Episode 36: Behind the Mercedes-Benz Expansion: An Unlikely Win for Rural Bibb County, Alabama

January 22, 2018

Mercedes-Benz has been successfully building vehicles in Tuscaloosa, Alabama for twenty years. But with a decision to move forward with two major expansion projects — an 800,000 square foot global logistics center and a 1.3 million square foot after-sales parts hub – the company quietly began looking for new location options in Alabama, Georgia and Mississippi.

Bibb County – a rural Alabama county with a population 22,000 – was the winner of both projects. We talk to Jason Hoff, CEO and President of Mercedes-Benz in the United States about the decision. But we also talk with Jeff Traywick, an economic developer from the regional group, the Birmingham Business Alliance who managed the project. He helped us identify and recognize two unsung heroes that made the deal possible.

Andy Levine (DCI): Mercedes-Benz began building its first and only North American manufacturing plant back in 1993 in Tuscaloosa, Alabama.

Patience Fairbrother (DCI): The plant has expanded dramatically over the past 20 years to the point where it outgrown its current footprint, and the decision to build an 800,000 square foot global logistics center, and a 1.3 million square foot aftersales parts hub, sent the company quietly looking for location options in Alabama, Georgia, and Mississippi.

Andy: Bibb County, a rural Alabama county with a population of 22,000, was the winner of both projects. We talked to Mercedes-Benz’s US CEO about the decision. But we also uncovered two unsung heroes in the process that made the deal possible.

Patience: So welcome to Episode 36 of The Project: Inside Corporate Location Decisions. I’m Patience Fairbrother of Development Counselor’s Interational.

Andy: And I’m Andy Levine also with DCI, and Patience’s cohost of The Project. So Patience, I do feel like we’ve hit kind of this new summit in the podcast that we’ve done together for over a year now. It was quite an honor to interview Jason Hoff, the President and CEO of Mercedes-Benz’s US operations.

Patience: I think we were kind of both hoping we were gonna get a Mercedes out of the interview.

Andy: It didn’t work out that way of course, but it was a nice thought.

Patience: It wasn’t his thought. And it really was such an honor to speak with Jason Hoff. It was terrific. And we also had the chance to sit down with Jeff Traywick, who’s the senior project manager of the Birmingham Business Alliance, and he’s the economic developer who worked closely with Mercedes and their consultants on this expansion project. So Jeff shared with us the story of two behind-the-scenes heroes that helped make the project a reality for Bibb County. And we’re delighted to recognize them both on today’s episode.

Andy: But let’s get started with Jason Hoff of Mercedes-Benz.

Jason Hoff (Mercedes-Benz): I’ve been with Mercedes-Benz for almost 25 years, and spent a vast majority of my time here in Tuscaloosa. Started back in 1993. I was working in Germany and got hooked up with the project, the M Class project as it was known back then. Moved here in 1994 and stayed here until 2010 in various functions. Everything from finance controlling to production and logistics. And then in 2010 I did move back to Germany for three years, and I worked in our procurement group. And then in 2013, came back to become CEO. So let’s say my blood flows with the M Class project here in Tuscaloosa.

Andy: So can you share a little about the company’s footprint in Alabama right now?

Jason: Yeah, we started out with a plan to build about 65,000 cars a year, and we had said maybe it’d be 1,500 team members that we would employ here. And that was back in the mid-90s when we started the project. We built our first car in 1997 and celebrated, this year, 20 years of production. And 20 years later, we have a capacity of 300,000 vehicles, which is approximately what we built last year. And we have an employment of fulltime Mercedes team members of 3,700. And every day we have a little over 7,000 people that come through our gates.

Andy: Exports. Cars built in the USA and then shipped overseas provided the impetus for both of these new projects. In particular, the global success of the M Class, Mercedes’s luxury SUV that is built in Alabama, has been critical.

Jason: From the SUV side, we are definitely exporting more than we were. We’ve always been a large exporter, you know, somewhere in the 50/50 range. Fifty percent for the domestic market, 50% export. That fluctuates, or used to fluctuate some, depending on the year and demands, and the different markets. What we’ve seen is definitely an increase in the demand overseas, be that China, Europe, even other far flung countries of the world. So there is a growing demand for SUVs.

Patience: So we’d like to switch gears now to talk about the two recent announcements in Bibb County. So there’s the 800,000 square foot global logistics center. And then there’s the 1.3 million square foot aftersales hub, with a total capital investment of… between the two of those of $248 million. So could you just start by telling us about the genesis of these two projects and how they first came about?

Jason: Sure. Mercedes has always utilized what we call a CKD business, complete knockdown business. And that’s where we assemble kits of vehicles, send those kits to certain markets that require a certain level of local content, or local production. And the final production of the vehicle happens in those markets. Those markets include countries like India, Vietnam, Malaysia. So that business has grown as has the demand of our SUVs have grown. So we right now have kind of a small operation with a small warehouse doing that. We project a significant increase in that business in the coming years, and that’s what drove the global logistics center, that first building that you mentioned.

The other is, you know, with the growth of our sales, of our vehicles here, comes an automatic growth in the aftersales business. And we’ve been growing our warehouse and logistics space for that area through, let’s say additional warehouses in and around the Tuscaloosa and Birmingham area. And what we came to the conclusion or point was is we need to consolidate those back into one location.

Patience: The project had a significant real estate requirement, and that was a key driver.

