German High-Tech Triangle

Mohammed Omar looks out of the window and allows his eyes to wander, but there’s nothing to see – far and wide, only scorched fields, an empty road and a few lonely electricity poles. There’s lots of space here in the former cotton state of South Carolina. Then Omar turns round, looks at his com­puter screen – and can see the future. “This will be the auto industry’s Silicon Valley,” enthuses the Jordanian-born engineer. “We’re now planning for coming decades.” A high-tech center of the automobile industry? Here, “in the middle of nowhere”? But Omar is serious. Together with his colleagues, the mechanical engineering specialist from Clemson University near the small town of Greenville is seeking new solutions for a traditional industry. His research is largely funded from Germany – by BMW.


While the tradition-rich US car industry in Detroit fights for its life, the Southeast is preparing for a breakthrough when the crisis is over. From Alabama to South Carolina, from Georgia to Tennessee, large and small companies from all over the world are creating a new network. At the head of this group are the German manufacturers Daimler, BMW and Volkswagen. Almost simultaneously, Daimler and BMW built their first American plants here 15 years ago: Daimler in Alabama and BMW in South Carolina. Several years later, Volkswagen is now constructing a state-of-the-art plant a little further north, in Tennessee. They are building a closely knit network of suppliers, researchers and developers – with their plants marking the corners of the “German triangle”. Familiar suppliers such as ZF, Continental, Pierburg, Hella and Dräxlmaier are settling in the tri­angle along with French tire manufacturer Michelin. ThyssenKrupp is also in the process of building a new steel plant in Alabama.

A few years ago, their ideas were still greeted with sneers from the established carmakers in Detroit. The critics even claimed that BMW stood for “Big Money Wasted”. Meanwhile, however, production is running smoothly and a large proportion of the cars are exported to Europe. BMW made 170,000 vehicles in Spartenburg in 2008 and this total is set to rise to 240,000 by 2012. “The region will continue to grow after the crisis,” says Dave Lucas of the Autodata market research company. “There’s a spirit of optimism; they’re looking to the future.” However, the great breakthrough has not yet occurred. The latest fall in demand has also seriously affected German manufacturers. They are all significantly reducing production. Some suppliers that also produce parts for General Motors or Chrysler have their backs to the wall – and are relying on help from the carmakers in the Southeast.

Although the German automakers are competitors on their domestic market, here, away from home, things are rather different. Even rivals like Daimler, BMW and VW cooperate closely. Suppliers and researchers are shared, political and legal conflicts fought together. “People know each other and help each other,” says an engineer who has moved here from southern Germany. Traditionally, German firms enjoy a good reputation in the South. Fifty years ago, the first engineering firms came from Germany to supply the then important textiles industry.

The new carmaking cluster now represents a big and perhaps the only chance for Alabama, South Carolina and Tennessee. As a result, the states are fighting hard for every new business. “Policymakers then did everything to attract BMW to Spartanburg,” remembers Douglas Woodward of the University of South Carolina. The economist has now been documenting the development of the auto in­dustry in the region for 15 years. The state investment has paid off, explains Woodward: “If BMW had to close its plant, a total of 23,000 jobs would be lost.”

Far from planning to close down, BMW actually aims to expand. In addition to the X5 SUV and the new X6 Sports Activity Coupé, the smaller X3 will be rolling off the line in the near future. The carmaker has already invested a total of five billion euros in Spartanburg and another 750 million is on the way. At the beginning of 2011 the first Volkswagens will also begin rolling off the assembly line in Tennessee. By then, at the latest, hope the carmakers, demand will be picking up again. In 2018, Volkswagen plans to be selling 800,000 vehicles a year, four times more than at present.

“German engineers and American workers – the perfect combination” is the slogan the companies are using to promote their products. The fact that the cars are made in America is crucially important on the US market. German producers together still have a market share of less than 10%. When it comes to the premium segment, however, their market share has already reached 40%.