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Mercedes-Benz set foundation for Alabama auto industry growth

TUSCALOOSA, Alabama – The three-pointed star of Mercedes-Benz is still casting a glow over Alabama 20 years after the global automotive giant picked the state for its first U.S. passenger car factory.

Mercedes’ decision, announced in Tuscaloosa on Sept. 30, 1993, represents the moment the foundation was laid for an auto industry that continues to add facilities and well-paying jobs across the state. With the Mercedes announcement, Alabama exploded onto the international business scene and began positioning itself to land billion-dollar projects.

“What Mercedes did for Alabama was that it gained the state marketing you really could not buy,” said Bill Taylor, who headed the Mercedes plant from 1998 until 2009. “Mercedes coming to Alabama just put the state on the map across the globe. It made headlines all over the world.”

To land Project Rosewood, as it was codenamed, Alabama had to beat out 30 states in a hectic seven-month courtship in 1993. Mercedes’ site selection team picked a tract in the Tuscaloosa County community of Vance after an exhaustive review that examined 150 sites across the U.S. Key factors in Mercedes’ decision boiled down to workforce, infrastructure, a growing regional supplier base, proximity to ports, a strong business climate and a university presence.

“We were in the right place, at the right time, with the combination,” said Lee Thuston, a lawyer with Burr & Forman in Birmingham who was the involved in the project and other economic development deals that followed.

CONSTANT EXPANSION

When Mercedes announced its Alabama project in 1993, the automaker outlined plans to invest $300 million in a 1,500-worker plant making between 60,000 and 70,000 SUVs per year. The facility has been in a state of almost constant expansion ever since.

The investment now stands at more than $4 billion, and the facility produced more than 180,000 vehicles last year, spread across three models. There are nearly 3,000 workers, with plans under way to hire another 1,000.

Mercedes says 15 percent of the passenger cars it sells in the U.S. today are made in Alabama. Two new models are being launched at the Alabama plant: the C-Class sedan in 2014 and a fifth, undisclosed vehicle in 2015.

“Being successful – hugely successful, I might add – has validated their choice in Alabama,” said Taylor, who is now president of the Economic Development Partnership of Alabama.

Mercedes’ selection primed Alabama for dramatic auto industry growth. In 1999, just two years after the first M-Class rolled off the assembly line in Vance, Honda announced plans for an Alabama plant. Toyota unveiled plans for an engine plant in Huntsville not long after, and Hyundai built an assembly facility in Montgomery. Altogether, the four auto companies have invested around $8.5 billion in Alabama.

“Mercedes sent a signal to others in the auto industry that they could find success in Alabama – and not just to the auto industry but to other industries as well, “ said Brian Hilson, who helped recruit Toyota to Huntsville and now serves as president of the Birmingham Business Alliance. “If Alabama was good enough for Mercedes, it was good enough for any company.”

RADIATING GROWTH

The growth of Alabama’s auto industry has triggered massive economic ripples that have touched many parts of the state. One example: Though the City of Auburn stands nearly 140 miles from the Mercedes plant, it has become a hotbed of auto suppliers, thanks to its proximity to the Hyundai plant and a Kia factory in nearby West Point, Ga.

Auburn Mayor Bill Ham Jr. said the city’s 20 auto suppliers provide jobs for nearly 1,900 people. Suppliers from Germany, South Korea and Japan have set up shop in the area, producing parts not only for the automakers with Alabama operations but also for BMW, Ford and General Motors. Total investment made by these firms stands at nearly $395 million.

“Being sandwiched between the Hyundai and Kia plants on the Interstate 85 corridor, having all those automotive suppliers in Lee County represents an important business for us,” Ham said.

Alabama’s network of auto suppliers for Mercedes, Honda and Hyundai now tops 130 companies, with new arrivals being announced regularly. Days ago, Bolta Werke GmbH said it will invest nearly $40 million in a Tuscaloosa facility and hire more than 350 workers. The company will supply the Mercedes plant and the Volkswagen factory in Chattanooga, Tenn.

Mercedes has helped plug Alabama firmly into the global economy. It has become the state’s top exporter, responsible for most of the $5.9 billion in Alabama-made vehicles that were shipped to overseas destinations in 2012. The state’s other automakers also contribute an international flavor to Alabama’s economy.

In Montgomery, home to Hyundai and nearly 30 Korean manufacturers, the cultural influence has become ingrained, with Korean bakeries, groceries, retail shops, churches, a Saturday Korean-language school and more. To help Korean families make the adjustment to Alabama life, the Montgomery Area Chamber of Commerce set up a Korean Family Support Office. Once, the office lined up harp lessons for a young Korean musical student. Hyundai itself has become a major philanthropic force, contributing to numerous organizations.

“It has impacted our community everywhere you look,” said Ellen McNair, senior vice president of corporate development for the Montgomery chamber and its Hyundai point person.

TARGETING NEW SUPPLIERS

Alabama’s economic developers have their sights set on further expansion in the automotive manufacturing sector. For one thing, the expanding line-up of different vehicles produced by the state’s automakers – the total now stands at nine – creates additional supplier activity.

“As volumes increase, and automakers add products, we have the opportunity to add new suppliers,” Sewell said. “Mercedes-Benz now uses three different suppliers for the seats in its Alabama-made vehicles. When it just produced the M-Class, it didn’t need that level of support.”

Alabama’s economic developers also are targeting the kind of auto industry jobs that are missing in the region. The EDPA and the Alabama Department of Commerce, for instance, are working together to target tool and die manufacturers, which have not yet moved in force into the Southeast because of the high capital cost involved in establishing an operation.

The concentration of auto assembly plants and their supplier networks in Alabama and across the Southeast, however, make the state an attractive location for such an operation, Alabama officials argue.

“We want them for the foundation of our industry.” Sewell said. “We are working to position Alabama as the automotive leader in this part of the country.”

Hilson, the chief of the Birmingham Business Alliance, is confident that the auto industry’s positive momentum will continue to generate jobs and new investment across the state. The BBA’s seven-county region already is home to several suppliers, and Hilson’s group would like to attract more.

“As great as the last 20 years have been, there is no reason the next 20 years can’t be even better,” Hilson said.

 

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