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BMWs made in South Carolina surge as major U.S. auto export

By Christoph Rauwald
Bloomberg News

SPARTANBURG, S.C. 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 BMW in the area since the manufacturer started auto assembly there 20 years ago Friday.

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

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, Ford or Chrysler as well as the entire state of Michigan.

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.

Rising costs in Germany, along with the expense of developing cleaner cars, make South Carolina an attractive site. Auto workers in the United States are about 47 percent cheaper to employ than their counterparts in Germany, according to data from the Berlin-based VDA auto lobby.

Still, the South Carolina factory was a big gamble in the early 1990s, when BMW was less than one-third its current size. Known for quality and precision, the German carmaker needed to ensure its standards were met by workers new to making autos.

There were hiccups. Before the start of production, a group of young German technicians needed to be coached in acceptable bathing attire after locals complained about the snug-fitting swimming briefs they were wearing.

There are also potential warning signs ahead. While flexible labor rules in the non-union South helped BMW boost productivity, the United Auto Workers is targeting foreign-owned plants and narrowly missed organizing Wolfsburg, Germany-based VW’s new factory in Chattanooga this year. The UAW said Thursday that it’s opening an office in Chattanooga to try to set up a German-style works council at the plant.

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