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BMW speeds Spartanburg growth; VW drives Chattanooga hopes

By: Dave Flessner
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By: Mike Pare
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Bobby Hitt

GREENVILLE, S.C. — BMW, which promotes itself as the “ultimate driving machine,” has lived up to that billing for South Carolina’s upstate economy, according to local officials and economic experts.

Nearly 15 years after opening a $500 million assembly plant with nearly 2,000 employees in Spartanburg County, the German automaker has more than doubled its staff and boosted its plant investment nearly tenfold. A new study estimates BMW now generates 23,050 direct and indirect jobs for the Greenville-Spartanburg area.

“There is no question BMW has changed forever the way the area does business,” said Gerald Howard, chief executive of the Greenville Area Development Corp., a business recruitment agency supported by local governments and businesses. “The jobs and capital investment and the suppliers — all have had a huge impact.”

As Volkswagen prepares to break ground this fall on its only American manufacturing plant at the Enterprise South industrial park, Chattanooga leaders hope for a similar German-led economic invasion.

Chattanooga Mayor Ron Littlefield, who visited the Greenville area with other government and business leaders in August, said BMW’s track record in South Carolina offers Chattanoogans a view of their future.

“We have tremendous economic opportunities ahead with what Volkswagen can bring to our community,” he said.

Both Chattanooga and Greenville-Spartanburg are midsized Southern metropolitan areas with strong manufacturing traditions buffeted by economic shifts. With revitalized, riverfront downtowns, Chattanooga and Greenville were recently listed among the top 10 U.S. cities to move to in the 2008 edition of Relocate America’s 100 Top Places To Live!

In 1992, the same year Chattanooga opened its nationally acclaimed Tennessee Aquarium, South Carolina landed BMW in Greer, located between Greenville and Spartanburg, which sit about 30 miles apart.

BMW opened its only American manufacturing facility in 1994 on 1,030 acres along Interstate 85 midway between Atlanta and Charlotte, N.C. By late 2010, VW plans to build its only U.S. plant on 1,350 acres along Interstate 75 midway between Atlanta and Nashville.

If Volkswagen follows the example of its German counterpart, the Chattanooga region should expect faster growth in jobs, income and population.

Economists at the University of Tennessee in Knoxville project the Volkswagen plant should generate 11,477 jobs at the plant, its suppliers and related businesses. But if VW continues to expand as BMW has done over the past 15 years, the economic payoff could be much greater for Southeast Tennessee, they say.

A University of South Carolina study estimates BMW has pumped $8.8 billion into South Carolina’s economy through its own investments and more than 40 automotive suppliers that have clustered within 50 miles of the plant.

With another $750 million expansion under way at BMW — the fourth major addition to the plant since its opening — those benefits should continue to grow.

textiles to autos

The spinoff businesses, tourism and international attention generated by the BMW plant helped the manufacturing-based economy of Spartanburg County withstand the loss of 11,692 textile and apparel jobs over the past 15 years.

Even with the unraveling of nearly 80 percent of the county’s textile and apparel jobs since 1992, Spartanburg County still has outpaced Hamilton County in overall job growth, thanks in large part to BMW and its suppliers.

“I don’t know where we’d be without BMW,” said George Fletcher, executive director for the South Carolina Council on Competitiveness, a statewide group created in 2004 to develop business clusters across South Carolina. “They gave us a needed breath of fresh air.”

University of South Carolina economist Doug Woodward said when BMW broke ground on its American plant, local residents were as concerned as they are today about job losses, declining stock prices and outsourcing of industry.

“When BMW came here, there wasn’t much good news,” he said.

Staff Photo by Patrick Smith A $750 million expansion is currently being added to BMW's manufacturing facility in Spartanburg, S.C. Since the facility opened in 1992, BMW has invested more than $5 billion in the plant and now employs more than 5,400 workers.

But a new 16-page analysis by Dr. Woodward of BMW’s economic impact found that the carmaker now adds more than $1.2 billion a year in extra wages and salaries and generates an estimated 4.3 jobs in the region for each of the 5,400 employees and contractors who work at the plant.

“From an economic perspective, the investment has been spectacular,” he said.

