Mercedes holds key to Alabama auto industry boom

Mercedes holds key to Alabama auto industry boom
The central role of Mercedes-Benz in Alabama's economic growth for the past two decades can hardly be exaggerated. (Mercedes)

In the 20 years since Mercedes-Benz began producing the M-Class SUV in Tuscaloosa County, Alabama’s auto industry has roared to life in communities across the state.

Vehicle production has steadily risen to make Alabama one of the Top 5 auto-producing states in the U.S. Last year, for the second year in a row, workers at Mercedes, Honda and Hyundai combined to build more than 1 million vehicles.

Jobs are on the rise, too, growing by more than 200 percent over the past 15 years.

Though Mercedes’ original plans called for production of about 60,000 vehicles each year in Alabama, annual production has grown to top 300,000. (Mercedes)

In 2016, there were 38,730 jobs at auto, engine and motor parts manufacturers in the state, up from 12,760 in 2001, according to data supplied by the Economic Development Partnership of Alabama (EDPA).

The average annual earnings of all of those jobs combined is $70,680.

Meanwhile, the economic output of the state’s auto and parts manufacturing industries has grown from an estimated $1.1 billion in 1997 to about $6.2 billion by 2014, according to the Center for Business and Economic Research at the University of Alabama.

On Feb. 14, 1997, the day the first customer-ready M-Classes began rolling off the assembly line, no one dreamed where it would lead, said Steve Sewell, EDPA executive vice president.

“The growth and economic impact have far exceeded our expectations, and the industry’s extraordinary success has earned the state a reputation as a top business location,” he said.

‘Fertile ground’

While Mercedes started it all, the industry would not be what it is without the major contributions of Honda and Hyundai, which built their own auto assembly plants in the state in the years following the M-Class debut, as well as Toyota’s engine plant and hundreds of suppliers and support businesses.

An Odyssey minivan moves down the line at the Honda plant in Lincoln. Honda began production in Alabama in 2001. (Honda)

But Mercedes’ decision to build its first U.S. manufacturing plant in Alabama was a signal seen around the world that the state was fertile ground for new business opportunities, said Greg Canfield, secretary of the Alabama Department of Commerce.

“That decision was the key that opened the doors to an industry that continues to create new opportunities today,” he said. “It was a vote of confidence from a premium automaker with a long and storied history of innovation and excellence that saw great potential in Alabama.”

That signal is still reverberating globally, as Mercedes has completed multiple expansions at its Tuscaloosa County operations, Canfield said.

Today, the facility, known as Mercedes-Benz U.S. International Inc., has seen investment valued at more than $4.5 billion and has the capacity to produce 300,000 vehicles per year.

Another expansion, which includes a new body shop, major enhancements to the SUV assembly shop and upgraded logistics and IT systems, is in the works. The project is valued at $1.3 billion and will create 300 jobs.

“Mercedes’ initial vote of confidence in Alabama has been proven correct time and time again, thanks to the company’s strategic vision and the skill and dedication of their workers here who have helped them achieve and surpass those goals,” Canfield said.

‘Transformational impact’

Alabama’s business recruiters often say the Mercedes success story helps in courting other companies, and not just those in the auto industry.

Then-Gov. Jim Folsom, center, joined Mercedes executives Andreas Renschler, left, and Dieter Zetsche for the company’s groundbreaking in Tuscaloosa County. (Made in Alabama)

The automaker’s presence here helped usher in a new era of foreign direct investment in Alabama, in industries including automotive, aerospace, chemical and more. In 2015 alone, the state’s FDI topped $3.4 billion.

Mercedes has lifted other areas of the state’s economy, too.

The company is consistently Alabama’s top exporter, and in 2015 alone shipped more than $5 billion in products to 135 markets around the world.

Overall auto exports for that year, the latest for which data is available, topped $7 billion, a record annual total and a 5.8 percent growth from the previous year. Exports of motor vehicle parts reached $1.2 billion, an 18 percent increase.

“Mercedes has had a transformational impact on Alabama’s auto industry, as well as the state and its economy as a whole,” Canfield said. “With new growth on the horizon for the company in Tuscaloosa County, we anticipate even more opportunities for Alabama workers and support businesses throughout the state.”

This story originally appeared on the Alabama Department of Commerce’s Made in Alabama website.

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