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Mercedes Triples Down on Alabama Investment

ABOVE SUVs move toward completion at the Mercedes-Benz plant in Tuscaloosa County.
 

More than two decades ago, when Mercedes-Benz U.S. International proclaimed Alabama winner of the bid for its SUV production, the state celebrated a victory that opened the doors to the auto industry in the South. What might have seemed like a gamble on a new region of the country has proved the wise investment it always was. And the company doubled down on that commitment — tripled down really — with two announcements in September.

The auto line that made Alabama a name in the car game will now take the state to the next level, with a $1 billion investment to expand the Tuscaloosa plant to accommodate assembly of battery-powered vehicles.

Meanwhile, a second investment, of almost $250 million, sets up a Global Logistics Center and a new after-sales North American hub on 278 acres in the Scott G. Davis Industrial Park in Bibb County. The project, slated for a 2019 opening, will create 429 jobs with an 800,000-square-foot center to support worldwide operations by supplying car kits to overseas assembly plants.

Jason Hoff, president and CEO of Mercedes-Benz U.S. International, says the announcement is a reinforcement of the commitment made more than 20 years ago when Alabama was chosen as home to Mercedes-Benz’s SUV production for the world market.

It was September 1993 when Mercedes dropped a pin on the state for production of the former M-Class SUV, now the GLE vehicle. The first M-Class rolled off the assembly line in 1997, and with it the state piqued the interest of other automakers,  suppliers and supporting businesses that have since made Alabama home and positioned the state as one of the key automotive business clusters in the U.S.

And the impact of that decision has reverberated through the world marketplace. In August, the company hit the 750,000 mark in numbers of SUVs built at the Vance plant, and more than 70 percent of those SUVs are exported to markets globally.

“I’ve been with Mercedes 25 years, and the vast majority of that time in Alabama,” Hoff says. “I was here at the beginning. There’s a lot of blood, sweat and tears invested in the operation here, and it means a lot to me that we are celebrating the successes of the last 20 years and (announcing) something that will have impact for the next 20 years. That was something I was excited to be part of. We’re excited about the future here.”

The company is building on the Alabama red clay that has proved a fertile ground for the industry — the only site to build the full-size Mercedes SUV. The new commitment comes on the heels of an earlier investment of $1.3 billion announced in 2015, including a new Body Shop and major enhancements to the SUV Assembly Shop, as well as upgraded logistics and IT systems.

Now the plant is being expanded to prepare for the production of the next SUV generation, including plug-in hybrid models.

“We are integrating those into the existing line, and a number of models will come out over the next few years,” Hoff says. “Building electric next to gas gives us the flexibility to be able to adapt to the needs consumers have as demand for electric grows in the coming years. There are some pretty dynamic numbers.”

The expansion into electric makes the Tuscaloosa plant one of the “smartest” automotive facilities in the world. And the big news with the new Bibb County campus is expansion of that footprint into the Birmingham metro area.

Alongside the Global Logistics Center is an after-sales North American hub, consolidating three existing after-sales warehouses in the state, to provide overseas markets with spare parts, meeting rising demands for the company’s growing variety of models. The hub is expected to begin operations by the end of 2020.

According to the Birmingham Business Alliance, once fully operational, the new campus will provide $307.9 million in economic impact annually for the state, including contributing $109.2 million to the state’s GDP and $62.4 million in earnings to Alabama households from direct and indirect jobs, according to an economic impact study from the University of Alabama Center for Business and Economic Research. Economic impact for the Birmingham region will be $285 million annually and $59.1 million in household earnings, which includes $192.8 million in impact and $29.2 million in earnings for Bibb County alone.

“The Bibb County expansion of logistics operations will enable us to send kits of parts to different countries, including the Far East,” Hoff says. “We will also supply all of our service parts. That means over 600 new jobs, and we’re really excited about adding Bibb County to our operations area. We’ve had to add to our warehouse space and logistics over the years and have spread out. Now we will have it centrally located again.”

Jefferson Traywick, senior project manager for the Birmingham Business Alliance, was one of the first to realize Mercedes was looking at an expansion to the new 278-acre site in prime proximity to Interstate 20/59.

“The project was pretty secretive to begin with,” Traywick says. “They looked at a number of sites from Tuscaloosa all the way to Talladega. They also had one out-of-state site in Georgia they were considering for the project.”

As Traywick worked to ensure the most suitable fit for the mystery project, he figured out initially that the buyer was German and it was automotive related. When they turned their focus more intently on the Davis site, it took a little “imagineering” to showcase the property.

“It was hard to get them to envision the possibilities of the location early on,” Traywick says. “It was still undeveloped, still wooded and ungraded. We were able to work very closely with the site engineers to help them envision what the project would look like on the site. We knew it would be a two-phase project, and we later learned it would be a worldwide parts distribution facility.”

Mark Tyner, Bibb County administrator, was aggressive on development deals in the county, and the park itself was the product of a vision by Scott Davis, a timber magnate who felt the site had a future with Mercedes.

“He had the foresight to acquire the property that could be used by Mercedes suppliers,” Traywick says. “The county has not had major economic development for 20 years.”

Situated between Birmingham and the existing Mercedes plant, the rural area was rife with raw potential. Within a 45-minute drive of a population center, Scott graded one of the sites and put in a road partway. When he passed away, his family continued work on the site.

In 2016, MollerTech announced its 150,000-square-foot plant to manufacture interior parts for the next generation of Mercedes SUVs. The addition of electrical, sewer and gas that accompanied the site development made the park even more appealing, though there were still a few stumbling blocks. When Bibb County officials were apprised of potential obstacles, they set about surmounting them to make the site ideal for the auto giant.

“Bibb County is very aggressive. If you give the folks in the county a problem, they will find a solution — they make attaining and solidifying a solution an easy process,” Traywick says. “One of the problems we had was topography. That was the biggest challenge. Getting utilities to the site was another challenge, with major upgrades to gas infrastructure.”

Alagasco and Alabama Power worked with Bibb County to make Mercedes comfortable enough to make the site work.

“For the county itself, this is huge,” Traywick says. “There were 22,000 people in the county and 12 percent unemployment rate when Mercedes announced it was coming to Alabama in the 1990s. This was always a very poor county, and Mercedes and other companies have had dramatic effects.

“For us to have a Mercedes project jump the boundary into the metro area allows for more job opportunities to residents in Birmingham itself. The automotive front is very strong, and as we are continuing to see new projects in this sector, it bodes very well for us moving forward. There are additional opportunities for us with electric vehicles. This is a new area we had not had an opportunity of going after before.”

Mercedes was a trendsetter, choosing a state that is proving it has the logistics and manpower to be a giant in the industry.

“We have had a great workforce here in Alabama,” Hoff says. “The fact that we’ve been able to accomplish what we have is a testament to that. Alabama has become an automotive hub with three other automotive plants building cars here. The whole automotive industry has migrated more and more South, and I’m happy Mercedes was the first one to come to Alabama.”

Cara Clark is a freelance contributor to Business Alabama. She is based in Birmingham.

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