BMW aims big crossover at U.S. -- and Mercedes

S.C. plant capacity to rise to 450,000

The X7 crossover BMW will build at its Spartanburg, S.C., plant will compete with the Mercedes-Benz GL produced in Alabama.
Spartanburg plant profile
Production started: 1994
Vehicles currently produced: X3, X4, X5 and X6 crossovers
Number of vehicles produced: 2.5 million
Size of plant: 5.5 million square feet under 1 roof
Size of site: 1,150 acres
Additional facilities: BMW Performance Center with test track, training and development center, employee family health center, BMW Zentrum Museum, Information Technology Research Center
Number of employees: More than 7,000
Source: BMW

SPARTANBURG, S.C. -- BMW's decision to approve the seven-seat X7 crossover was driven by competitive pressure -- especially in the United States, says CEO Norbert Reithofer.

"We cannot just ignore a market for a BMW product," he said at a press briefing Friday before a ceremony to announce a $1 billion, 100,000-unit expansion to BMW's factory here.

"One of our competitors is alone with such a vehicle in the premium segment, and the competition needs at least a second one," Reithofer said, referring to the Mercedes-Benz GL, which is built in Alabama. Mercedes-Benz sold 29,912 GLs last year, up 15 percent from a year earlier.

The decision to approve the X7 was made a year ago, he said.

Reithofer provided no specifics on the vehicle. But insiders said it would go on sale in 2017 or 2018.

The United States and China will be the biggest markets for the X7, which will be based on BMW's large vehicle architecture.

Harald Krueger, BMW board member for production, said the X7 will not account for the entire 100,000-unit increase in capacity at Spartanburg. BMW was constrained by how many crossovers it could produce because of the paint shop's 350,000-unit capacity. The expansion will include an extended paint shop, which means the plant can produce more X3, X4, X5 and X6 crossovers.

Reithofer also said BMW will produce an X5 plug-in hybrid in Spartanburg using technology and knowledge from its i electric vehicle and plug-in hybrid subbrand. The X5 plug-in hybrid will go on sale in the United States next year. Further details were not released.

BMW continues to add crossover models and derivatives because of their growing popularity and because of vehicles launched by the competition, Reithofer said. "We have to ask, 'What are the right products for us?', and we think the X7 is the right product to add to our X family," he said.

Reithofer said he sees no risk in further investment in the United States because the market will soon return to prerecession levels.

"A lot of people said the market would not come back," he said. "I said it will come back and be a very important market in the future."

Krueger said BMW has no plans to add a stamping plant in Spartanburg because of its "good relationship" with supplier Magna International. It also has no plans to add an engine factory there, he said.

The latest expansion of Spartanburg will make it BMW's biggest plant, exceeding that of the company's Dingolfing, Germany, factory, which has a capacity of 350,000 units.

Spartanburg's current capacity is 350,000 units, with the latest expansion taking it up to 450,000. Last year, the plant produced 297,326 vehicles.

Export center
BMW's Spartanburg has a heavy mix of exports
YearExportTotal production% export
Source: BMW

Reithofer: X7 plan approved a year ago

Reithofer said the combined expansions will raise capacity 50 percent over last year's production total. The 150,000-unit increase "is equal to a whole new plant," he said.

Since opening 20 years ago, the Spartanburg plant has become a centerpiece of BMW's global manufacturing strategy.

Spartanburg is the industry's biggest producer of vehicles exported from North America, according to BMW. The flexible, high-volume plant is the German automaker's "center of competence" for crossover production, Reithofer said.

It also has played a key part in BMW's nine-year reign as the world's best-selling luxury brand, a title being challenged this year by Audi.

The X7 will be sold primarily in the United States. It will be the fifth nameplate to be made at the factory. The X3, X5 and X6 are produced in Spartanburg for worldwide sales, and the X4 has gone into production prior to its June retail launch. The plant is BMW's only production site for the crossovers.

Spartanburg, BMW's only factory in North America, has produced about 2.5 million vehicles since 1994. BMW has invested $6.3 billion at the site since 1992, when construction began.

Joe Langley, an analyst specializing in automotive production at IHS Automotive in suburban Detroit, said the latest expansion "is a testament to their faith and their work force there and the efficiency of that plant. That is an incredible story alone."

Spartanburg is one of BMW's most flexible factories, using a two-line assembly system that allows quick adjustment to market demands and allows the plant to build to order.

Last year, it exported 71 percent of its annual production -- 201,760 vehicles.

"There is nothing else in North America that does anything like that," Langley said. "The next closest would be Mercedes-Benz in Alabama, and they are on the lower side."

Key dates
Timeline for BMW's Spartanburg, S.C., plant
June 22, 1992: Plans to build a plant announced
Sept. 30, 1992: Groundbreaking
April 6, 1993: Construction begins
Sept. 8, 1994: First American-made BMW, a 318i, rolls off the line
Sept. 26, 2002: In 10 years, factory had grown to 2.4 million square feet. BMW announces $400 million investment and 400 new jobs.
March 10, 2008: BMW announces a $750 million investment to add 1.5 million square feet to produce the BMW X3.
Jan. 12, 2012: The factory had grown to 4 million square feet. BMW announces $900 million investment and 300 new jobs in preparation for the X4.
Sept. 17, 2013: 2.5 millionth BMW is made in South Carolina; BMW prepares to expand to 5.6 million square feet
Source: BMW

Spartanburg doesn't build vehicles on speculation. Experts say BMW does build-to-order manufacturing faster and more flexibly than any other automaker.

"If it is not ordered, we don't build it," said Sky Foster, manager of corporate communications for BMW Manufacturing Co. "This separates BMW from other automobile manufacturers in North America.

"We believe that our production processes should have the flexibility to adjust to sudden shifts in market demand."

For instance, when the U.S. automotive market dramatically fell in 2009, the plant exported a record 80 percent of its production to growing markets such as China.

A factory spokeswoman said that by the end of 2014, BMW will have more than 8,000 employees in Spartanburg. The plant has two body shops with two lines and two assembly halls.

BMW canceled X7 development in 2008, at the height of the automotive market's collapse. But with demand for larger crossovers now growing in the United States, BMW decided to restart work on the X7 instead of increasing the size of the redesigned X5 that went on sale last year.

The X7 will fill a gap in BMW's lineup. The large crossover would compete with not only the Mercedes-Benz GL, but also the Lincoln Navigator and Cadillac Escalade. Audi is rumored to be considering a larger crossover, the Q9.

The X7 will share parts with the other X vehicles and large passenger cars. It also will have a full third-row seat.

Dealers have been clamoring for a larger crossover, saying the X5 is too small for some U.S. buyers. Damon Shelly, owner of two BMW stores in California, said the vehicle has been on his personal wish list for years.

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