate. We've seen parallel growth paths in general with the automotive cluster and with the aerospace cluster."
"We're still seeing competitive rates of growth from both regions," Von Nessen said.
Staff writer Melissa Blanton contributed.