BMW’s US manufacturing plant at Spartanburg, South Carolina, has been at the centre of BMW’s movement into new market segments in recent years. It retains a key role going forward and has now been reconfigured as a more flexible resource, reports just-auto editor Dave Leggett.
Some background
Detroit’s problems are rarely out of the headlines these days but there is more to the US auto manufacturing industry than the Big Three’s traditional heartland of Michigan and the northeast US states. The rise of the ‘new domestics’ has gone hand-in-hand with increased investment flows to the southern states of the US.
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Kia is the latest to join the club: this week the Hyundai subsidiary announced that it will build a manufacturing plant in the state of Georgia, production to commence in 2009.
Kia will be joining a list of ‘new’ light vehicle manufacturers in the US South that already includes BMW, DaimlerChrysler (Mercedes-Benz), Nissan and Hyundai. The investment wave is being driven by relatively low costs of manufacturing in the region, the availability of non-unionised labour, state incentive packages and, in the case of BMW and Mercedes, the need for more US manufacturing capacity in order to offset the adverse effects of the weak dollar against the euro.
‘Make them where you sell them’ is one way to avoid problems with currency movements, an issue that has always been high on the agenda for large-sale exporters from Europe to the US.
The move by foreign-owned manufacturers into the southern states was also driven by the fact that as new investors, they would enjoy free access to a large potential pool of labour, unlike if they had invested in northern states with long established car plants. A report by the Centre for Automotive Research points out that some 45,000 Alabamians applied for the chance to secure one of the 1,500 positions at the original Mercedes facility. The new carmaking facilities in the region are spread out so that the new investors can enjoy a substantial pool of local labour.
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By GlobalDataThe southern states of the US are also attracting more supplier industry investment now, something that is further adding to the general attractiveness of the region to vehicle makers.
BMW Spartanburg at centre of BMW product offensive
BMW’s Spartanburg, South Carolina, plant typifies the southern wave of auto industry investment. The models made at the plant have been big sellers in the US, especially the X5 SUV. But the cheap dollar has also made the plant’s output profitable for export.
In 2005, BMW’s Spartanburg plant built 105,000 X5s (US sales in the year estimated at 38,000 units) and 19,800 Z4s (US sales estimated at 10,000 units).
BMW plans a number of new models for further volume growth over the next few years and the Spartanburg plant is at the core of the strategy.
In 2006, the company expects to benefit from an updated Z4 roadster as well as the introduction of a Z4 coupe.
BMW’s plant at Spartanburg in the US has been reorganised for a gear-up in Z4 production. At the end of last year the plant was shut for four weeks as the Z4 and X5 manufacturing lines were consolidated into a single flexible line. Outgoing Z4 roadster production in 2005 was just 19,800 units against 35,000 units in the previous year.
“We see a bright future for the new Z4 Roadster and the Z4 Coupe, especially with the arrival of the new 6-cylinder engines,” said BMW UK product manager Martin Sloan, speaking at a BMW Z4 launch event at the BMW Performance Centre, Spartanburg.
“There are significant improvements in the new range over the old and we have added a number of new variants in the new Z4 line-up, including the Z4 M Roadster. We see the Z4 range as a key component in what the BMW brand is all about – especially a sense of dynamism and sportiness,” he said.
Sloan also said that the BMW X5, due to be replaced at the end of the year, had been an ‘unbelievable success’ with sales staying high last year in defiance of the usual tail-off that models see towards the end of their lifecycle.
“We are very pleased with the performance of both X products,” Sloan said.
“The X3 is also doing well now that the 2-litre diesel engine is well established,” he added.
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Sloan also acknowledged that there are a number of options for BMW in further meeting market sub-segments from its X-range. He admitted that a seven-seat configuration SUV was a possibility for the next generation X5, though he also conceded that the ‘third model’ for Spartanburg may be a ‘space-functional concept’ as heavily hinted by BMW CEO Dr Panke.