Jason: We knew we needed to look for some new land, some additional land. The size of buildings we were looking at already drove us to the point where we couldn’t fit it on our property. Or let’s say we didn’t want to fit it on our property. So that took us down the path of saying, “Okay, we’d like to look for some new land.” We also said we wanted it to be, if possible, as close as possible to the plant. It wasn’t an absolute must or prerequisite, but it’s a bit nice to have, to be able to have it so close to the property. The size was definitely an issue because it’s not a small piece of land, of property. You can find property 250 plus acres, but a lot of times you’re then looking at multiple owners, and multiple transactions to acquire that land.

Andy: And that brings us to our first unsung hero in the story, a man by the name of Scott Davis. Jeff Traywick gave us the background on Scott.

Jeff Traywick (Birmingham Business Alliance): It kind of helps to understand the history of both Bibb County and the Scott G Davis Industrial Park. Bibb County is our region’s most rural county. It’s an area with about 22,000 residences, and has a strong background in timber, both in growing and processing wood products. Now one gentleman that had done very well for himself in that timber industry was a gentleman by the name of Scott Davis. He saw that the county was deficient in available product that could be marketed to industrial projects. He realized that there’s a lot of possible opportunity with Mercedes being just about eight miles down the road. But without size, the county was really losing out on potential job growth and economic opportunity.

So Scott, when he realized that that county needed industrial space, he looked at a number of sites around the county, and ended up acquiring a large tract of land right at the intersection of US Highway 11 and County Road 5.

Patience: Sadly Scott Davis passed away in the early stages of the park’s development. But his family continued to market and invest in the park that bears his name.

Andy: Now that land within the park had one significant challenge to it. It was hilly, and it was hard to see how two different facilities totaling over 2 million square feet of space, would ever work here. Jeff described the first visit by the Mercedes team, which almost killed the project.

Jeff: We probably had about 9 or 10 individuals that came out to take a look at the park that first time. We still did not know that it was Mercedes at the time, only that somebody wanted to come take a look. So we got the access key to the gate, met them a few hundred yards from the entrance, and carpooled in. It was a very dry day, a very dusty site. So much so that whenever we would stop the car, we’d have to wait for several minutes for the dust to clear before we could actually get out. But we were able to get them well into the site, a very thorough tour of the location. But yeah, once we stopped the cars, got out, the looks on their face were… it was more of a mix of astonishment and just stone-cold concern. There’s no way we can put an 800,000 square foot facility on this site.

Patience: And that brings us to our second hero in today’s story, a civil engineer named Draper McMillan, with the Tuscaloosa firm of McGiffort and Associates.

Jeff: Draper’s a great guy. He started working on that Scott G Davis Industrial Park really when he first started getting into civil engineering. I don’t know if it was the first project that he worked on, but it was one of the first. And he stayed with that park over the years as we’ve marketed it and tried to sell it. He’s really been a go-to guy over the years. And he did such good work really on making the company comfortable that the project would go there. They actually retained him on to work with them for the remainder of the project.

Patience: Draper convinced the Mercedes team that was with some significant grading the site would work. And that ultimately helped win the day for Bibb County. We’re going to go back now to Jason Hoff of Mercedes for the final word on this project.

Andy: If you had to say the top three reasons why we chose that location versus the other options, we’re looking at both in-state and out of state, what would be the top three things that’d come to your mind in terms of why the Bibb County site worked so well?

Jason: Not in any particular order, but the three would be the location itself being only approximately seven miles from the plant is a real advantage for us. The site itself being one that we only had to deal with one landowner. We felt like we could grade it to the right level. And it’s got the infrastructure that it needs in terms of access to both rail and the Highway 11, and not too far from the Interstate. And then last, but certainly not least, is as we’ve talked about, you know, I think we’re gonna be able to tap into a workforce in that area that is ready to work, and maybe is more available than some other areas. So we’re excited about the possibilities of that area from a workforce standpoint.

Andy: The two projects will be completed by 2020, and are expected to employ up to 600 people. It will truly have a transformative impact on Bibb County.

Patience: So we’re up to the takeaways part of the episode. Andy, what stood out to you about these two projects?

Andy: A couple of different things stood out to me. First of all, I do have to call out Scott Davis. So here is a man who grew up in Bibb County. He saw an opportunity, but he also saw a problem that here they are, I guess seven or eight miles away from this huge big international facility that Mercedes-Benz has. And they just needed to develop some available land, some developable land that people could develop facilities on. The original idea was not that Mercedes would expand. The idea is that Mercedes’s suppliers would expand there. So there was this problem. He invested the money. He put it forward, and he made it happen in terms of the plant. And this expansion never would have taken place without him. So that’s the first thing that stood out to me.

The other thing, and this didn’t come out so much in how we carved this up, but for both Jeff as well as for Jason, both talked about how important it was that they keep this project silent while they were exploring land. And they tried very hard to do that whenever they were going to visit and look at facilities, to look at land. They never took a Mercedes-Benz with them, which I thought was kind of funny. But they were able to do it essentially and keep this under wraps, keep it away from the media, keep it away from land speculators as well.

Patience: So that is a wrap on Episode 36 of The Project: Inside Corporate Location Decisions.

Andy: Of course, we really wanna thank Jason Hoff of Mercedes-Benz for taking the time to speak with us. It was an honor to interview him. We also wanna thank Jeff Traywick of the Birmingham Business Alliance for sharing the stories of Scott Davis and Draper McMillan, and their collective impact on this project. Finally, a special thank you to Felicia Gerard of Mercedes-Benz, and Lauren Cooper of the Birmingham Business Alliance for their help in setting up these interviews.

Patience: The Project is sponsored by DCI. We’re 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.

 

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