Driven by demand: BMW’s expansion accelerates business for suppliers

SC BIZ
By Lydia Dishman | Contributing Writer
Monday, 23 June 2008

Carmen Geschke is sitting at the conference table in her office organizing a stack of papers. The president of ProTec Enterprises LLC looks up briefly as the volume of proceedings on the other side of the wall increases.

Laughter rings through the sound of industrial equipment as a group of her employees assemble hydraulic hoses for one of their automotive clients. “I have a great team,” Geschke says, smiling.

ProTec is a Tier 2 supplier, meaning they create parts to distribute to a larger business who in turn supplies an original equipment manufacturer, or OEM, such as BMW. With just 10 employees, ProTec certainly qualifies as a small business, but their services, which include logistics and equipment testing, are ISO certified, just like the big guys. And they are poised for growth.

Like many of the industrial suppliers sprinkled throughout the Upstate, Geschke is doing what she can to be proactive and meet the demand that is sure to come when BMW’s $750 million expansion is complete.

BMW’s second plant in Greer is expected to require 500 full-time jobs as their production increases, pushing their suppliers, too. The new facility will build the next generation X3 sports activity vehicle while production of the Z4 roadster, originally built in Greer, will move to Germany.

BMW draws from 194 suppliers in the United States, 52 of which are located in South Carolina. Do they expect the number to increase?

Doug Woodward, research director at the University of South Carolina’s Moore School of Business, estimated that one job could be added to the supplier network for every job created at BMW.

Creating alliances
What motivated Geschke to make the leap from accountant to owner of an industrial supply company was anticipating a need for minority- and woman-owned businesses, she says. She and her husband moved to South Carolina from that other automotive epicenter, Michigan, to found ProTec in 2004. Since then, they count Haweka-USA, Weiss Umwelttechnik Germany and CU-ICAR among their clients. They also worked on a 15-month project for BMW.

Right now, ProTec is working on building up the maintenance testing equipment side of its business, as well as forming an alliance with other small minority- and woman-owned businesses to provide clients such as BMW a complete range of products and services from logistics and janitorial to assembly and graphic design. Geschke explained that BMW is trying to promote diversity among its suppliers and is calling for 5% of that business to come from certified minority- and woman-owned businesses.

“BMW’s diversity managers have given us a lot of support and helped us look at strategies to increase our business,” she says.

Support for growth has come from other sources too, most notably from the Greer Development Corp. Geschke gives credit to Executive Director Reno Deaton who assisted in their relocation from Duncan to Greer’s Gateway International Business complex just down the road from BMW and by “showing us how we can take advantage of tax incentives as we grow.”

Deaton is optimistic about the area’s readiness for the expansion and Greer Development Corp.’s role in it. “We can provide so many opportunities for suppliers, from Tier 1 on down,” he says. “We have a number of sites available in close proximity to the plant, great infrastructure and a community that is willing to develop.”

Managing growth
Bernd Birnbaum, the plant manager for ZF Lemforder in Duncan, has witnessed the impact of BMW’s growth first hand since he arrived in South Carolina in 1994. Today, he oversees 100 employees who produce axles in a 118,000-square-foot facility.

When BMW first started operations in South Carolina, he said BMW was pulling in a lot of suppliers, but that’s changed as the area has developed.

“When I drive into this area now, it is a big difference,” Birnbaum says.

ZF Lemforder’s first location in Duncan was a spec building the company had to add very little to. That changed when ZF was awarded the business for the X5, he says.

“We had to build our own second building, completely to our specifications,” he says.

Birnbaum points out that they sold the first facility to another automotive supplier company from Germany.

Kurt Mueller, vice president Chassis Systems ZF Lemforder North America, says BMW has been a ZF customer since the 1930s in Europe.

“The whole idea was to follow them,” he says. “We started with a simple assembly operation and BMW did design and development. We were sequence supplying.”

Now, Mueller says, the concept is the same but the scope has grown.

“We have been a design and development partner: sourcing, managing sources, logistics and quality. All of that has moved over to us,” he says.

Of BMW’s latest expansion, Mueller says, “Our hope is to continue to grow with them. There are never guarantees. When they put out a contract for a particular platform, timing is always important. We are positioning ourselves for next opportunity, and are confident that we will be part of their future.”

Mueller makes another prediction about the future of the entire automotive industry.

“There has been a large shift as Alabama and South Carolina are becoming a locale of choice,” he says. “As new customers continue to come in and the infrastructure is built up, the area can leverage the investment and build on itself.”

Supplying a work force
All this new business requires people. Brett Yardley, marketing and communications specialist with Management, Analysis and Utilization Inc., says in anticipation of their needs, BMW approached MAU to help launch a new work force concept to begin in July. MAU was already working with BMW to provide production line associates.

“They asked if we could help with this concept of extended work force, to bring more stability to their employees,” he says.

That led to the creation of a new division called Tier 1 Solutions that would combine two different specialties, logistics and production. Tier 1 Solutions will service production and logistics employment requirements to supplement BMW’s own work force. “We were looking for ways provide logistics. We are very excited about it,” Yardley says.

The new Tier 1 Solutions positions will include a competitive pay and benefits plan comparable to those of the best employers in the Upstate.

“BMW has always been an industry leader and an innovator of new ideas. In this case, they acknowledged the need of their strategic, extended work force partner,” says Randy Hatcher, MAU’s president.

MAU has been providing Human Resource functions for them since 2006.

“If they do well, we do well,” he says. “We have a positive outlook. BMW has had a huge positive impact on the entire Upstate.”

The company, headquartered in Augusta, Ga., also has branches in Anderson, Greenville and Spartanburg and serves other customers such as Milliken and Standard Motor Products, an automotive parts firm.

This partnership was announced a little over a month after the news of BMW’s plans to build a second facility, Yardley says.

“When they made the announcement, we were ready. We are hiring some new people ourselves to handle the work flow, primarily for human resources but also for safety and accounting,” he says.

Return on investment
This $750 million investment is BMW’s largest, exceeding the $600 million it made initially. When complete, BMW’s total investment in South Carolina will top $4.2 billion.

The company also committed to increasing manufacturing space by 1.5 million square feet, expanding U.S. production to 240,000 per year and adding 500 workers by 2012.

BMW officials have said increasing U.S. production is an important hedge against the weak dollar. Frank-Peter Arndt, a member of BMW’s board of management, said the expansion “is a sign of our commitment to the USA and to our home in South Carolina.”

Geschke can’t think of a reason this won’t be a win-win for everyone.

“The talent is here,” she says. “With the dollar vs. the euro, work can be done one and half times cheaper here. The industry needs to fit U.S. requirements, not only European ones, because the U.S. provides a lot of business.

Manufacturing is growing faster, but we need to do more research and development. CU-ICAR is perfect to grow other knowledge-based businesses.”