Episode 31: Alabama Bets the Farm on Mercedes-Benz (and Wins)

October 30, 2017

“Tell me if this is true or false. If it’s true, I’m gonna throw you out this window.” This was one of the more colorful exchanges when a member of the Alabama economic development team confronted a  Mercedes-Benz negotiator with a USA Today article that said the company’s automotive manufacturing plant was headed for the state of North Carolina.

In our continuing “The Big Deal” series, we take a look at Mercedes-Benz’ announcement  of plans to open its first and only manufacturing plant to North America in 1993. Tuscaloosa County, Alabama was the winner of this 1,500 person manufacturing plant that has grown to nearly 7,000 workers over the past 20+ years. To get the full story, we talked to Dara Longgrear, Executive Director of the Tuscaloosa County Industrial Development Authority, Samuel Addy is a Senior Research Economist with the University of Alabama and Neil Wade, a veteran economic developer who was the President of the Economic Development Partnership of Alabama at the time of the Mercedes-Benz announcement.

Janis Joplin: Oh Lord, won’t you buy me a Mercedes Benz?
My friends all drive Porsches, I must make amends.
Worked hard all my lifetime, no help from my friends,
So Lord, won’t you buy me a Mercedes Benz?

Patience Fairbrother (DCI): Back in 1993, Alabama shocked the business world by winning the Mercedes-Benz North America plant. But the state took a beating from the national media for the $253 million incentive package, at the time, the biggest in U.S. history.

Andy Levine (DCI): In an article titled, “O Governor, Won’t You Buy Me a Mercedes-Benz Plant?” the venerable “New York Times” wrote, “The auto maker’s affection have cost the state dearly. Tax breaks and other subsidies are pushing $300 million. That amounts to $200 thousand for each job. Mercedes, it appears, has driven a state with a subcompact budget to spend far beyond its means.”

Patience: Twenty-plus years later, the score reads, “Alabama, one. ‘New York Times,’ zero.” It is generally accepted that the incentive offered by Alabama is among the best economic development deals of the 20th century. So welcome to Episode 31 of “The Project: Inside Corporate Location Decisions.” I’m Patience Fairbrother of Development Counsellors International.

Andy: And I’m Andy Levine, also with DCI, and Patience as co-host of The Project. I’m pretty sure this is the only time we’ll be able to work a Janis Joplin song into our podcast.

Patience: I think you may be right about that.

Andy: And I just am curious, have you ever heard of Janis Joplin given that you’re about half my age?

Patience: Of course I have.

Andy: So you have?

Patience: She’s a classic. She’s a classic, a legend.

Andy: Okay. All right. Good to know. Okay. Good.

Patience: So about two months ago, we went back in time to look at BMW’s decision to locate in Greenville, South Carolina. Today we look at the other big automotive deal that took place just a year later when Mercedes-Benz announced plans to build a 1,500 person manufacturing plant in Tuscaloosa County, Alabama.

Andy: We’re going to start with our interview with Dara Longgrear, who has headed up the Tuscaloosa County Industrial Development Authority since 1986. He was in his early 30s when the Mercedes-Benz search first was being talked about.

Dara Longgrear (Tuscaloosa County Industrial Development Authority): Well, Mercedes, I guess, you could say got on my radar screen as it did for many economic developers after the BMW announcement in South Carolina. I guess that made everybody aware that there is beginning a movement of the OEM makers from Europe to the U.S.

And then at the auto show, that year in Detroit, in ’93, Mercedes, different than what BMW had done, they announced to the world that they intended to build an assembly plant in North America and that all 48 states were potentially in the running. And they were gonna begin that process.

Andy: His goals were kind of modest for the search.

Dara: I just wanted to be the Alabama site, and I thought if we could qualify as the site from Alabama for such a prestigious project that that was something that we could build upon.

Patience: Dara was as surprised as anyone when he learned that the Tuscaloosa site had made the short list of the five finalists. No one thought Alabama could win the sweepstakes. But the state’s team pursuing Mercedes-Benz was highly motivated.

Dara: But I think our advantage was that, at that time, we had a very cohesive recruiting team and the team was very focused. We were working on nothing else but that for about five months, four months, and it was seven days a week.

Alabama took, you know, the approach that, no, this was a game changer for our state. I mean, to have arguably the world’s most recognized automotive logo and one that’s recognized for high quality and engineered products to build their products successfully in Alabama, this was a game changer. So we never lost track of that.

Patience: In many of our episodes we try to uncover ways that a community distinguishes itself from the competition. Here’s an example of how the Alabama team sought to overcome negative stereotypes about their state.

Dara: We were constantly trying to come up with little angles. One I can think of off the top of my head is, we were in and out of helicopters a lot. And of course it was a hot southern summer, so we would stay inside buildings waiting for the helicopters to arrive before we’d load people on. And one of the buildings that we use on a pretty regular basis is a music hall on the University of Alabama’s campus.

And so we would wait in the music hall in the air conditioning while the helicopter would land and unload or load. And while we were in the music hall, we had arranged where classical music was being practiced, you know, by university students, and the Tuscaloosa has a symphony and the university has obviously a music school. And we were arranging for classical music to be played constantly just to put something in the background that might be something you didn’t expect where you were.

Patience: Competition was coming down to the wire. A major newspaper reported that Mercedes had selected North Carolina for their site and that prompted a near violent exchange with the Alabama team.

