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Sprinting Ahead
Relationship puts together assembly plant deal
By Shannon Cavanaugh
Contributing Writer
Gov. Mark Sanford and Secretary of Commerce Bob Faith didn’t quit after DaimlerChrysler gave Project Bluebell the red light.
Project Bluebell was the name given to the company’s efforts in 2002 to find a new home in which to assemble its Sprinter van.
Several times during the past few years, Sanford and Faith boarded planes bound for Germany to meet with company executives hoping one day to convince the automaker that South Carolina was the right fit and climate in which to do business.
Their persistence paid off with DaimlerChrysler’s recent decision to relocate its North American Sprinter van assembly plant from Gaffney, S.C., to a 460,000-square-foot building it owns in Ladson. The company plans to initially hire 220 employees and invest $35 million to retrofit the facility.
It will start hiring employees at the first of the year and assemble its first van by the end of 2006. The plant would run two shifts. The company would not give specifics on salaries except “they are competitive with other automakers in the area” and would meet or exceed the Charleston County wage average of $15.50, said Rolf Bartke, head of DaimlerChrysler’s Mercedes-Benz vans business unit.
“Recognizing how critical relationships are in business, Gov. Sanford and Secretary Faith made every effort to build relationships with senior leaders in our company,” said Bartke. “and to communicate that South Carolina wanted to be a partner in our success,” Bartke said.
The incentives
However, the deal did not come together based on relationships alone. It also came with a price tag.
One of the biggest incentives was the port. The Port of Charleston “played an integral part” in its decision to locate here.
The port allowed easy access of getting materials to the plant and a negotiated reduced cost to the company for using the port. The Department of Commerce declined to comment on specifics, as did the Port of Charleston.
“Due to the nature of negotiations, I can’t get into the agreement, but I can say port access is very important to DaimlerChrysler, and we took that into account. They will ship tens of thousands of containers and will become our largest customer,” said Bryon Miller, S.C. State Ports Authority spokesman. “We were happy to help. Besides the 220 jobs, this is a big boost for the port. We’ll see a lot of spin off, especially for all the 400 private companies that work here along the waterfront.”
This is not the first time the port has made concessions. Miller said the port often takes into consideration the individual needs of its 4,000 customers that ship in and out of some 150 countries.
The reduced costs at the port and its proximity to DaimlerChrysler’s assembly facility will allow the company to save money and time on their assembly process. Currently, DaimlerChrysler produces van parts in Dusseldorf, Germany, and during the past three years, has shipped kits through the Port of Charleston. The kits are then transported to Gaffney, where employees assemble the vans.
The state also pitched in its share of incentives. And as DaimlerChrysler’s presence in the area grows so will those incentives.
South Carolina law provides for a $2,500 tax credit per employee and because the jobs are considered a multi-county economic development, Charleston County is throwing in another $1,000 for a total of $3,500 per employee. That tax incentive is effective for five years, said Daniel Young, project manager and director of grants for the Department of Commerce.
“All incentives are performance based with a claw back,” Faith said, meaning that if DaimlerChrysler does not keep its end of the bargain of creating and maintaining jobs and investments into the facility, the company would have to repay taxpayers’ money to the Department of Commerce.
Future growth
As the company meets its targeted sales growth, it will bring more work and jobs to the Lowcountry. Faith outlined the company’s plan.
In Phase I, the company will hire 220 employees and invest $35 million in converting its facility. That means a credit of about $3.85 million to the company.
It will also receive $250,000 in refunds for job development credits on the 220 employees over the next 10 years for a total of $2.5 million. The total package offered by state and county officials based on the 220 jobs is $6.35 million. The state also will kick in a $500,000 infrastructure grant to build a new road to the plant.
In Phase II, the company would add 410 new jobs and invest $80 million into the plant with the goal of assembling more vans in North Charleston. If DaimlerChrysler hires the additional 410 employees, it would have to negotiate for more job development credits and are eligible for more tax incentives. However, the value of tax credits go up or down because they are based on per capita income and employment rate at that time, Young said.
In Phase III, the company would add 1,170 jobs and invest $325 million to make the assembly plant a full manufacturing operation, from creating parts to painting vans. The state would give the automaker a $15 million grant to put in rail service. Again the company would have to
renegotiate the incentives.
DaimlerChrysler hopes that Phase II and III would happen simultaneously, Faith said.
Bartke made no promises about the future, even denying any discussions with state officials about eventually creating a total of 1,800 jobs and investing $435 million over the next six years, saying that “customers create more jobs.”
The van’s history
Soon after introducing the Sprinter to the North American market, DaimlerChrysler found it was going to need to expand production.
Charleston was one of the top contenders in 2002 for a Sprinter assembly plant that would have given the state more than 3,000 jobs, but word spread that the company had selected Pooler, Ga., a community outside of Savannah. However, that did not happen either.
Instead, DaimlerChrysler put its project on hold. In 2003, Sanford and Faith flew to Germany to restart talks with the European automaker.
In early 2005, product demand brought DaimlerChrysler back looking for a new site. It considered roughly 64 sites over four years.
Faith said the state “got back in the game in a big way” when they learned of the sale of American LaFrance and a soon-to-be vacant facility that the company did not plan to sell.
DaimlerChrysler subsidiary Freightliner LLC announced in September that it was selling the emergency vehicle manufacturer but keeping the 460,000-square-foot building as an asset.
Within two months of the announcement, a deal was put together.
The plant, located at 8500 Palmetto Parkway in the Palmetto Commerce Park, is surrounded by 90 acres of land that is for sale and across the street from MTU Drive Shaft, another DaimlerChrysler subsidiary.
It is uncertain if Sprinter plant employees will unionize or receive union negotiated benefits as some non-union plants do. Bartke would only say DaimlerChrysler is “open to the democratic process.”
The demand
Since DaimlerChrysler introduced the German made van into the United States and Canada in 2001, its sales have increased 400%. That growth is what sent the auto giant searching for a larger facility than their assembly plant in Gaffney, which employs 70.
Strong demand for the Sprinter van put pressure on the capacity at the Gaffney assembly plant, which is also used by Freightliner Custom Chassis Corp. to assemble diesel heavy-duty chassis. Freightliner will reassign employees to other job duties at the Gaffney location, company officials said.
With this shift and realignment of production to North Charleston, DaimlerChrysler’s goal is to produce 60,000 vans each year and capture a 15% share of the North American market.
“We have ambitious, long-term plans for the van market in North America,” said Bartke. “The Ladson location will provide immediate increase in annual output to 32,000 units, roughly 10,000 more than is possible today at Gaffney, as a first step to react to market demand.”
The next generation 2007 Sprinter van, with its Mercedes-Benz transmission, will roll off the assembly line in late 2006 with a new look and feel. Customers will also have a choice of diesel or gasoline fueled engines. The Sprinter Van gets 25 miles to the gallon and sells for around $26,000 to more than $30,000.
Automotive cluster
Sanford calls the announcement of 220 jobs a “very significant investment” in the state’s economy.
“This shows the significance of clustering to give the state a competitive advantage,” Sanford said at the recent announcement. “Right now, in the state, we have some 232 automotive suppliers, and 41 of the 46 counties in South Carolina have auto related companies in place. The state is building supremacy.”
Faith said it was years of teamwork that landed the company here.
“It’s a big day for the state’s economy and a reason to celebrate,” Faith said. “It happened because this administration and the governor are focused on getting jobs.
“We would not be in the game today for 1,800, if we weren’t here today with 220 jobs,” Faith said.
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