Week of July 23, 2001
Blockbuster Deal of the Week
from Site Selection's exclusive New Plant database
BMW Picks East German SiteBy JACK LYNE Site Selection Executive Editor of Interactive Publishing BERLIN -- Ending a yearlong process that began with 250 European sites submitting bids for the project, BMW (www.bmw.com) picked an east German site in Leipzig for its new US$860 million auto plant that will employ 5,500 workers.
for $860 Million, 5,500-Employee Plant
The site in Germany's ex-communist east won out over four other shortlist finalists: Arra, France; Rolin, Czech Republic; and two other German cities, Augsburg and Schwerin. A total of 125 German cities bid for the BMW plant.
"It wasn't an easy decision for us," Bayerische Motorenwerke Chairman Joachim Milberg said at last week's announcement in Berlin. Beginning in 2005, the Leipzig plant will produce 650 BMW 3-series autos each day, he said.
Some Saw Rolin, Schwerin as FrontrunnersSome observers had considered the Czech site as the frontrunner for the project. Wages in the Rolin area would have been significantly lower.
Others thought that Germany's federal government favored the Schwerin site in the state of Mecklenburg-Western Pomerania. Prior to BMW's announcement, the German press had been buzzing with speculation over unconfirmed reports that the federal government had held discussions in Berlin with Mecklenburg-Western Pomerania government officials.
Instead, BMW picked Leipzig (www.leipzig.de), a city with a population of some 500,000. A combination of factors made the city the location of choice, Milberg explained. The Munich-based automaker gave particularly high marks to the Leipzig area's availability of skilled labor, he said, as well as its quality infrastructure and transportation facilities, which will provide strong links to the company's plants in its headquarters state of Bavaria.
BMW, Milberg continued, also liked the 495-acre (200-hectare) site that it selected in Leipzig. Another critical decision driver was the agreement by area labor unions' to accept more flexible work-scheduling rules at the Leipzig plant, the BMW chairman explained.
EU Incentives Projected at $244 MillionEuropean Union (EU at www.europa.eu.int/index-en.htm) incentives also helped steer BMW to Leipzig. The Economics Ministry in Saxony state (www.sachsen.de) said that it expects that the German company will receive incentives of some $244 million for locating in Leipzig, which is qualified for EU subsidies by virtue of its status as an economically disadvantaged region. The EU incentives will help compensate for "the economic disadvantages of the location," said Milberg.
Leipzig's real estate costs provided an advantage, however, in comparison to some of the other shortlisted sites. Sources in the German real estate industry predicted that BMW would pay some $2.23 million for the 495-acre Leipzig site. By comparison, land in the competing city of Augsburg, Bavaria, would have cost roughly five times as much, real estate insiders speculated.
BMW will also likely receive financial assistance from the city in hiring and training employees at its new Leipzig manufacturing facility. The city has offered similar assistance to other major location projects that have come into the area.
Porsche, Infineon Also Pick East German SitesBMW will find not only skilled labor in Leipzig, but abundant availability as well. The east German unemployment rate stands at 17 percent, almost double the national average. State labor officials reported that their Leipzig office had registered almost 70,000 unemployed workers.
The mix of high skills and a deep labor availability that drew BMW has proved equally attractive to other major firms.
Porsche, for example, is building a new $44 million plant in Leipzig, which will make the company's new off-road vehicle. And Infineon has announced that it will open a 4,000-job semiconductor fab in Dresden. East German sites are also reportedly in contention for a new Mitsubishi engine plant and an Intel-backed chip fab.
The BMW plant in Leipzig will have a particularly potent economic punch. City officials estimated that the plant's suppliers will add such a mass of spin-off jobs that the total impact on the area may be as many as 10,000 new jobs.
The big job totals are good political news for the government of Chancellor Gerhard Schroeder (www.bundespraesident.de). Schroeder has vowed to cut German unemployment before the 2002 elections. BMW's decision sends a "clear signal for the future of east Germany," Schroeder said.
©2001 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.