BMW in Spartanburg / by kevin murray

There are plenty of foreign manufacturers that assembly their vehicles in the United States such as Acura, Honda, Hyundai, Infiniti, Mercedes-Benz, Mitsubishi, Nissan, Toyota, Volkswagen, and BMW in Spartanburg, South Carolina.  The United States is definitely not noted or known for its low labor costs but these mega-conglomerates recognize that labor costs are just one small component of a much greater whole in which the biggest factors in their opening of automobile plants in the USA approximately thirty years ago can be laid down to these three factors:


1.       Quid pro quo/free trade agreements

2.       For decades the USA was the largest auto market by sales volume in the world and now is second only to China

3.       Tax incentives


Vehicles are known as big ticket sale items in the world,  and with an average sale price of a new vehicle in the USA being just over $30,000 in 2012, the numbers involved in this industry are positively staggering.  Therefore, it is in the best interests of foreign manufacturers to come to a negotiated agreement with the government of the United States that allows these manufacturers to preclude tariff costs or to reduce them substantially based on certain contingencies being met, so that their vehicle prices are competitive with other manufacturers in the United States.  The United States is far too lucrative a market to pass up or to not take advantage of in all of its aspects, especially since the USA's transportation and ports are first rate, its labor force is available and scalable, its labor holidays are reasonable, its manufacturing capability is state-of-the-art, and further that the United States does not mandate using Union labor.


Additionally, the United States is somewhat unique in the world in that each of its fifty states competes against the others, in regards to incentives, tax rates, cost-of-living, and amenities.  In fact, it appears that States within this country will fall over themselves in providing special tax incentives and tax breaks in exchange for commitments in capital and labor investment.  Unfortunately, for most cities, the politicians that negotiate these deals on behalf of their citizens are not seasoned entrepreneurs with sophisticated business acumen but mere pretenders at the negotiation table.  This results in press releases that spin the job creation in one way, while saying little or nothing about the tax giveaways and other incentives that undercut the very deal that was made.


To make matters worse, too many city and State government lack transparency in their business deals in which the citizens have an absolute right to know.  Additionally, situations in which a certain manufacturer is provided special tax incentives and deals, means that the playing field for other businesses in the community is unlevel and consequently that their burden of taxation is unnecessarily higher.  The Nerve recently looked at BMW's $900 million expansion project in Spartanburg and through the Freedom of Information Act they were able to determine that: " a Dec. 2, 2011, application to the state for incentives, BMW said it had 3,822 permanent, full-time jobs in the entire state as of Jan. 1, 2011, – slightly more than half of the number that was cited in the press release."  In addition, "records … for BMW's latest expansion project show that the company will receive millions, and possibly tens of millions, in incentives over time."  Finally, "the incentives agreements for BMW’s latest expansion project allow job development credits if the average wage for the new employees is at least $15.12 per hour, which, based on a 40-hour work week, is slightly less than the 2011 per-capita income for the county."


Is BMW good for Spartanburg, or is it mainly good for BMW?  For fiscal year 2013, BMW's yearly revenue was just over $76 billion dollars, with a net income of over $5.3 billion dollars, whereas the city of Spartanburg just voted itself a yearly operating budget of $33.6 million dollars for fiscal year 2014.  I wonder just how badly outclassed Spartanburg was in its negotiations and their continued negotiations with BMW and how little it would take for those select few that represent Spartanburg in these talks to be compromised.  Further, because BMW sells high-end automobiles and SUVS, you would think that there would be plenty of middle management and upper management jobs within the corporation that would quite pay well.  No doubt, these jobs do exist; they just don't seem to exist at any meaningful level in Spartanburg.