S.C. politicians favor BMW over bailout of Detroit

Charleston Regional Business Journal
By Molly Parker

The big brands that fuel South Carolina’s automotive industry - BMW, Bosch, Daimler, to name a few - immigrated from foreign lands.

So it might not come as a huge surprise that S.C. lawmakers are less than enthusiastic about spending $25 billion in taxpayer funds to save the domestic auto industry in Detroit, some 700 miles away.

“It sends a bad message to any foreign company looking to locate in the United States,” said Joel Sawyer, Gov. Mark Sanford’s spokesman.

Democratic congressional leaders asked General Motors, Ford and Chrysler executives to submit a formal spending and repayment plan by Dec. 2. And lawmakers were expected to convene in Washington the week of Dec. 8 to consider the aid package.

But even before viewing the details, the bulk of South Carolina’s congressmen were either opposed to the plan or leaning against it.

Rewarding an industry that has saddled itself with a top-heavy management structure, runaway employee salaries and union monopolization is unfair, the mostly Republican delegation argued, while pointing to the success of ripe foreign industry in their own backyards.

“Locally, it would be hard for me to go back to BMW, a company that announced earlier this year that, in a $750 million investment, the volume of cars exported through the Port of Charleston is expected to increase 50% to about 150,000 vehicles a year, and tell them that I supported giving money to their competitors who made poor business decisions to begin with,” Rep. Henry Brown wrote in a recent letter to constituents.

Still, others warn that underestimating the economic impact of the Big Three could be detrimental to the Southeast, where suppliers depend on both foreign and domestic auto manufacturers and dealerships contribute significantly to the employment base.

Stinging rebuke South Carolina’s share of the foreign auto industry in the United States is largely fueled by two German-owned companies: BMW, which moved to Greer in the Upstate in 1994, and Bosch, which opened its first U.S. facility in North Charleston in 1973. Both employ several thousand people directly and have huge economic spinoff impacts.

A recent report from the University of South Carolina’s Moore School of Business estimated that BMW supports 23,050 jobs statewide and generates $1.2 billion in wages.

The legislative delegation issued a stinging rebuke of the U.S. auto industry, even though the governor and every federal lawmaker in South Carolina drives an American-made vehicle, according to a Business Jounral survey.

The state’s two Democratic congressmen, John Spratt and James Clyburn, were less harsh in their analysis of the bailout proposal, but they were lukewarm in their support. Spratt’s spokesman said he was hoping for a compromise. The congressman drives a decade-old Buick LeSabre.

Clyburn, the House majority whip and owner of a Lincoln Town Car, will support the plan to keep the Big Three out of bankruptcy but has called for the companies to submit a detailed spending plan and for top management to resign, an aide said.

Rep. Gresham Barrett thinks the Big Three should “do their due diligence,” looking internally to save money before they “come to Congress looking for taxpayer money,” spokeswoman Colleen Mangone said. His constituency includes BMW, but Barrett drives a Ford Fusion.

U.S. Sens. Jim DeMint and Lindsey Graham drive Ford Crown Victorias and share a distaste for the bailout proposal. DeMint opposes it and Graham is not a fan, their aides said.

“Detroit’s basic problem is that they created a business model that doesn’t have a snowball’s chance in hell of surviving in a global economy,” Graham said.

Sanford also drives American: He owns a Dodge minivan, a Chrysler brand.

Work force flexibility

In a recent Bloomberg TV interview, DeMint suggested the companies restructure in bankruptcy court to help them untangle from the pricey union contracts that have hamstrung their budgets.

Bolstering his argument, DeMint pointed to “some very successful auto companies in the U.S.,” including BMW in South Carolina, that are “operating successfully even in a down economy.”
BMW’s Greer facility is actually expected to shut down for two weeks in December and lay off up to 733 temporary workers by year’s end to account for the slowed economy. But this flexibility is heralded by company executives and politicians as a boon for the overall industry.
Most of the employees work full-time hours, but they are considered temporary because their salaries and benefits are paid by a contract agency called Management Analysis and Utilization Inc., based in Augusta, Ga. This contract situation gives BMW the ability to easily adjust its work force to keep pace with demand.

“As BMW flexes with the economy, those positions were eliminated,” marketing and communications director Brett Yardley said. “They will work through the end of December. When the plant starts back up, BMW will have to rehire them when needed, through MAU.”
South nabs foreign auto David Ginn, executive director of the Charleston Regional Development Alliance, agreed that South Carolina is competitive because of the “flexible labor markets here.”
That, along with a skilled work force, has attracted major auto companies to the Southeast in general, and South Carolina in particular, he said.

Combined, South Carolina’s auto base and that of its southern neighbors are threatening to outshine the Rust Belt, observers say, noting that activity continues despite the economic downturn.

Volkswagen recently said it would build a $1 billion plant in Chattanooga, Tenn., and Toyota Motor Corp. announced plans for a $1.3 billion facility in Blue Springs, Miss. And Kia Motors Corp. is wrapping up its $1 billion plant in West Point, Ga.

In South Carolina, Daimler AG — another German company — also fuels the auto industry with its Sprinter van manufacturing facility in North Charleston.

‘Globally connected’

But many of the suppliers that have sprung up to serve South Carolina’s auto manufacturers also do business with domestic automakers and suppliers. Bosch, for instance, which employs 2,100 people locally, makes power train components that can be found in foreign and domestic vehicles.

The list also includes domestically owned suppliers, such as DuPont and Cummins Turbo, that depend on business outside the foreign-auto-driven Southeast to keep their operations afloat.
That’s why some tied to the S.C. auto industry believe lawmakers might have to swallow the bitter pill and extend Detroit a taxpayer-backed loan.

“It’s all globally connected, and there’s no way to untangle it,” said Bob Geolas, executive director of the Clemson University International Center for Automotive Research. “Like a lot of people, I don’t have much sympathy for the position the Big Three find themselves in. But we are in an economic situation where to lose the jobs and to lose a manufacturing base at this particular time could be even more devastating to an already fragile economy.”

An unrelated group, the Center for Automotive Research, a Michigan-based nonprofit organization that conducts research and analysis of trends in the auto industry, said a complete collapse of Detroit’s automakers would have a negative impact on foreign-owned automakers for at least one year.

CAR said it would take that long to replace suppliers and smaller companies that would also go out of business. In three years, foreign-owned automakers in the U.S. could expand enough to support 20% of Detroit’s output.

Caravan to Washington

Carl Galeana, vice president of Detroit-based Galeana Automotive Group, said much of the public does not understand what would happen if the Big Three went under. That misunderstanding seems to grow the farther one gets from Detroit, he said, such as in South Carolina, where Galeana operates a Chrysler-Jeep-Kia dealership in Columbia.

Galeana is part of a committee aimed at getting one person tied to the auto industry — auto mechanic, union member, dealer or diner owner who feeds a local work force — from every state to travel to Washington when the hearings start.

“This doesn’t affect Detroit or the state of Michigan or the Midwest,” he said. “This impacts the entire country.”