BMW has continued to expand, despite the slowdown in U.S. car sales, because a majority of the vehicles assembled here are exported around the globe. Last year, about 65 percent of the 157,530 BMW vehicles produced in South Carolina were exported through the Charleston port to buyers in other countries, BMW spokesman Bobby Hitt said.

higher wages

As automotive jobs have replaced many textile and apparel jobs in South Carolina, average manufacturing wages also have increased. BMW pays its production workers up to $26 an hour, more than double the wage rates paid in many of the remaining apparel mills in the region, Mr. Hitt said.

Although automotive suppliers generally pay only about two-thirds as much as car companies such as BMW, the average manufacturing wage rate in Spartanburg County still has outpaced inflation since BMW started production here.

According to the South Carolina Employment Security Commission, the average weekly manufacturing wage grew at an inflation-adjusted annual rate of more than 2.4 percent in the first decade after BMW opened its plant. The typical manufacturing weekly wage of $797 in 2004 was up $246 from 1994, or $112 more when adjusted for inflation.

Mr. Howard said BMW’s arrival “shook up the wage rates a little.”

“They hire the best. They scoop up the cream,” he said.

C. Ben Davis, the area director for the Spartanburg Workforce Center of the South Carolina Employment Security Commission, said existing manufacturers were concerned about BMW boosting market wage rates and stealing workers.

“There was probably some of that, but with nearly 500,000 workers in driving distance of the BMW plant, the labor market wasn’t necessarily that disrupted,” he said.

In fact, overall manufacturing employment has continued to shrink even since BMW located in South Carolina. The number of manufacturing jobs in Greenville and Spartanburg counties declined from 103,700 in 1992 to 64,700 in 2007, reflecting the decline in the U.S. textile industry and efficiency gains at other factories, Mr. Davis said.

John Hensley, 52, who works at one of BMW’s suppliers — Spartanburg Steel — said the automaker helped sustain and transform Spartanburg County.

“We’ve lost most of our textile mills and other industry so we really needed what BMW brought to this area,” he said.

changing models

The Greer BMW plant currently builds the X5 sports activity vehicle and the X6 sports activity coupe. BMW recently moved production of the Z4 roadster originally made in Greer to Germany. A new diesel-powered X5 will join the Greer lineup this year, with a hybrid based on the X6 coming in 2009.

Production of the X3, the smaller sibling of the X5, will move to Greer around 2010, BMW officials say.

BMW’s current expansion is projected to add another 500 jobs, which is helping the local real estate market absorb the economic slowdown better than most markets.

Keith Jones of the Greenville commercial real estate firm NAI Earle Furman describes BMW’s massive plant as “a big trickle down” to the economy. Once VW is up and running in Chattanooga, “you’ll see a lot of nice things happen,” he said.

Even amid the nationwide mortgage meltdown, one of the most healthy aspects of the Greenville-Spartanburg, S.C., economy is industrial real estate.

“Old textile mills are coming down,” Mr. Jones said.

Some of the mills are being converted to condominiums or used for new automotive, wind power, construction and other job creators, he said.

Home sales in the Greenville-Spartanburg area are off about 25 percent so far this year compared with 2007. But Realtor Lee Cunningham said the market “is doing better than most of the country.”

In the second quarter of 2008, the median home price of single-family houses in Greenville was up 5.1 percent from a year ago to $160,300. By comparison, the median price for homes nationwide fell 7.6 percent in the same period to $206,500 and median home prices in Chattanooga fell by 2.1 percent to $132,400.

International appeal

BMW also helped put the world spotlight on upstate South Carolina, helping the Palmetto State attract the highest percentage of foreign investment of any state. According to the Organization for International Investment, 127,500 jobs, or 8.4 percent of all private industry employment in South Carolina, come from U.S. subsidiaries of companies headquartered abroad.

“We have businesses from more than 50 different countries,” said Dr. Patricia Harrison, executive director for the International Center of the Upstate, a Greenville-based nonprofit that helps companies and individuals work with multiple cultures. “These investments have not only created thousands of jobs, but they have added a more multicultural feeling to the entire region.”

Ben Haskew, chief executive of the Greater Greenville Chamber of Commerce who helped recruit BMW when he was at the Spartanburg Chamber in the early 1990s, called BMW “the economic gift that keeps on giving” with its repeated expansions and draw for suppliers.

“BMW has wildly exceeded expectations,” he said.

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