BMW and South Carolina: The Big Deal That Almost Never HappenedJuly 25, 2017
This week, we bring you a new sub-series called “The Big Deal,” which takes a look at some of the biggest economic development deals in history and how they impacted communities. We start with BMW’s decision to bring its first facility outside of Germany to Spartanburg, South Carolina in 1992.
To get the full story, we talked to Douglas Woodward, an economist with the University of South Carolina, Bobby Hitt, a former BMW staffer who became the Secretary of the South Carolina Department of Commerce in 2011, and Wayne Sterling, a legendary economic developer who managed the BMW project 25 years ago. Listen on to learn how Governor Carroll Campbell convinced BMW’s Chairman to reverse an initial decision to locate the plant in Omaha, Nebraska.
Andy Levine (DCI): In the world of site selection, BMW is an epic tale. Back in 1992, the luxury car maker announced the decision to build its first major production facility outside of Germany.
Patience Fairbrother (DCI): Spartanburg, South Carolina was the winning community, and over the past 25 years, the decision has had a transformative impact on the state and its economy.
Andy: But as we learned from some of the key players in this high-stakes drama, the project almost went to Omaha, Nebraska instead.
Patience: So welcome to Episode 23 of “The Project: Inside Corporate Location Decisions.” I’m Patience Fairweather, of Development Counselors International.
Andy: And I’m Andy Levine, also with DCI, and Patience’s co-host of the project. So today, we take the project in a different direction.
Patience: I like it when we mix things up. It keeps everyone on their toes.
Andy: Always good to mix things up. As our loyal listeners know, most of our episodes focus on a recent location decision and why a specific company chooses a specific location.
Patience: But today, we’re introducing a new and intermittent segment, called “The Big Deal.” We’re going to go back in time and look at a handful of projects that were truly transformative to a state or community. We’ll talk to key players and reflect back on a company’s location decision, and we’ll talk to respected economists about the impact each project has had to transform a community.
Andy: So Patience, it is time for our first installment of “The Big Deal,” and I can’t think of a better project to examine than BMW’s decision to build its first plant outside of Germany in Spartanburg, South Carolina. Now just to show how important this has become, in the last year, this facility produced over 400,000 new cars, making it BMW’s most productive plant in the world.
Patience: It’s really the ultimate big deal in North America. So we’re going to hear from three key players in today’s podcast. The first we might call “The Economist.” Dr. Douglas Woodward, who’s Director of the Division of Research and a professor of economics at the University of South Carolina. He started at USC in 1987, five years before the BMW announcement.
Douglas Woodward (University of South Carolina): BMW is the most significant investment in South Carolina. There’s no question about that.
Andy: The second is the company man. Bobby Hitt was one of the first American hires made by BMW, back in 1992. He worked for the company for 18 years, until he, in an odd twist of fate, became South Carolina’s current Secretary of Commerce, in 2011.
Bobby Hitt (South Carolina’s current Secretary of Commerce): When it was announced, I think it ought to be our equivalent of the shot heard round the world. It was a change point in South Carolina.
Patience: And finally you’ll hear from the salesman. Wayne Sterling was the Executive Director of the South Carolina Development Board, responsible for working the project with one of the best economic development governors in history, South Carolina Governor, Carol Campbell.
Wayne Sterling (South Carolina Development Board): BMW was probably the sexiest project that I worked on.
Patience: It’s sort of rare to hear the words “sexy” and “economic development” in such close proximity.
Andy: Very true. Now let’s go back to our economist, Dr. Douglas Woodward. We wanted to understand the impact BMW had on the state’s economy.
Douglas: It’s been tremendous. They under-promise and over-deliver, in this case. What happened, BMW said, in 1992, that they would hire 1700 workers and put about $500 million in capital investment in South Carolina. It turns out, right now, they directly have 9000 workers. They put in over $4 billion of capital investment. It has had a transformative effect on the state of South Carolina.
Andy: The multiplier effect has a huge impact as well, with an estimated 30,000 additional jobs from BMW suppliers.
