Week of January 15, 2001
  Special Report

Mercedes Goes to Maui:
Company Officials Outline Alabama Success

By JACK LYNESite Selection Executive Editor of Interactive Publishing

KAPALUA BAY, MAUI, HAWAII -- "We knew that it would be looked at as a benchmark facility," said Linda Paulmeno of the 1,500-employee, US$400 million plant that Mercedes decided in 1993 that it would locate in Vance, Ala., a rural area outside Tuscaloosa.

"Many Wall Street analysts said we wouldn't make it," recalled Paulmeno, communications director for Mercedes-Benz U.S. International.

Linda Paulmeno, Mercedes-BenzBill Taylor, Mercedes-BenzMercedes made it. The company, in fact, in August announced a $600 million, 2,000-employee expansion that will bring Mercedes' total Alabama investment to $1 billion.

That expansion marked the acid test for the Alabama presence, explained Bill Taylor, Mercedes-Benz U.S. International president and CEO.

"In our industry, the factor that decides whether your location choice is successful is expansion," said Taylor, a 32-year veteran of the auto wars. "An expansion is the answer to whether you made the right decision with your site."

ABOVE LEFT: Mercedes' $600 million Alabama expansion "is the answer to whether you made the right decision with your site," said CEO Taylor. ABOVE RIGHT: "Many Wall Street analysts said we wouldn't make it," recalled Paulmeno, a member of the Mercedes site selection team that picked the Vance, Ala., site.

An Uncommonly Strong Bond

What the analysts scoffed at in 1993 has developed into an uncommonly strong bond between a company and a state.

Last week's PGA Mercedes Championships in Maui, for example, drew more than the likes of Tiger Woods, et al. Also on hand were Mercedes' Taylor and Paulmeno, who addressed the fifth annual Alabama Business Conference at the Mercedes Championships.

The Mercedes executives were joined by a high-powered host of state dignitaries, including the governor, lieutenant governor, state House speaker and the chancellor of the University of Alabama system.

But perhaps the Mercedes-Alabama love-fest isn't so surprising. Both parties had substantial stakes riding on the Vance plant.

Landing Mercedes simply put Alabama on the auto-plant map, with Vance winning out over 150 sites in more than 30 states. Mercedes has become a $1.3 billion industry that accounts for 10,000 total jobs, according to a 1999 study by Auburn University at Montgomery. Mercedes and its tier-one suppliers have invested nearly $700 million in new facilities and expansions, and have a combined annual payroll of $354 million.

In addition, the success of Mercedes' Alabama plant played a significant role in swaying Honda's 1999 decision to locate a $400 million, 1,500-employee plant in Lincoln, Ala., many industry analysts contended.

Mercedes Faced Host of Unknowns

Mercedes' stakes were as big, if not bigger. As Taylor noted, "A lot of industry analysts said that you couldn't build a Mercedes outside of Germany" - something the company hadn't done before the Alabama project.

Increasing the degree of difficulty was the fact that the first non-German plant would be building a totally new line, the M-Class SUV, with a totally new production system. And Mercedes was taking that host of uncertainties into a state that was then largely an auto-industry unknown.

Those unknowns have become knowns. And one thing Mercedes knows is that it has a flourishing operation.

As Taylor noted, "Our Alabama plant, along with the Graz, Austria, plant, produced more than 90,000 vehicles worldwide in 1999 - a 33 percent increase over 1998."

And the Alabama plant's quality, he added, has helped Mercedes weather the recent cooling of U.S. auto sales, with GM and Ford, for example, experiencing substantial reductions. "Mercedes' sales grew 17 percent during that period," Taylor noted. "Quality was clearly the driver."

Labor Quality 'First Criteria'

"Our first criteria was work-force quality and suitability," said Paulmeno, a member of the Mercedes site selection team assembled in 1993 and the first of the company's now 2,000 employees to locate in Alabama. "The AIDT (Alabama Industrial Development Training) program was the differentiator."

