Small-town BMW plant shows big returns

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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, are testament to the mark made by Bayerische Motoren Werke AG in the area since the manufacturer started auto assembly there 20 years ago today.

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 AG spent on a new plant in Tennessee, will mean more BMWs are made in South Carolina than anywhere else.

X7 SUV

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 Co., Ford Motor Co. or Fiat SpA’s Chrysler as well as the entire state of Michigan, the historic home of the American auto industry.

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 U.S. are about 47 percent cheaper to employ than their counterparts in Germany, according to data from the Berlin-based VDA auto lobby.

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