Despite its somewhat sluggish economy, European companies continue to invest heavily in U.S.-based manufacturing facilities, according to a recent survey of state commerce and economic development departments conducted by Expansion Management magazine.

This marks the fourth year for the annual survey of European capital investment in the U.S. manufacturing sector. In order to be included, a European-based company must make a brick-and-mortar expansion in the United States that involves a capital investment of at least $1 million and creates at least 10 new jobs. In addition, these expansions must have taken place within the past two years,

Topping this year’s list is Spartanburg, S.C., with nearly $750 million in European capital investment during the past two years.

A major reason why is BMW. Ten years after it first began making automobiles in Spartanburg, the German automaker continues to reinvest in, and expand on, its huge South Carolina facility.

Last fall, BMW announced that it planned to invest $400 million in its North American manufacturing facility in Spartanburg, creating an additional 400 jobs. Infrastructure for the expansion will be supported with the construction of a $35 million interchange and ancillary roads to accommodate future growth of BMW and its supplier network.

“The General Assembly understood that infrastructure development was essential in bringing large projects of a minimum of $400 million and 400 jobs to the state when it passed the Economic Development Bond Act,” said Charles S. Way, secretary of the South Carolina Commerce Department. “We appreciate [legislators’] ability to see how good planning today produces a high yield for tomorrow.”

The BMW plant is just the tip of the iceberg. During the past 10 years, the German automaker has attracted 41 automotive suppliers employing 7,200 workers, according to the South Carolina Department of Commerce. Currently, the state’s automotive sector has 203 companies, including BMW. These firms employ 46,291 workers, representing 15.3 percent of the state’s total manufacturing work force. Automotive companies are located in all but three counties in the state.

One of those major suppliers is Robert Bosch GMbH. Last December, the company announced plans to invest another $200 million in its Anderson plant. Bosch’s long-term plans include adding new product lines and a possible facility expansion that will create more than 200 new jobs at the Anderson location.

“This investment reflects Bosch’s ongoing commitment to the Anderson area and to South Carolina,” said Jim Tolson, vice president, commercial, of the Anderson facility.

Robert Bosch GmbH began operating in South Carolina in 1974. Since then, the company has expanded its Charleston area operations six times and added automotive facilities in Anderson and Sumter, as well as a joint venture with Denso in the state. The Anderson facility opened in 1985.

No. 2 on this year’s list is Kokomo, Ind., with $410 million in European capital investment during the past two years.

DaimlerChrysler Corp. invested $455 million in its Indiana Transmission Plant (ITP) in Kokomo to produce a Mercedes-Benz-developed transmission, the first example of component sharing between the Chrysler Group and Mercedes-Benz since the merger of Chrysler Corp. and Daimler-Benz in 1998.

The company broke ground on the new facility in 2001, with production slated to begin later this year.

The new facility will have the capacity to produce 400,000 Mercedes-Benz W5A580 transmissions annually. ITP currently produces about 400,000 45RFE rear-wheel drive automatic transmissions for Jeep vehicles and Dodge trucks annually.

DaimlerChrysler invested more than $1 billion in 1996 to build ITP, which began production in 1998. DaimlerChrysler’s $127 million investment in the company’s Akron, Ohio, plant was a major reason why that city ranked No. 14 on this year’s list.

Rounding out the top five U.S. cities for European expansion are the Kansas City metro, Birmingham, Ala., metro, and Ghent, Ky. (See list, page 25.)

Not all of the European automotive investments were in the $100 million range.

Benteler Automotive Corp., a German company with U.S. headquarters in Auburn Hills, Mich., is building a new manufacturing facility in Opelika, Ala. Construction of the $20 million plant began in January, with expected completion by September. The building will cover 144,000 square feet and is being built on a 38-acre site in the Northeast Opelika Industrial Park.

Benteler Automotive supplies components, modules and systems to a global customer base. Its product lines include chassis systems, safety and structural products, exhaust systems and tubular products. The new facility will produce products to support Benteler’s Southeastern U.S. customer base.

“Our new Opelika facility represents a major step forward for Benteler in North America,” said Walter Frankiewicz, president of Benteler Automotive North American Operations, in making the announcement.

Benteler selected Opelika after conducting an extensive analysis of 25 cities in four southeastern states. According to the company, the Opelika location was selected because of its central location and proximity to the growing number of vehicle assembly plants in the region.

Opelika is part of Alabama’s fastest growing Metropolitan Statistical Area (MSA), as well as the 19th fastest growing MSA (out of 331) in the nation.

More Than Just Automotive Projects

Nor were all of the European expansions in the automotive industry.

The Cleveland metro area, which ranked No. 13, was the site of a variety of European expansions, ranging from Germany’s Ben Venue Laboratories’ (sterile pharmaceuticals) $61 million expansion and France’s L’Oreal USA Products’ (hair care products) $60 million expansion, to facilities operated by Italy’s M&G Polymers USA (polymer research) and Switzerland’s Valtronic USA (medical implant chips).

The Netherlands-based DSM High Performance Fibers announced a $100 million expansion of its Greenville, N.C., facility last fall. Greenville ranked No. 22 in this year’s survey.

DSM will build two new Dyneema fiber production lines, as well as one additional Dyneema UD production line, adjacent to the existing Dyneema production facilities at the DSM Pharmaceuticals site in Greenville.

Dyneema fiber is used in the production of lightweight bullet-resistant vests, helmets, vehicle armor and, recently, bulletproof aircraft cockpit doors.

The expansion was the result of a growing demand for DSM products, according to a company spokesman. He said that all production lines are currently running at capacity. The added lines should be fully functional by late 2004.

The company received a $25,000 Flex Grant from North Carolina’s Eastern Region, one of the state’s seven economic development regions, to assist in the expansion.

Birds of a Feather Flock Together

The hardest part about attracting foreign investment is attracting that first company. After that, others will follow. That’s why, although this year’s survey only includes European expansions during the past two years, the same top cities have a tendency to make the list year in and year out.

Why? Because all companies, not just European, have a tendency to “follow the herd,” so to speak.

If a German auto parts manufacturer is considering opening a facility in the Southeastern United States, it is likely to focus on areas where other German companies have already set up shop.

The main reason is the comfort level they feel knowing that other German — this applies to other nationalities, as well — business executives have gone through the site selection process and chosen a certain city. After a while, as more companies of similar nationalities congregate in a metro area, social and cultural amenities such as schools, churches and food tend to establish themselves in those cities.

The same is equally true, if not more so, for Asian companies establishing facilities in the United States.

That’s not to say that European or other foreign companies look only at cities where their fellow countrymen have preceded them. Clearly, they do not.

However, more so than for U.S. companies, knowing that there are fellow countrymen living and doing business in a particular city carries a lot of weight in terms of the final site selection decision.

Bill King is the chief editor of Expansion Management magazine. He can be reached at BillKing@penton.com. Rachael Hedgcoth is a freelance business writer based in Overland Park, Kan.