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Manufacturing Champions Out of Alabama

Mercedes CEO Markus Schaefer says his Tuscaloosa plant in the “great green environment” of Alabama is a company benchmark of efficiency — a brand and process comparable to the football team up the road.

Markus Schaefer sits in a conference room at the Mercedes-Benz manufacturing plant in Vance and reflects on two years of amazing success. The president and CEO of Mercedes-Benz U.S. International talks about the records that have been set and the enthusiasm generated during this remarkable run, which has impressed even outside observers.

Yes, the Mercedes factory in Vance has been very successful. But Schaefer’s praise was aimed just down the road, to Tuscaloosa, where supporters of the University of Alabama football team celebrated Alabama’s second consecutive national championship (and third in four years). Schaefer might be a native of Germany, but he has become a fan of the Crimson Tide. He particularly likes head coach Nick Saban’s style of leadership, which he says is similar to the way Mercedes tries to operate.

“We have a good relationship with Coach Saban, because we share the same philosophy. We both have a passion for excellence,” Schaefer says. “For him, it’s all about everything being just right. That’s the same thing here at this place. When you see the lawn and the building and the shop floor, everything has to be clean and straight and exactly perfect. There’s discipline and routine. There’s not much room for making too many mistakes in putting a Mercedes together. It has to be right.

“Alabama football and the way Coach Saban wants it and the way we do our business here, we feel we have a lot of similarities. These two brands, they fit very well together.”

That includes the bottom-line results for both entities. Since Schaefer arrived in Vance in July 2010 for his second stint at the facility (he was vice president of engineering at the factory from 2002-07), Mercedes-Benz USA has been on a roll that is positively Tide-like. The company reported record U.S. sales of more than 270,000 models in 2012, a 12-percent increase over 2011. Sales of the Vance-built M-Class SUV rose 6 percent in 2012, while the GL-Class SUV sales grew by 3.6 percent. All told, the plant produced approximately 182,000 vehicles in 2012, easily topping the previous production high of 174,356 set in 2007.

“It was our most successful year in 16 years of being here,” Schaefer says of the Vance plant, which produced its first vehicle in 1997. “We’re really awed by the response of the market to our latest products. We were not able to satisfy all the orders. The customer feedback, the awards, the volume, it all exceeds our expectations.”

The numbers are even more amazing to Schaefer when he considers what the situation was like when he arrived in Vance in 2010. The recession had taken a severe toll on the entire automotive industry, and Mercedes was not immune to the downturn. The company cut output, shortened working hours, offered buyouts to full-time employees and eliminated most part-time and temporary jobs. So Schaefer embarked on a rebuilding effort that sounds a lot like the famed “process” that Saban often touts, in which everybody pulls together to focus on gradual, daily improvement that will result in long-term success.

“I came at almost the lowest point this organization had seen,” Schaefer says. “The organization was fighting a lot of issues. We were really hit by the (economic) crisis. The organization had a very difficult year in 2009. When I came in 2010, it was about rebuilding morale and building a strategy for the future and showing some hope. Everybody sacrificed some things in 2009. So it was just about building back hope and motivation and building up a vision for the future. It was all about lifting spirits and painting a picture that we could provide an even more stable employment for the future. It was something we all went through together.”

Barely two years later, the production facility was back to running 24 hours a day, six days a week. “We went from a real crisis mode in 2009 to one record after the other in 2012,” Schaefer says. “It’s fantastic. Sometimes people maybe haven’t realized just how far we are now, because it came so fast.”

Apparently Mercedes executives at the German headquarters have noticed, because they have given approval for significant expansion of the Vance facility. The company will invest $2.4 billion in growing the plant, including the expected addition of a fifth product line by 2015. Schaefer says he expects annual production volume to reach nearly 300,000 vehicles by then. And while he admits there is always a concern about expanding too quickly, he says the demand for the Vance-produced Mercedes vehicles justifies the commitment.

“We are very fortunate in one way: that we have an order bank which is much, much larger than what we can do. And it looks like in 2013 our order bank will be even larger,” Schaefer says. “In the worldwide network of many plants that Mercedes has, this plant has really become extremely competitive in terms of efficiency and quality. So, with our production system, we are really a benchmark in terms of efficient production.

“We’re actually really conservative about putting investment into here. Nevertheless, this conservative investment is $2.4 billion. By 2014, we’ll have (a total of) about $5 billion investment in this plant. We have some high confidence in the market. We have confidence that our products will perform, and that there is a further development of the U.S. market.”

The fact that he is overseeing this multi-billion dollar expansion illustrates just how far Schaefer, 47, has come since he started at Mercedes in the company’s manufacturing trainee program 23 years ago. He says at that time he simply was “a car-crazy guy” who worked a variety of jobs through high school in order to buy his first vehicle (a used 1972 Porsche that needed repairs). He steadily moved up through the ranks at Mercedes, from operations engineer to planning engineer to production officer.

During this time it was announced that Mercedes was going to build a production facility in Alabama. Schaefer admitted that it was a surprising decision to the workers in Germany, since the company was notoriously insular.

“We worked in the German state of Swabia, and typically we had only Swabian people around us,” Schaefer says. “If you came from out of the Swabian state, you were already a foreigner. And then suddenly we had people from Alabama in the plant. This was very, very new. Nobody could have imagined how this international expansion would accelerate over a relatively short period of time.”

Schaefer received his first view of the Alabama expansion when he came to Vance in 2002. He says he had no reservations about making the move, partly because he had just spent time in Cairo, Egypt as the plant manager of Egyptian German Automotive, but also because there was no preconceived notion in Germany about what life would be like in Alabama.

“Germans don’t distinguish between the North and the South and the East and the West. We were just coming to the U.S.,” Schaefer says. “Over time, we learned that people from the North and people from the South are different animals sometimes. But basically the typical German fellow who comes here for the first time has really no idea.”

Schaefer has now spent a total of eight years in Alabama, and he says the state has become his second home. One of his two children was born here, and he has grown accustomed to the more relaxed lifestyle and the concept of Southern hospitality.

“I was a little astonished at how much countryside there is here,” Schaefer says. “It’s quiet. That’s what people like. It’s not that busy of an environment, so you don’t have to fight every morning in big traffic. The way to work is so pleasant. You live in a great green environment. And it’s the people. The friendliness and welcoming attitude of the people here.”

Of course, there is also the football. Schaefer says as soon as Alabama won last month’s national championship game, he sent a text to several Mercedes executives in Germany who have developed a following for the Crimson Tide. And there is always the love of cars. Schaefer has accumulated a small classic-car collection over the years, which includes a 1982 SL Roadster convertible along with his beloved ’72 Porsche.

“Unfortunately, I don’t have much free time, so they’re just sitting in my garage, waiting for future days,” Schaefer says. “Cars have always been my dream. Basically, management at Mercedes is just a bunch of engineers who are crazy about cars.”

Cary Estes is a freelance writer for Business Alabama. He lives in Birmingham.

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