As the BMW factory in South Carolina prepares to introduce its fifth and largest SUV, the X7, AMS looks at what makes this operation so important for the German brand within its worldwide production network

One of BMW’s biggest success stories is not a car but a plant. Spartanburg in South Carolina has just recorded a record half-year production figure of just under 200,000 units amid rising global demand for its all-SUV output. That follows an announcement from BMW in March last year that the plant is to gain a $1 billion investment to boost its capacity to 450,000 units per year by 2016. The increase is needed both to slake the world’s thirst for premium SUVs and also to incorporate production of a fifth SUV called the X7, the largest the factory has built to date.

It was the switch to SUVs in 1999 that really accelerated the growth of the plant. At the 1994 start of operations, Spartanburg was the only factory building BMWs outside Germany, manufacturing 3-Series saloons followed by the Z3 and Z4 roadsters. The X5 from 1999 – BMW’s take on a road-focused premium SUV – proved to be a hit with consumers, and by 2005 the plant had built half a million for sale worldwide.

That decade, SUVs were pilloried globally as fuel prices rose, but the surprising long-term losers turned out to be the sports cars. They went into decline in the US while SUVs survived and even thrived by becoming more frugal and car-like. The Z4 was shifted out in 2008, and in the same year a $750m expansion plan was announced to build a new assembly hall for the smaller X3 SUV, which previously had been built in Austria by contract manufacturer Magna Steyr. In 2010, the X3 started production and in 2012 the plant produced a record 301,519 cars, including its two millionth vehicle. This year, just three years later, its three millionth vehicle has been produced, an X5 M for export to Sweden.

These days, the four-strong production line-up includes coupe versions of Spartanburg’s SUVs, the X6 and the smaller X4, but it is the more practical cars which dominate. In 2014, the newly launched third generation of the X5 made up almost half the total output, while the X3 was in second place; the previous year, the X3 came top.

Always an international player
Key to the plant’s success are its exports. Spartanburg makes BMW SUVs for global markets, and last year exported around 250,000 vehicles – 70% of its output – outside the US. BMW reckons that volume was worth $9.2 billion, citing US Department of Commerce figures, making it the largest exporter of passenger cars by value. Indeed, the port at Charleston, 200 miles south-east of the plant last year said that BMW was the biggest user of its roll-on/roll-off facility.

The uniqueness of BMW Spartanburg as the German brand’s only factory in the Americas is set to change, however, with the recent news that in 2019 BMW will open a plant in the central Mexican state of San Luis Potosí with a capacity of 150,000 units per year. A Brazilian factory has also been announced, but it is Mexico, with its free-trade agreements, low-cost labour and fast-improving supplier base, that looks most likely to challenge Spartanburg’s position. No model has been announced but most commentators expect it to produce the 3-Series.

BMW Spartanburg

BMW Spartanburg will boost its capacity to 450,000 units per year by 2016 using a $1 billion investment
In an interview with AMS (see box below), Spartanburg production head Manfred Erlacher said that, far from being a rival, the Mexican plant will help to drive down prices of the large number of common parts BMW shares between its cars. Erlacher says the proportion of parts sourced in North America, including Mexico, is 70%. The OEM reckons to have 270 suppliers in North America, 40 in South Carolina.

However, the value figure is much lower, according to the Made in America Auto Index from the Kogod School of Business in Washington DC. It claims that the X3 has the highest level of Spartanburg’s four vehicles, at 30%, while figures from the American Automobile Labeling Act put the X3 (again the highest) at 20%. In both cases, it is the fact that the engines and transmissions come from Europe that skew the figures, something Erlacher says will not change while the economies of scale are so good, even with these components making the double Atlantic crossing.

The carbon-fibre connection

Could Spartanburg be about to build cars using carbon fibre? That was the suggestion made by German business magazine Wirtschaftswoche last June. It said the plant may add an SUV version of BMW’s electric vehicles, the i3 B-segment car and the i8 sports car, which are made from the carbon-fibre reinforced plastics supplied by BMW’s joint venture, SGL at Moses Lake, Washington.

Spartanburg’s head of production, Manfred Erlacher (see below), would not comment on this report, but he did predict that the material will be used more widely in future BMWs. Last year, BMW said it would invest a further $200m in the facility, which is operated with aircraft manufacturer Boeing and was first established in 2010. In a complex arrangement, SGL makes the fibres from raw materials supplied by Japan. The output is shipped to Germany to make carbon-fibre fabrics and then body parts are made in a separate plant before being shipped to Leipzig, where BMW assembles the i3 and i8.

Giving Spartanburg the ability to do this would reduce the shipping miles. Interestingly, the plant already has a close connection with Leipzig – Erlacher was formerly head of that facility before he came to Spartanburg, which adopted many of its features, including the ‘finger’ layout that shortens the distance to the assembly line for delivered parts.

A fifth expansion in two decades
While the 2016 upgrades will not bring an engine plant, they will rebuild the bodyshop and upgrade the two assembly halls, says Erlacher. At present, the plant boasts a roofed area of 5m sq.ft and and has 8,000 employees (due to become 8,800 by 2016). Spartanburg is well known for its use of biogas, piped from a nearby landfill since 2003 to fuel turbines designed to generate 50% of its electricity. The American Environmental Protection Agency puts the figure at 37%, but that is still enough to put the plant fourth in the Green Power list for sustainable electricity generation as of April 2015, just ahead of GM’s Fort Wayne plant (another biogas user). BMW estimates that it saves $5m a year as a result. The plant also uses smart meters to identify any equipment using too much electricity.