“I think many of us were a little surprised by Dr Panke’s remarks about that proposed vehicle when he made them,” Sloan said, emphasising that any such vehicle is still some way away from market launch (analysts say 2008). Eventual volumes for such a vehicle are estimated by some analysts as likely to be in the region of 35,000 units a year.
But would it make sense to assume that any such vehicle (essentially a Mercedes R-class fighter) would be made at Spartanburg and share plenty of componentry with the X5? “Yes, it might,” admitted Sloan, although he could not confirm that such a model was in development.
As far as other BMW niche models are concerned, Sloan outlined the basic tenets of BMW’s criteria for development: “When BMW looks to enter non-traditional market niches, the proposed vehicle must be first and foremost a BMW, embodying core BMW values, especially those of sportiness and dynamism. For example, that’s what we did very successfully when we entered the SUV segment with the X5; it is both sporty and dynamic – clearly a BMW – as well as fulfilling certain utility parameters for that segment. But any new BMW product must deliver on these essential BMW values.”
Z4 prospects clouded by ‘stressed segment’
BMW’s expectations are high for sales of the new Z4 roadster and the coupe, although BMW representatives are quick to point out that the whole segment which includes the Audi TT, Mercedes-Benz SLK and Porsche Boxster, has stagnated in the US and Europe. This, they say, partly explains the apparently sharp drop-off in Z4 sales in 2004 (19,800 sales versus 35,000 in 2004 and 57,000 in 2003).
In some respects, the decision to build a Z4 Coupe is a little surprising – the Z3 Coupe was a poor seller. During a six-year production run that ended in 2002, BMW sold less than 18,000 Z3 Coupes. And the competition is stronger now that Porsche has introduced the Boxster-based Cayman coupe below the 911. But the Z4 coupe concept showed in Frankfurt last year was well received.
Despite competition from more rivals than ever, BMW is confident in sales prospects for the updated Z4. Uwe Ellinghaus, Marketing Director for BMW (UK) Ltd, said: “BMW’s roadster pedigree, combined with an even more recognisable design language, place the Z4 emotionally at the top of any sports car enthusiast’s list. The Z4 offers a choice of the world’s lightest 6-cylinder petrol engine or the fantastic M3 powerplant, the world’s fastest electronically operated hood, striking design and the solid build quality expected from BMW’s US plant.
“Experience has also shown us that BMW buyers seek an ultimate driving experience that balances with cost of ownership considerations. They want, and get, the best of both worlds with whole life costs, low service and maintenance charges and some of the best residual values in the market. The new Z4 delivers on all levels.”
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Single-line manufacturing
BMW’s Spartanburg facility has completed what it says is one of the most complex assembly process restructurings ever attempted within the plant, the conversion of the two-line assembly system into a one-line system.
The new one-line system allows the assembly of Z4 Roadsters, X5 Sport Activity Vehicles and future new models on one line instead of having a line for each vehicle.
The new assembly system allows the plant to more easily adjust to fluctuations in market demand, BMW claims.
According to Dieter Lauterwasser, vice president of assembly: “The one-line system will give us the flexibility to vary model combinations from 100% X5s to 60% Z4s and 40% X5s.”
The dismantling of the Z4 production line began in November last year, when the last Z4 of the year was completed.
During the four-week production shutdown, employees went through off-site training so that they would know how to build both X5 and Z4 models upon returning to work.
Production of the new updated Z4 and M Roadsters has begun, and the Z4 Coupe and M Coupe production is scheduled to begin later in the spring.
Capacity considerations
BMW says that under the new flexible single-line, maximum production capacity at Spartanburg is 590 units a day on a 100 hours-a-week basis. Future capacity utilisation prospects are heavily predicated on the relative performance of different models and resultant model-mix considerations (for example, the X5 takes longer to build than the Z4), but the arrival of a third model at the plant could see another shift added to increase capacity if necessary.
