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States Step on Gas to Land $300-Million Mercedes Plant : Manufacturing: Irvine-based Fluor Corp. is helping the German auto maker select a site for its new factory.

September 07, 1993|From Times wire service reports

REIDSVILLE, N.C. — North Carolina Gov. Jim Hunt wasted little time putting together a game plan to woo Mercedes-Benz after the German auto maker announced plans to build a $300-million assembly plant in the United States.

Hunt and his top economic advisers immediately began working to land the top industrial prize of 1993. Some 20 state workers were recruited for the campaign.

The governor lobbied the General Assembly to appropriate $35 million for an automotive technology center to be built at the Mercedes site if the state landed the plant. He also persuaded lawmakers to approve a package of tax incentives and credits for Mercedes.

"We needed to make changes to be more competitive. We weren't competitive," Hunt said at a recent groundbreaking for a $37-million plant for Schlegel Corp., which supplies rubber weatherstripping to BMW and Mercedes.

Hunt is banking on his belief that the kind of incentives that persuaded Schlegel to build in North Carolina will be attractive to Mercedes.

Mercedes-Benz hopes to select its U.S. site by early October and begin construction by next spring. The plant is expected to employ 1,500 workers who will produce a new four-wheel-drive sports vehicle.

Fluor Corp., the Irvine-based engineering giant, has the weighty task of helping Mercedes select a location. The company will not release details about its search, a spokeswoman said, because the contract is "highly confidential."

Right now, there are still a number of sites under consideration, Mercedes-Benz spokeswoman Linda Paulmeno said recently, but she declined to specify how many sites or say what states were still on the auto maker's list. California was ruled out early because of its higher costs and greater distance from Germany.

Mercedes officials reportedly toured South Carolina in late August. Other states believed to be on their list are Georgia and Tennessee, although sightings of Mercedes officials have been reported as far away as New Hampshire.

States are willing to jump through hoops to capture the new high-wage jobs.

Alabama Gov. Jim Folsom signed legislation last month that would give tax breaks to Mercedes-Benz if it built the plant in Tuscaloosa. Other states are offering similar incentive packages with features such as free worker training, tax credits and infrastructure improvements.

Last year, South Carolina used a similar package of incentives--valued at more than $130 million--to attract BMW to build its first U.S. plant in Greer.

But Paulmeno insists that financial incentives are not the top priority in the selection process.

"The winner won't necessarily be the one that put up the most money," she said. "We can't stress enough that we are not looking just to go to the community that tries to prove it wants Mercedes-Benz the most."

Hunt doesn't like to link North Carolina's economic incentives exclusively to Mercedes. But observers agree that the enticements put the state in a better position to compete.

The governor doesn't want North Carolina to lose out--again. The state is still smarting after losing BMW to South Carolina.

Luring BMW took South Carolina officials three years, numerous trips to Europe and promises of free land, tax breaks and employee training.

Hunt says other states are offering more incentives than North Carolina. "The main thing we can offer them is training," he said.

David Andrea, a senior research associate at the University of Michigan's Transportation Research Institute, said the project is of utmost importance to the longevity of Mercedes, which said recently it would eliminate 14,000 more jobs in high-wage German assembly plants with a goal of saving $600 million.

"Along with BMW, Mercedes-Benz is going to find out if its American-built cars will be accepted," he said. "They cannot afford any miscues or develop a bad reputation in the process of setting it up."

Andrea believes that the Southeast is a logical location for the new plant because of available land, proximity to ports for exporting the vehicles and a growing work force.

Bob Farley, a partner with the Chicago-based consulting firm PHH Fantus, which helped BMW pick its site, said the two companies have approached their expansion projects in different ways.

"BMW looked at Europe, Asia and Mexico before finally narrowing it down to the U.S.," he said. "As far as I know, Mercedes-Benz has always focused on America."

While Mercedes-Benz may be downplaying the incentives, Farley said, the company is aware of every detail in the various state proposals.

"The incentive negotiations for these once-in-a-decade projects are increasingly important to the companies," he said. "They look at it as risk-sharing and . . . commitment by the state to meet them halfway."

But Farley said it will likely come down to "intangible factors" when Mercedes-Benz makes its choice.

"It's usually a combination of things," he said. "The Southeast is doing very well in comparison to other parts of the U.S. and western Europe. Sometimes it's simply, 'Success breeds success, and we want to be part of it.'

"When you get down to two or four sites, it's always a tough call. Most of the offers are very, very equal. It's a judgment call."

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