BMW at 20: Plant exceeds hopes, tax debate ongoing

BMW at 20: Plant has exceeded expectations, but debate goes on over government tax incentives

Associated Press
BMW at 20: Plant exceeds hopes, tax debate ongoing
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FILE - This May 8, 2008 file photo shows the production line at the BMW assembly plant in Greer, S.C. It has been 20 years since BMW announced it would build an automotive plant in South Carolina. Two decades later, the plant churns out 30,000 vehicles a month and remains a touchstone in the state’s modern history. (AP Photo/The Greenville News, Ken Osburn, File)

GREER, S.C. (AP) -- Two decades ago, then-South Carolina Gov. Carroll Campbell stood at the Greenville-Spartanburg airport and announced that a BMW plant being built just up the road would be a benchmark in the history of the state.

By most measures, the German automaker's plant near Greer has exceeded some lofty expectations. BMW officials said they expected the plant to have 2,000 workers and make 6,500 luxury vehicles a month. In November, the factory's 7,000 employees produced more than 25,000 of BMW's crossover vehicles, which are a mix of an SUV and a coupe. In 20 years, BMW has invested $6 billion in South Carolina, an amount nearly equal to the state budget proposed by Gov. Nikki Haley this month.

"They never stopped building the plant. It has been a continuing expansion," said Bruce Yandle, an economics professor emeritus at Clemson University.

BMW is now as much a part of modern South Carolina culture as barbecue buffets and The Shag, so much so that politicians have been chasing the next BMW ever since.

But some say that pursuit has had its drawbacks. BMW received hundreds of millions of dollars in public money and tax breaks. While that investment appears to have paid off, it also led to an often-cash-strapped state providing millions more in taxpayer money to hundreds of other companies — most of it without much public oversight — making it nearly impossible to judge the quality of these public investments.

Officials say BMW's success is evident. A parade of suppliers followed the German automaker's plant, and a University of South Carolina study found BMW and the plants that supply the parts to make the vehicles account for more than 1 percent of the state's nearly 2 million workers.

The automaker gave $10 million to help Clemson establish its International Center for Automotive Research. The auto plant just off Interstate 85 might be the most recognizable landmark between Atlanta and Charlotte, N.C.

"I couldn't even begin to quantify what their presence has meant. Obviously, their impact touches so many different areas," Greer Mayor Rick Danner said.

BMW said it had no plans to mark the 20th anniversary of the announcement and groundbreaking. Instead, the company celebrated last January when its 2 millionth vehicle came off the production line. It also announced yet another expansion, worth $900 million and 300 new jobs.

Campbell, who was governor from 1987 to 1995 and died in 2005, doggedly pursued BMW over several years. A flurry of faxes at all times of the day and night between Germany and South Carolina secured the deal in June 1992, with Campbell celebrating by climbing into one of the company's luxury sedan's with a "BMW 1" license plate. BMW liked the land and tax breaks offered by the pro-business state along with its easy access to interstates and the port in Charleston.

South Carolina beat out Nebraska, whose governor at the time complained that he "couldn't move the Atlantic Ocean." The observation has been on the mark. BMW currently exports 70 percent of the vehicles made in South Carolina, with most of them heading out to sea on cargo ships.

BMW's decision wasn't met with all praise, especially outside the state. Plenty of people in the U.S. were already angry about manufacturing jobs going overseas for lower wages, and some suggested a plum manufacturer like BMW picked South Carolina because its people would work cheap. The state's right-to-work law also meant employees were not required to join labor unions.

"South Carolina was to the Germans the state that bore the closest resemblance to Mexico," a columnist in the New York-area paper Newsday wrote.

But BMW helped bring along a Southern manufacturing renaissance, especially with automobiles, Yandle said

"Then you had BMW's arch rival Mercedes thinking about locating a plant somewhere in the U.S.," Yandle said. "If those folks in South Carolina can build a BMW that the world will accept, then somewhere else in the South could make a Mercedes that the world would accept."

The pursuit of BMW and other companies also increased the race to offer tax money, tax breaks and property as incentives to private companies. BMW got the equivalent in today's dollars of about $325 million in incentives. But the plant likely would have been successful even if it hadn't gotten a dime of taxpayer money, said Ashley Landess, president of the South Carolina Policy Council.

Politicians were soon trying to find the next big thing and likely gave incentives to companies that squandered the money. A Pew Center report this year found that 26 states, including South Carolina, didn't have an adequate system for evaluating how well tax incentives were working to bring economic development.

"You had one big success and everyone chases the next one," said Landess, whose group thinks incentives amount to corporate welfare that hurts capitalism and competition. It would rather see lawmakers lower taxes to improve the state's business climate.

Also, BMW didn't bring the kind of economic kick that Campbell and others hoped for in individual wallets. Per capita income in Greenville and Spartanburg counties has barely risen faster than the rate of inflation in the past decade, according to U.S. Census figures. The poverty level in both places has increased, and BMW and its related industries couldn't buffer the state from the Great Recession, as unemployment soared past 11 percent three years ago.

Still, per capita income in Greenville County was $26,547 in 2010, about $3,200 more than the South Carolina average.

BMW also has put an emphasis on being green. The company began a project in 2003 to use methane gas generated from a nearby landfill to power some of its plant. Now the project provides half the energy the plant needs. The automaker also takes an interest in local culture, having given $1 million to the Spartanburg Center for Arts, Science and History.

BMW was a once-in-a-generation economic development package for South Carolina. Last year, Boeing opened an aircraft factory in North Charleston that the governor and others repeatedly compared to BMW. The Boeing plant was the subject of a dispute with the National Labor Relations Board, which charged that the aircraft maker was building the facility in South Carolina in retaliation over past contract disputes. The board filed a lawsuit that was later settled.

Yandle said the opportunity is there at the Boeing plant for the same kind of history-changing growth, but it will be years before the impact of that company will be known.

BMW's most important legacy may be its suppliers. About 50 plants in South Carolina provide parts to the automaker. Together they have added 16,000 jobs to the 7,000 employees that actually punch the clock at the BMW plant.

"The question is whether Boeing can build those auxiliary enterprises," Yandle said. "BMW is still making that happen. A brand new transmission plant just opened in Laurens County, and a lot of that has to do with BMW being right up the road."

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