Photo credit: BLOOMBERG
Friday’s announcement of BMW’s next expansion at its Spartanburg, S.C., plant and the addition of the X7 crossover will mark another milestone for a factory that’s become a centerpiece of BMW’s global manufacturing strategy.
Since producing its first car 20 years ago, Spartanburg has expanded to rank as the industry’s biggest producer of vehicles exported from North America, according to BMW. The flexible, high-volume plant is the German automaker’s “center of competence” for crossover production, CEO Norbert Reithofer says.
It has also played a key part in BMW’s nine-year reign as the world’s best-selling luxury brand, a title being challenged this year by Volkswagen AG’s Audi.
On Friday, BMW will outline plans to build the X7, a seven-seat crossover, at the Spartanburg factory and expand annual capacity to 400,000 units, a person familiar with the plan has told Automotive News.
The crossover would be sold primarily in the United States. It would be the fifth model to be made at the factory. The X3, X5 and X6 are produced in Spartanburg for worldwide sales, and the X4 is coming this year. The plant is BMW’s only production site for these crossovers.
BMW’s first and only factory in North America, Spartanburg has produced about 2.5 million vehicles since 1994. BMW has invested $6.3 billion at the site since 1992, when construction began.
To build the X7, BMW will add about 50,000 units of production. The company will not disclose details until Friday’s news conference in Spartanburg, which will be hosted by Reithofer.
Joe Langley, an analyst specializing in automotive production at IHS Automotive in suburban Detroit, said with this expansion, Spartanburg will be one of BMW’s largest plants worldwide.
“That is a testament to their faith and their work force there and the efficiency of that plant,” Langley said. “That is an incredible story alone.”
Spartanburg is one of BMW’s most flexible factories, using a two-line assembly system that allows quick adjustment to market demands and allows the plant to totally build to order.
Last year, it exported 71 percent of its annual production — 201,760 of a total build of 297,326 crossovers.
“There is nothing else in North America that does anything like that,” said Langley. “The next closest would be Mercedes-Benz in Alabama, and they are on the lower side.”
Reithofer said during a conference call with analysts last week that BMW is the largest exporter from a NAFTA country: “The U.S. will stay a market with great potential for us.”
BMW CFO Friedrich Eichiner said during the call that Spartanburg is “a decisive factor in the success of the BMW Group,” because it is “located in the world’s largest premium market.”
Timeline for BMW’s Spartanburg, S.C., plant
• June 22, 1992: Plans to build a plant announced
• Sept. 30, 1992: Groundbreaking
• April 6, 1993: Construction begins
• Sept. 8, 1994: First American-made BMW, a 318i, rolls off the line
• Sept. 26, 2002: In 10 years, factory had grown to 2.4 million square feet. BMW announces $400 million investment and 400 new jobs.
• March 10, 2008: BMW announces a $750 million investment to add 1.5 million square feet to produce the BMW X3.
• Jan. 12, 2012: The factory had grown to 4 million square feet. BMW announces $900 million investment and 300 new jobs in preparation for the X4.
• Sept. 17, 2013: 2.5 millionth BMW is made in South Carolina; BMW prepares to expand to 5.6 million square feet
Spartanburg doesn’t build any vehicles on speculation. Experts say BMW does build-to-order manufacturing faster and more flexibly than any other automaker.
“If it is not ordered, we don’t build it,” said Sky Foster, manager of corporate communications for BMW Manufacturing Co. “This separates BMW from other automobile manufacturers in North America.
“We believe that our production processes should have the flexibility to adjust to sudden shifts in market demand.”
Most vehicles produced by the Japanese and Koreans in North America — with the exception of Nissan in Mexico — are sold in this market, said Langley.
“BMW, compared to most other facilities, operates very efficiently with high utilization levels and because they are the global source [of crossovers], they can weather ebbs and flows of different markets,” Langley said.
For instance, when the U.S. automotive market dramatically fell in 2009, the plant exported a record 80 percent of its production to growing markets such as China.
BMW X6 production was launched at the South Carolina plant in 2008.
Photo credit: BLOOMBERG
From 3 series to X
BMW has been flexible in its use of Spartanburg. BMW went from breaking ground in June 1992 to production of the 381i, its first vehicle, 14 months later in September 1994. By auto industry standards, it was considered a rapid startup.
The 3-series sedan was produced until 1995 when factory production shifted to the Z3 roadster. The Z3, in three variants, was produced until 2002.
Spartanburg ended Z3 manufacturing and made the larger Z4 successor from 2002 to 2008.
BMW expanded the factory in 2008 with a $750 million investment to produce the X3, the smallest crossover it makes in the United States.
In 2012, after seizing the U.S. luxury brand sales crown from Lexus, BMW made an additional investment of $900 million to add 50,000 units of production and 300 jobs in preparation for the X4, a crossover with coupelike styling smaller but similar to the X6. The factory has a capacity of 350,000 units, and the X4 goes on sale in the United States this June.
A factory spokeswoman said by the end of 2014, BMW will have more than 8,000 employees in Spartanburg. The plant currently has two body shops, a paint shop with two lines and two assembly halls.
To produce the X3 in 2010, BMW used a “finger plant” design similar to its Leipzig plant in Germany.
“The fingers are constructed along the sides of the plant and allow for direct deliveries to the exact point — 130 dock doors — for 80 percent just-in-time delivery on the production line,” BMW’s Foster said.
A logistics warehouse was also constructed as part of the X3 assembly facility “to ensure leaner processes and quicker delivery routes,” he said.
BMW cancelled X7 development in 2008, at the height of the automotive market’s collapse. But with demand for larger crossovers now growing in the United States, BMW decided to restart work on the X7 instead of increasing the size of the redesigned X5 that went on sale last year.
The X7 is expected to go on sale in 2017 or 2018 in the United States, filling a gap in BMW’s lineup. The large crossover would compete with the popular Mercedes-Benz GL and rumored Audi Q9, as well as the Lincoln Navigator and Cadillac Escalade.
The X7 will be based on one of BMW’s two new vehicle architectures, and will share parts with the other X vehicles and larger passenger cars. The new architecture gives BMW better economies of scale and allows it to launch vehicles faster than in the past, companies executives have said.
The X7 will have a full third-row seat. Dealers have been clamoring for a larger crossover, saying the X5 is too small for some U.S. buyers. Damon Shelley, owner of two BMW stores in California, said the vehicle has been on his personal wish list for years.
An aerial view of BMW’s sprawling plant in Spartanburg, S.C., showing construction of a 1.5 million square-foot expansion in June 2010.
Photo credit: BMW
Mercedes-Benz sold 29,912 GLs last year, up 15 percent from a year earlier. The GL is produced in Tuscaloosa, Ala.
Last year BMW sold 1.66 million vehicles worldwide, setting a new sales record. The company has a group target of 2 million in sales by 2016.
Last year, the United States accounted for 19 percent of the BMW Group’s sales, slightly below China’s 20 percent. BMW sold 309,280 vehicles in the United States last year and one-third — 102,502 units — were crossovers.
Producing in the United States will give BMW a cost advantage and additional sales as crossovers have gained popularity, experts say. Langley says he expects North America to be a “a hub for production going forward.”
“I do not see BMW slowing down,” he said.
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