Douglas: So right now, you know, they, for every one job, roughly, that BMW hires, there’s three additional jobs throughout the supplier network. And on the consumer side, because these workers spend their income in our state, that also boosts the employment up. So it’s a big multiplier effect on employment. Automobile plants like this have the biggest impacts, the biggest indirect effects, multiplier effects, of any kind of business.
Andy: Finally there’s the impact on the Port of Charleston. BMW cars made in Spartanburg, South Carolina get exported all over the world, and 86% of those cars travel through the port.
Douglas: And the export, by the way, these cars, to 140 countries. 70% of this output is exported from the United States. That’s where the BMW plant is different than any of the others. It’s the largest exporter of cars in the United States.
Patience: But it was also a game-changer for South Carolina, from an image perspective.
Douglas: It’s hard to imagine this state without BMW, in so many ways. Just for example, because of BMW’s decision to locate here, it really opened the eyes of a lot of other investors who have since come, and they all look at BMW as this, you know, this marquee company that, if they’re making an investment and making decision to come, and they’re continuing to invest and expand in South Carolina, maybe there’s something going on there.
Patience: As we mentioned, Bobby Hitt was the company man, one of the very first employees hired by BMW in the state. We have to apologize in advance for the quality of our recording with Bobby. There seemed to be a problem with his microphone about halfway through the interview. But what struck us about his comments was how emotional working for BMW was for South Carolinians.
Bobby: People who were selected to be a BMW production associate, I think, would have felt kind of like they’d won the lottery. I mean it was so much competition for these jobs, because it was a new industry. It was an exciting industry. It was a brand industry.
Andy: One of my favorite parts of the interview with Bobby was a moment when all of the quality control checks were complete, and the plant was finally approved to start producing cars for sales. The company chairman flew over from Germany for a meeting with the entire plant.
Bobby: Everybody was in the cafeteria for, you know, an all-associates meeting, as we would have called it in the day, maybe 500 of us in the company. He got up and congratulated everybody for what we had done to get to this point, to get qualified, and [inaudible 00:06:12] hard part begins because then you have to do it every day, faster and faster and faster. You know, everybody just sat there like, you know, wide-eyed kids listening to this. He said, “Oh, by the way, the whole world is watching, and the fate of our company is in your hands.”
Patience: Again, our apologies for the sound quality. But as we teased at the beginning of this episode, the BMW project almost passed over South Carolina. As far as we can tell, this element of the story has never been told publicly before. So it is our pleasure to bring you a bit of economic development history. Wayne Sterling is 81 years old and happily retired, but he remembers the BMW project vividly and recounted for us a critical meeting with BMW’s chairman, Dr. Eberhard von Kuenheim, at the company’s headquarters in Germany.
Wayne: We’d go…The governor and our team, we’d go to Germany, up on top of that big building into there, a board room, for what was to be our final presentation to them of the final sites that they had not eliminated, which there were still two, and we were hoping to get a handshake and do a deal. We get there, and we make our final presentation on those two sites and how perfect they were for the company and all this good stuff. The governor asked for the order. Dr. von Keunheim looks down, and he looked to either side of him, but [inaudible 00:07:44] on the other side of him. But he didn’t say anything to them. He looked up at the governor, and he said, “Governor,” he said, “We really appreciate the work that South Carolina has put into this effort.” He said, “Everything we’ve asked you to do, you have done, but you just don’t have a site we like. So we’re gonna have to put this project in Omaha, Nebraska.”
Patience: This was not the response they were hoping for.
Wayne: I thought my governor was gonna die, really. I mean it just deflated him. It was terrible. So he looked at me and said, “Wayne, don’t we have some more project other sites we can show them?” I said, “Governor, we’ve given them every site that met the criteria given to us by the consultant. Something tells me we didn’t get the full picture from the consultant, or we misinterpreted.” I said, “Ask him if he had the best site in the whole world,” which he didn’t seem to be happy with Omaha anyway…Said, “If he had the best site in the whole world, where would it be? And what would it look like?” Governor finally agreed that we didn’t have another site. So he turned around and asked Dr. von Kuenheim that question.