Spartanburg is highly innovative when it comes to new techniques for improving production. Although a scheme to use the Google Glass smart eyewear for quality assurance went nowhere after Google scrapped its product, collaborative robots are going from strength to strength. These robots, from Danish company Universal Robots, are certified to work alongside humans and were first used to roller-press a foil with adhesive bead on the insides of X3 doors to provide sound and moisture insulation. According to Erlacher, the robots are now used to apply plastic interior parts as well as to pass heavy parts to line workers, saving them from carrying components to the line.

BMW Spartanburg and Mercedes in Vance, Alabama (which also makes SUVs for global sales) are both success stories for the US administration: world-class plants making a success of building cars in poorer states with little automotive history, then exporting much of the output. Yet another expansion – its fifth – will cement Spartanburg’s exalted place in the BMW production network. As the OEM’s board member for production, Harald Kruger, said when announcing the $1 billion upgrade: “The US is our second home”.

Steering Spartanburg

BMW’s SUV-focused Spartanburg plant is led by Manfred Erlacher, who took over in 2013 after moving from his role as head of BMW Leipzig. Here, Erlacher discusses his future challenges as Spartanburg continues to expand, adding a large SUV, the X7

AMS: BMW announced in March that Spartanburg will get $1 billion to expand production to 450,000 units per year by 2016. You’re pretty much at 400,000 now. Where will the $1 billion go?
Manfred Erlacher: We will invest in a new bodyshop and different assembly areas to achieve volume. We want to be more efficient, and get out better quality.

AMS: You’ve been alone in this region in terms of manufacturing plants. Now BMW has said it will open a plant in Mexico by 2019. Is this a rival to you?
ME: No, the Mexican plant is not a rival. We are used to working in a production network, that is what we did in the past, and that’s one of our strengths in the future. We work closely together and support each other. Our basic philosophy is that production always follows the market.

AMS: So it will help you?
ME: Yes, I get a much stronger supplier environment. A few years ago, we had 200,000 [units], now we have 400,000; with each extra car you get scale effect by the supplier and we use common parts for each car. When the volume grows, then it makes sense for tier-one suppliers to bring in tier-two and tier-three suppliers. The Mexican plant will further persuade them.

Manfred ErlacherManfred Erlacher, head of production, BMW Spartanburg
AMS: Will the Mexican plant bring more content by value into the NAFTA region?
ME: Yes. They are traditional cars; that means more traditional supplier parts, that means the value of the supplier volume will increase.

AMS: Will the Mexican plant make the 3-Series?
ME: We haven’t announced that. I can only say it doesn’t influence Spartanburg; we are still the X plant. The vehicle will have common parts. On the design side, it’s quite different, but in the background it’s quite similar, so suppliers can use the same production equipment.

AMS: Your engines come from Europe – is that going to change?
ME: No. We don’t want to localise. The plants in Germany are highly efficient due to the scale effect and therefore have the lowest cost base. There is no business case behind an engine plant here.

AMS: Do you take any carbon fibre from BMW’s joint-venture plant, SGL at Moses Lake in Washington?
ME: Not yet. To build lighter cars is a challenge for the future. What we choose and how we get production of a car will be different; we will use different materials. The new 7-Series is built using carbon fibre and you could predict that some of this material would be used in our other cars.

AMS: There was a report saying that Spartanburg could get an i3-style electric SUV. Will that happen?
ME: I can’t comment on that. We do make a hybrid plug-in version of the X5, and we are ramping up production of that at the moment.

AMS: Will you keep building SUVs?
ME: We have the flexibility in the plant to build other cars but there's no need at the moment – it's highly efficient to build only X models. There's the biggest similarity between these models and we have enough demand from customers. The SUV market is the fastest-growing segment in the car industry and we follow this trend, or a little bit above it.

AMS: You say you now produce 50% of your electricity from biogas. Are you planning to increase that?
ME: We keep [it] at 50%. But we are producing more cars, so overall we use more of this gas. The focus on [the] environment and sustainability has not changed. All our forklifts run on hydrogen, for example.

BMW SpartanburgCollaborative robots are among the pioneering technologies introduced at BMW Spartanburg. Their use is being expanded
AMS: Are you planning to use more collaborative robots?
ME: We want to expand this. Collaborative robots can work directly alongside human beings without any protective fence and that is a big step in the future. The first was used to roll the door foil on, but now we have other uses and we have a lot of ideas about what they can do in the future. Firstly it makes work for our associates safer, because if you have repetitive processes you can use [robots]. It also improves the quality. But there’s a cost saving too, because in the end there must be a business case behind it.

AMS: Do the robots work in any other areas?
ME: Putting on plastic parts for the interior, and also handing heavy parts to associates so [they] don’t have to carry it. Those are happening right now in production. Where you need [the] dexterity of human beings, it's not possible to use them, but we have some ideas to make part handling much easier and even more efficient.