20 years of Mercedes-Benz in Alabama: A defining moment in the Heart of Dixie
By Mike Randle
Twenty years ago this month, Alabama landed the Big Kahuna when German automaker Mercedes-Benz chose a rural setting between Birmingham and Tuscaloosa for its first U.S. assembly plant. Mercedes' decision in September 1993 to build its first facility outside of Germany in Vance, Ala., is universally considered to be the single-most important economic development event in Alabama history.
Prior to Mercedes-Benz, the state of Alabama was viewed by many in the national media as a socio-economic backwater. After Mercedes began production in 1997, the state's economy flourished like few in the nation, with SB&D naming Alabama "state of the year" five times over a six-year span from 2003 to 2008.
"It's been a huge success," said Anthony Topazi, the former COO of Southern Company, who was an industrial recruiter with Alabama Power when Mercedes-Benz announced its project in 1993. He was one of three key individuals -- Dara Longgrear of the Tuscaloosa County IDA and Billy Joe Camp, the head of Alabama's state economic development agency at the time being the other two -- who were at the point recruiting the German automaker.
Topazi was also the former head of Mississippi Power and successfully led that company through the aftermath of Hurricane Katrina. He is retired now after completing a highly successful career. He obviously has many fond memories of the Mercedes-Benz site search 20 years ago.
"One story I will tell you Mike, is that Mercedes officials did not come with a negative impression of Alabama. They knew nothing of Alabama, so they were open-minded in seeing what the state was really like. They sincerely wanted to know who we were and what we were capable of doing," Topazi said.
"What really impressed them was the fact that we never missed a deadline for any request for data and other information. Mercedes officials told me that Alabama was the only state that made every deadline in the analysis phase of the decision."
There were other impressions made by Alabama and Topazi in capturing the Mercedes project 20 years ago. "Against the advice of a real estate agent we were using" (the agent was charged with showing Mercedes executives homes in Tuscaloosa), "we decided to take the company's executives to the worst areas of town first. Why did we do that? Because every community has problem areas and you can't hide them," Topazi said.
"So we thought, let's show them the areas that are in bad shape ... the places we were trying to make better. Then we showed them the attractive areas of Tuscaloosa. Dr. Herbert Gzik and Andreas Renschler (the Mercedes executives conducting the site search) loved that honesty. So many of the other sites Mercedes was looking at were trying to gloss over things, making their communities seem better than they were," Topazi said. "I told the Mercedes team, 'Listen, I am going to tell you the absolute truth about everything.' They liked that."
Dara Longgrear, executive director of the Tuscaloosa County Industrial Development Authority, recalled the sequence of events of the Mercedes site search. "The year before," Longgrear said, "BMW announced they were going to South Carolina and to the surprise of many, Mercedes took a different approach. They announced their intentions to follow BMW to the U.S. at the Detroit Auto Show in January of '93. In May of that year, we made it clear to them that Alabama was interested in the project," Longgrear said.
"The team, which included Billy Joe Camp (Alabama Development Office), Glenn Pringle (Alabama Development Office), Mac Portera (University of Alabama), Anthony Topazi (Alabama Power) and I, discovered at the IDRC meeting in Atlanta that Bill Dorsey of Fluor Daniel was the site consultant," Longgrear said. "Apparently, Dorsey admired Gene Stallings and Alabama had just won the national championship in 1992, so Alabama Power agreed to fly coach Stallings to IDRC in Atlanta. Coach Stallings came up to the suite we had and he was very gracious, even though we was suffering from back problems.
"Coach Stallings met Dorsey and after the meeting we found out that the Mercedes project was actually in play, that it wasn't a closed competition with North Carolina being the site of choice. We answered the RFI sent to us by Mercedes and we made it to No. 1 on the company's list," Longgrear said.
An article in Business Week published October 10, 1993, titled "Why Mercedes is Alabama Bound," summed up the Mercedes site search. "In the end, gut feelings carried the day. The three finalists were in a dead heat when it came to business climate, education levels, and transportation. Alabama's incentive package was a bit richer than North and South Carolina's, but Mercedes officials say long-term operating costs in all three locations were roughly equal. 'Whether you get $10 million more or less in one state doesn't make any difference,' says Andreas Renschler. The deciding factor was Alabama's zeal. 'We sensed a much higher dedication to our project,' says Dieter Zetsche" (Mercedes Managing Director at the time).
