TUSCALOOSA, Alabama – When automaker Mercedes-Benz announced in 1993 that it had picked a 966-acre tract of land near Vance, Ala. – population 300 – to house its first assembly facility outside of Germany, the news instantly raised Alabama’s profile in the international business community, according to economic developers.
“It was clearly Day One for economic development in Alabama. We had landed the No. 1 company in the world,” said Lee Thuston, a lawyer with Burr & Forman in Birmingham who worked on the Mercedes project and other major economic development deals that came later.
In the years since that announcement, economic development officials in Alabama often have said Mercedes’ decision to build its U.S. assembly plant in Tuscaloosa County provided with state with a halo effect that allowed it to better compete for major projects, and win many of them. The fact that Mercedes – a brand respected around the globe — had sized up sites in 30 states before selecting Alabama for an important project represented a powerful stamp of approval.
“When we talk to international companies that are considering Alabama for a project, Mercedes remains a major part of the story we tell them,” said Alabama Secretary of Commerce Greg Canfield. “The narrative is compelling because our partnership has been so strong and produced so much success. That makes an impression.”
Alabama’s profile in the international business arena rises with each new company announcing an investment in the state. In 2012, Alabama attracted 35 projects involving foreign investment, up 17 percent from the previous year (the nation’s second strongest growth rate), according to a report by FDI Intelligence. In 2011, Alabama ranked No. 7 among the states for foreign direct investment, according to an IBM Global Business Services report.
The auto industry remains a key sector for foreign investment in Alabama. Mercedes, for example, has made substantial investments in its plant as it prepares to launch production of two new vehicles, beginning next year with the C-Class sedan. Over the past two years, Honda has invested an additional $400 million in its Lincoln plant, adding 400 jobs.
“Before 1997 when the first M-Class rolled off the line, there was not a single vehicle produced in our state. Now, Alabama has become a destination state for both the automotive supplier and automotive assembly sectors,” Canfield said.
Mercedes’ success in Alabama attracted other international automakers – first Honda, then Toyota and Hyundai. Officials from South Korea’s Hyundai once peppered Montgomery representatives with questions about Mercedes during a meeting during that company’s recruitment, according to Ellen McNair, senior vice president for corporate development at the Montgomery Area Chamber of Commerce.
Following the automakers, suppliers have flocked to the state. Several suppliers have announced Alabama projects lately, including Bolta Werke in Tuscaloosa, Donghee America in Auburn, DAS North America in Montgomery and HS Automotive Alabama in Enterprise.
SUCCESS FUELED THE STORY
While landing Mercedes helped put Alabama on the map in international business circles, it was really what the automaker did afterwards that solidified the state’s reputation on a global business stage, making it a magnet for foreign direct investment, officials said.
“Every time Mercedes has expanded, it’s been a validation,” Thuston said.
Mercedes’ initial $300 million capital investment in Alabama has turned into more than $2 billion as the factory standing on the former pine forest has swelled to 4 million square feet. Last year’s production figure at the Mercedes facility was 180,379 vehicles, three times the original plant’s annual capacity.
Like Mercedes, all of Alabama’s auto manufacturing plants have carried out expansions since launching operations in the state, economic developers point out. In fact, the Toyota engine plant in Huntsville is on its fourth expansion project since production started there a decade ago. Employment at Toyota’s Alabama facility, initially projected at 350, will reach 1,150.
“Alabama today is one of the top auto-producing states. We wouldn’t be where we are today without Mercedes giving us a kickstart,” said Brian Hilson, president of the Birmingham Business Alliance who helped recruit Toyota while at the Huntsville/Madison County Chamber of Commerce.
Economic developers say the growth of the auto industry in the state has made an impression on companies in entirely different industries. Airbus Americas Chairman Allan McArtor noted that it was a factor in his company’s 2012 decision to build a $600 million A320 family passenger jet production center in Mobile.
“We were encouraged by the auto industry’s success in Alabama because its manufacturing aspect is a trained skill similar to that of aircraft assembly,” McArtor wrote in a column that appeared on the CNBC web site.
Hilson said the Alabama’s successful courtship of Mercedes in 1993 provided the state’s economic developers with a new level of confidence to pursue the projects of other large international companies.
“The Mercedes project significantly raised the bar for economic development in Alabama,” he said. “It made us more competitive. It gave us more to shoot at, and it gave us higher-caliber ammunition to shoot with.”