Said AIDT Director Ed Castile, "What differentiates AIDT is our recruitment and screening for pre-hire training." The Mercedes' project has kept that screening running in high gear. The first 20 advertised jobs drew 63,000 applicants, Castile recounted.

AIDT has set up a training center at the Mercedes site, in addition to its centers in Huntsville, Mobile and Montgomery. "We'll also be setting up a center at the Honda site," Castile said.

A new Mercedes plant in South Africa underscored the Alabama plant's work-force quality, Taylor explained. He volunteered some of his Alabama troops to get the new operation up and running. "They were skeptical," Taylor recounted. The first Alabama group was only asked to stay for two to three weeks.

Later, the South African operation "called and said, 'How long can we keep them?' " Taylor recalled. "Now, they've asked us for a second group, which will be going to South Africa for three months."

Governor Draws Mercedes' Praise

Alabama Gov. SiegelmanOngoing state support has also been a major factor in Mercedes' continuing expansion in Alabama, Taylor said. The Mercedes-Benz U.S. president and CEO had particularly high praise for Gov. Don Siegelman.

"When we decided we wanted to expand, I called the governor's office and said we needed to have a private conversation," Taylor recounted. "He said he would come to my house. I told him about [the proposed expansion], and he said, 'What do we have to do? We'll do whatever it takes.' The governor flew all the way over to Germany for a 20-minute meeting to approve the expansion." Said Siegelman, "Alabama is committed to education, economic development and strategic planning."

"Alabama is committed to education, economic development and strategic planning," said Gov. Siegelman.

Siegelman's proactive stance on economic development drew praise from a host of other speakers at the uncommonly well-run conference.

"For the first time in the state's history, we have ongoing development of an economic development strategy," said House Speaker Seth Hammett.

Tom MeredithSiegelman created the Alabama Commerce Commission, chaired by University of Alabama System Chancellor Thomas Meredith.

"The Alabama Commerce Commission is creating a long-term economic development strategic plan for Alabama," Meredith explained. Nineteen "critical first recommendations" will soon be introduced, including "establishing economic development regions, utilizing counties working together," Meredith added.

Siegelman has also spearheaded the passage of a state tort reform package, explained Lt. Gov. Steve Windom.

ABOVE: The Alabama Commerce Commission will soon introduce "19 critical recommendations," including "establishing economic development regions, utilizing counties working together," Meredith explained.

House Speaker Seth Hammett Lt. Gov. Windom Jacque Shaia, EPDA

Windom (above center) praised Gov. Siegelman for spearheading state tort reform, while Hammett (above left) noted, "We have ongoing development of an economic development strategy for the first time in the state's history."

Opening the conference was Jacque Shaia (above right), president and CEO of the Economic Development Partnership of Alabama (EPDA), a private, nonprofit organization supported by 73 leading companies committed to the state's long-term economic growth. The EPDA was one of the conference sponsors, along with Mercedes-Benz U.S. International, the Alabama Development Office and the Birmingham Development Board.

Enthusiasm Hasn't Waned

Community support sometimes wanes after the courtship of a project is sealed. But that apparently hasn't been the case with Mercedes.

"One big test with a site selection is what happens afterward," said Paulmeno, a New York City native. "Every day, the support that Mercedes gets in Alabama is not only as strong as it was in the beginning, it's even stronger."

Said Taylor, "It's not a honeymoon. It's an ongoing process."

Mercedes in turn has given back to the community, contributing more than $1 million to Alabama higher education and another $600,000 to help residents battered by recent storms.

"Yes, there is a new Alabama," noted Siegelman. The governor, however, cautioned against complacency.

"As Will Rogers once noted," said Siegelman, " 'Even if you're on the right track, you'll get run over if you stand still.' "

Related Article: “Labor, Speed and Business Clustering:
Speakers Address Challenges at Alabama Business Conference”



©2001 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.