Dara: It was during those meetings that “USA Today” came out with a scoop saying that the Mercedes plant was gonna be built in North Carolina. So of course there was some consternation on our side and I know a gentleman that worked with me at the time brought a newspaper in to one of the chief negotiators with Mercedes and he says, “Tell me if this is true or false. If it’s true I’m gonna throw you out this window.” And he said, “No, that’s false.”

And so that was quite a moment. And I know that night we knew we were gonna get it and we celebrated and the first thing I did was call my parents and say, how, “We’re gonna get it.” And I don’t think anybody really fully appreciated what it was gonna mean.

Patience: As a sidebar, we should share that Dara recently announced his retirement from the Tuscaloosa County IDA after 31 years at the helm.

Andy: Now we’re going to switch gears. We’re going to move from the economic developer to the economist. Samuel Addy is a senior research economist with the University of Alabama. He is originally from the country of Ghana and he joined the university in 1998. Tell us what you see as the impact of Mercedes-Benz and its location decision on the state and, basically, how did it change the economy within Alabama?

Samuel Addy (University of Alabama): I would use one word: tremendous. Now as you know, anything of value has both a quantitative and a qualitative aspects to it. I think it’s…the quantitative aspect is really easy. We go ahead, we perform an analysis on what the annual impacts are of the company, and I’ll tell you the last time I did one and the company had a five billion impact on the state.

Andy: In a state that has a GDP of $200 billion a year, one company being responsible for five billion dollars is a pretty big number. Just like the BMW project that we profiled previously, the company far exceeded their original projections in manufacturing output and job creation.

Samuel:
If you will recall, the company with its announcement was only looking to produce 65,000 vehicles, right?

Andy: Mm-hmm.

Samuel:
And hire about a 1,000, 1,500 workers. By ’98 and then later by ’09 when I did the last analysis, the company had far exceeded those targets.

Andy:
According to Sam, the plant currently employs about 7,000 workers, a mix of Mercedes employees and sub-contractors. They produce 300,000 cars annually.

Patience: So that’s the direct impact. But we also wanted to hear about the impact of the Mercedes-Benz decision on Alabama’s external image. So we turned to Neal Wade, a veteran economic developer who was the president of The Economic Development Partnership of Alabama at the time of the Mercedes announcement.

Neal Wade (The Economic Development Partnership of Alabama): Well, we like to tell the fact that in 1993 we had no automotive industry in the state. We really were producing no vehicles at all. Today we’re the fifth largest producer of automotive vehicles in the United States. Over one million vehicles are now produced in the state from three automotive manufacturers: Mercedes, Honda, and Hyundai.

We also produce more than 1.7 million automotive engines from Toyota, Honda, and Hyundai. So in the 24 years since Mercedes came to the state we have become a major player in the automotive industry with a tremendous impact from that investment, initial investment, that we made in 1993.

Andy: Each of our three interviews on this episode used the same phrases: game changer, breakthrough, tipping point, to describe the Mercedes-Benz announcement. Simply put, it helped Alabama move from a sleepy southern state to a manufacturing powerhouse.

Patience: So we’re up to the takeaways part of this episode. Andy, I thought it might be interesting to take a look at the Mercedes-Benz and BMW announcements together and look for some common ground. So what stands out to you in that regard?

Andy: You know, what’s interesting is I thought about that. They mirror each other very, very closely. So they both took place within a year of each other, 1992 for BMW and 1993 for Mercedes-Benz. Both projected a certain number and then the ultimate number has far, far exceeded by, like, a factor of four in both cases the number of employees that were anticipated.  I don’t think at the time anyone anticipated that they would be exporting their cars but there are tons of cars, BMWs and Mercedes-Benz, that are being made in the south and being exported overseas. The capital investment, once again, far, far beyond what was originally projected. To me, the two projects mirror each other very, very closely.

Patience: And we talked about the difference between obviously the direct impact as huge, but then to have the image impact as well, it’s really been transformative for both states.

Andy: We heard that from Neal Wade here. We heard that in our last podcast, but these were two southern states that had manufacturing but they didn’t have an incredibly well known brand like BMW or Mercedes-Benz.

In fact, both had, I think, zero auto manufacturing at the time of the announcement, and it really was transformative in terms of the image of both South Carolina as well as Alabama that we heard from today. I think Neal Wade actually summed it up really, really well, “We were making zero cars back in 1993. Today we’re the fifth largest car manufacturer in America.”

Patience: So that is a wrap on Episode 31 of “The Project: Inside Corporate Location Decisions.”

Andy: Of course, we wanna thank our three guests, Dara Longgrear, Samuel Addy, as well as Neal Wade, for sharing their stories about one of the greatest deals in modern economic development history.

Patience: The project is sponsored by DCI. We are the leader in marketing places and have served over 450 cities, states, regions, and countries. You can learn more about us at aboutdci.com.

Andy: We hope you’ll keep listening. There are many more projects to come. And now as a final treat, Patience is gonna sing for us, “Oh Lord, won’t you buy me a Mercedes Benz?” Yes, no?

Patience: I think I’ll pass. I’ll let Janis do the job.

Andy: Okay. We’re gonna let you hear Janis Joplin. This is the final verse. As a historical side note, Janis recorded this in one take just three days before she died of a drug overdose. So here’s Janis Joplin.

Janis: Oh Lord, won’t you buy me a Mercedes Benz ?
My friends all drive Porsches, I must make amends.
Worked hard all my lifetime, no help from my friends,
So Lord, won’t you buy me a Mercedes Benz ?

That’s it!

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