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Charleston Business

The partnership between the Palmetto State and Germany remains strong despite trade uncertainty

Jan 03, 2020 02:08PM

By Cindy Landrum

BMW's massive plant on Interstate 85 in Spartanburg County is proof that the South Carolina-Germany business connection is strong and growing, but it is from far the only sign.

In Ladson, north of Charleston, there's Mercedes-Benz Vans, which opened a new Sprinter production plant in 2018 and expanded existing assembly operations. Continental Tire broke ground last year on a new expansion at its growing Sumter facility. And in Anderson, Bosch has grown as well. Just last month, Freightliner Custom Chassis Corporation, a division of Daimler Trucks North America, announced an expansion in Cherokee County that will cost $13.9 million and create 193 new jobs.

All told, there are more than 200 German companies doing business in the state, supporting more than 40,000 jobs, according to the S.C. Department of Commerce.

"South Carolina has had more German investment in relation to its size than anywhere else," says economist Doug Woodward of the University of South Carolina, who has studied BMW's economic impact on the state. "No other state even comes close."

Despite tariffs and the trade war, experts said they have seen no measurable difference in investment activity by German companies in South Carolina, especially with companies already in the Palmetto State. The German American Chamber of Commerce of the Southern U.S., Inc. will release its German American Business Outlook this month.

But the danger is companies considering investments in the U.S. and South Carolina might think twice if the trade war continues, says Alan Shao, dean of the College of Charleston's School of Business and the school's vice president of corporate partnerships.

"At the end of the day, I think we can sleep well at night," he says. "There are enough reasons to have confidence as a state that German companies will stay here."

Game-changer

In 1992, when BMW announced it would build its first plant outside of Germany in Spartanburg County and create almost 2,000 jobs, it forever changed South Carolina. Besides breathing life into a state left staggered by the textile industry's decline and loss of tens of thousands of jobs, it further proved South Carolina was a place where foreign companies could succeed.

BMW promised 1,800 jobs. The plant, BMW's largest outside of Germany, now employs more than 11,000 people.

"BMW has paid multiple benefits to South Carolina," Woodward says. "It transformed Greenville's economy. Look at downtown and its revitalization. That's not entirely because of BMW, but to revitalize a place, people have to want to be there."

Woodward's research shows that 36,000 jobs in South Carolina are supported by BMW's manufacturing operation alone. He said BMW supports nearly 121,000 across the U.S. He also notes that for every 10 jobs BMW creates, 90 jobs are sustained through an economic ripple effect on the supplier network and through related consumer spending on U.S. goods and services. Just as important, BMW exports 70 percent of the cars built at the Greer plant, Woodward notes.

Overall, Germany itself is a big importer of Palmetto State products. In 2018, South Carolina exported $3.7 billion in products to Germany, or 11 percent of the state's overall exports. Germany ranked third among exporters. In the third quarter of 2019, Germany moved up to second, says Amy Thomson, director of international strategy and trade for the S.C. Department of Commerce. She says the commerce department, which has an office in Munich, will continue to organize missions and attend trade shows and exhibitions in Germany.

"Germany is a hotbed of international exhibitions," Thomson says.

With investment topping $140 million in 2018, German companies accounted for nearly one-third of all foreign direct investment and almost one-half of jobs created by foreign direct investment in South Carolina, Thomson said.

There are attempts to build relationships with German companies closer to home, too.

The College of Charleston's School of Business will team with the college's German program in the School of Languages, Cultures and World Affairs; The Citadel, and Trident Technical College to host the fourth annual German-American Business Summit at the Gaillard Conference Center on Feb. 5.

The summit brings together German companies in the Southeast that want to establish stronger ties to undergraduate education in the region. The summit focuses on workforce needs. This year's keynote speaker is Ruth Gratzke, senior vice president and head of product and systems sales at Siemens Smart Infrastructure in Atlanta.

"We've seen a lot more German companies become much more involved in what we do in the School of Business," he said. "The state of South Carolina and higher education has a lot to offer in terms of tomorrow's workforce."

Innovation key

Since BMW's arrival in South Carolina, there has been a proliferation of auto-related companies in the Palmetto state. Today, 66,000 South Carolina residents work at 400 auto-related companies that have a combined economic impact of $27 billion.

Woodward says signs show that the demand for cars may be slowing down—part of the cyclical nature of the auto industry.

"German companies are forward-thinking and, by and large, very stable," he says. "BMW is not going away. The U.S. is a major lucrative market for German companies."

But while South Carolina is very good at attracting investment, Woodward says the state needs to do more innovating. "That's the big story for us," he notes. "Over the last 10 years, our growth in per capita income was better than the U.S. But if we're going to continue to prosper as a state, we have to become more innovative."

That's where state leaders hope the S.C. Fraunhofer USA Alliance comes in.

The new partnership with the Fraunhofer network links businesses and entrepreneurs with students and researchers at the University of South Carolina and Clemson to encourage collaboration and innovation. Companies can get support from research institutions to solve specific problems with technology provided by the Fraunhofer. The S.C. Fraunhofer USA Alliance is a collaborative effort between the S.C. Council on Competitiveness, the Department of Commerce, and the Fraunhofer USA Center for Experimental Software Engineering in Maryland. The Fraunhofer USA CESE in Maryland works closely with the Fraunhofer Institute in Kaiserslautern, Germany. Five projects are underway or recently completed, including a collaborative robotics project between Clemson University and BMW.