The success of Mercedes-Benz -- Alabama's first automotive assembly plant -- over the last 20 years has greatly assisted in the state becoming one of the fastest growing automotive locations in North America.
In 1999, shortly after Mercedes began production in Vance, Honda announced it would build a large assembly facility outside of Birmingham in Lincoln, Ala. That facility currently houses about 5,000 workers.
In 2002, Alabama made news again when Korean automaker Hyundai announced its first U.S. plant in Montgomery, Ala. The state scored two other significant automotive projects when Navistar and Toyota announced major engine plants in Huntsville.
With five OEMs, the automotive industry positively affects the economies of almost every county in the state. Cullman County, located about 45 minutes north of Birmingham, is certainly one of those counties. "Cullman was selected as the location for the first Tier 1 supplier -- REHAU, Inc. -- to follow Mercedes-Benz to Alabama," said Dale Greer, Assistant Director of the Cullman Economic Development Agency. "Local leaders here will tell you the REHAU investment, payroll and contributions to the tax base are more than adequate to convince anyone that Alabama has gotten a significant return on their investment and Cullman has been a huge beneficiary," Greer said. "Thousands of people have a better quality of life in Cullman and Alabama because of Mercedes and suppliers like REHAU."
REHAU's Cullman venture has increased from the initial prediction of 50 jobs and a $5 million investment to an astounding 725 employees 20 years later. The company has invested $300 million in Cullman and operate in a state of the art building complex encompassing 850,000 square feet. REHAU will complete a Mercedes-driven $119 million project later this year that will create even more jobs in Cullman.
So prior to 1997 when Mercedes-Benz began production, not a single automobile had been assembled in the state. Today, Alabama ranks fourth in the U.S. in car and light truck production, is ranked fourth in the U.S. for vehicle exports and since 1997, more than seven million vehicles have been made in the state.
The Mercedes decision to build in Alabama wasn't without controversy. The incentive package Alabama gave the German automaker has been estimated to be anywhere from $258 million to $439 million. Some -- particularly the states that lost out on the project -- howled that Alabama merely bought the project.
I visited with Watts Carr, formerly of the North Carolina Department of Commerce, a couple of months after Mercedes chose Alabama. North Carolina was widely considered the favorite for the project. USA Today even published a story the day before Mercedes announced its intentions to go to Alabama that the project was going to Mebane, N.C.
During our meeting, Carr told me that "North Carolina would never pay that kind of money to an automaker." Another North Carolina Commerce employee told me in the same meeting, "They are never going to get the payback they are expecting."
In a story in The New York Times published September 1, 1996, titled, "O Governor, Won't You Buy Me a Mercedes Plant?" the sentiment was that the Mercedes deal would cost Alabama dearly. "Mercedes, it appears, has driven a state with a subcompact budget to spend far beyond its means. Tax breaks and other subsidies are pushing $300 million. That amounts to $200,000 for each job -- 18 times what Tennessee paid for a Nissan plant in 1980." Tennessee would later pony up nearly $600 million for Volkswagen in 2008.
But the naysayers didn't account for the obvious effect Mercedes would have on Alabama's economy overall. "Before Mercedes," Longgrear said, "Alabama was at a tremendous disadvantage. We had difficulty getting companies to even consider us because of a negative perception of our workforce. Before the Mercedes workforce success Alabama was always starting the site selection process from behind everyone else."
Alabama certainly isn't "behind everyone" now. The state has captured some huge projects over the years that it never would have won prior to Mercedes state officials claim. Boeing, Airbus, Honda, Hyundai, Toyota, Nucor, Lockheed Martin, Northrop Grumman and GE Aviation are just a handful of notable corporate nameplates that call Alabama home today.
Those companies and hundreds more have helped Alabama's economy weather the recession and recover much faster than some other Southern states. As of this writing, Alabama's unemployment rate is 6.3 percent, more than two percentage points lower than several states in the region.
And it was Mercedes that jump started Alabama's economy, helping create over 220,000 jobs in the state while investing billions in the process. "What Mercedes did for Alabama is it said to the country and the world that Alabama was an outstanding place to do business," Topazi said. "The image of Alabama dramatically changed when Mercedes-Benz came here."