Patience: And there was a small opening.
Wayne: Dr. von Kuenheim, again, thought for a minute, and he finally looked back at the governor, and he said, “Governor, if you had offered us that beautiful wooded site right next to the Greenville-Spartanburg Airport, that we flew into and out of, looking at these other sites that didn’t work,” he said, “we might be trying to do a deal with you. But really, we’re at the point where we’ve notified Omaha that we’re gonna come over there and announce this project, and we have to do that after this meeting.”
Andy: And this is where Governor Carol Campbell demonstrated his sales magic.
Wayne: Governor says, “Wait a minute.” Governor was a salesman now. He said, “Wait just a minute, Dr. von Kuenheim.” He said, “You are the client. You have the authority to call that group up there and tell them that you have to delay a little bit. You’ve got to finish looking at something else, and they’re the…They can do nothing but go along with it.”
Andy: He finally got the chairman to agree to postpone the announcement for two weeks, and that was all South Carolina needed. They flew home and engaged the state’s Port Authority to quietly start buying options on all the land on the site right next to the airport. They flew back to Germany in two weeks with a map of the properties that had been acquired, and that’s when the real negotiations started.
Wayne: They were so detail-oriented, that they would recalculate and re-evaluate every single item of the entire project, over and over and over again. I’ve never seen that kind of detail from any other company, not ever, not the Japanese, not the Taiwanese, none of those folks. They could not afford to make a large mistake because they weren’t as big as Volkswagen and Mercedes Benz and their main competitors. So I think because of that, they were more meticulous than anyone else.
Andy: It took about a year to finalize all of those details, but today, the BMW plant sits on the very spot Dr. von Kuenheim referenced in his meeting with Governor Campbell, and nearly 4 million cars have been produced by the Spartanburg plant. All right. So Patience, we are at the takeaways part of this segment. This obviously is a huge, huge deal. What stood out to you among some of the things that we heard in this episode?
Patience: First of all, I think we just have to talk about what a huge impact this single plant has had on the state. So this is 9000 direct jobs. Then of course, there’s the multiplier effect of an additional 30,000 indirect jobs. Then on top of that, we’re looking at the impact its had on the port, so 70% of the cars being exported, and the vast majority of them go through the Port of Charleston.
Andy: Excellent point. All three of those are important. I think equally important, this really raised South Carolina’s image dramatically and allowed them to attract other high-profile manufacturers. Boeing is probably the most recent example.
Patience: Boeing is a great example.
Andy: In the Charleston area. No, it had a massive, massive impact on South Carolina’s future. At the time, and we didn’t cover this in the episode, South Carolina, as well as a lot of the south, was really sort of hurting from the loss of textile jobs. The automotive sector basically replaced all of those lost textile jobs. So it was a pretty big win for South Carolina.
Patience: That’s pretty amazing.
Andy: Let me go in a little bit of a different direction. I just love Wayne Sterling’s story. I’ve heard about this South Carolina BMW project all of my life, but I never heard this angle that it was about to go to Omaha, Nebraska. Then, you know, Governor Carol Campbell…God bless him. He basically finds a way to get this decision delayed for two weeks, comes back, and is able to get it reversed. I mean I just think it’s like an incredible snatching victory from the jaws of defeat story.
Patience: So that is a wrap on Episode 23 of “The Project: Inside Corporate Location Decisions.”
Andy: We need to thank our three guests, USC’s Professor Douglas Woodward, Secretary of Commerce, Bobby Hitt, and the happily retired Wayne Sterling. They were all lucky enough to be part of one of the most important projects in South Carolina and maybe US history.
Patience: Please let us know what you think of this new “The Big Deal” segment, where we look back at major projects that transformed communities. We also welcome your feedback and suggestions on possible episodes for “The Big Deal.” 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.