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 will boost its capacity to 450,000 units per year by 2016 using a $1 billion investment
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.
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”.