California Enters Race for Mercedes : Automobiles: State agency is trying to steer the German car maker’s plant this way, but auto industry analysts warn that tough environmental standards make it a hard sell.
California has entered what promises to be a sharp competition among the states to persuade German luxury car maker Mercedes-Benz to build its U.S. plant here--but its chances of success do not look good.
The bid to attract the plant and its 1,500 manufacturing jobs to California is being coordinated by the California State Trade and Commerce Agency, whose mission is to encourage businesses to invest in the state.
Rebuild L.A. Chairman Peter V. Ueberroth also reportedly told community leaders last year that he was going to get Mercedes to build a factory in South Central Los Angeles, but RLA officials could not confirm on Tuesday whether the agency has engaged in lobbying efforts of its own with the auto manufacturer.
Like the estimated 30 states that have bombarded Mercedes with information kits and promises over the last several months, California received a polite letter thanking it for its interest.
However, state officials chose to interpret the absence of an outright rejection as an encouraging sign.
“They didn’t say, ‘We are not interested in California,’ ” said Brenda Lopes, acting director of the agency’s office of foreign investment. “So I am very positive. We worked hard to get BMW too, but they were very honest and told us from the outset that California was not in the running.”
After an intense bidding war, Bayerische Motoren Werke announced last June that it would build a $300-million assembly plant in Spartanburg, S.C. Mercedes-Benz confirmed Monday that it is seeking a site to build a U.S. factory.
Yet economists and auto industry analysts point out that many factors causing BMW to rule out California would enter into Mercedes’ final decision. Being close to suppliers and its European export market will likely outweigh the virtue of being close to its California customers, who buy about 25% of the vehicles sold by Mercedes in the United States.
In addition, high costs and tough environmental regulations may well keep Mercedes out. Several auto plants have closed in Southern California since 1980.
“It’s the longest of long shots,” said Jack Kyser, chief economist at the Economic Development Corp. State officials used New United Motor Manufacturing Inc.--the state’s lone remaining auto plant, known as NUMMI--as a main selling point in the proposal they sent Mercedes.
But the GM-Toyota joint venture in Fremont has been having problems of its own with state regulations.
A proposal to build a bumper plant nearby has been delayed by problems with local air-quality standards. And $50 million of a $350-million expansion last year to build a new truck line was devoted to meeting environmental regulations.
“I would say it’s fairly expensive to do business in California,” NUMMI spokesman Michael Damer said.
On Tuesday, Los Angeles Mayor Tom Bradley co-signed a letter to Mercedes Chairman Werner Neifer with state Treasurer Kathleen Brown, Assemblyman Terry Friedman and U.S. Rep. Howard L. Berman (D-Panorama City) urging the company to consider the state as a site.
But if the plant is built in California, it is unlikely to be built in the Los Angeles Basin. State officials said rural areas would be better able to compete with the “green-field” sites in the southeast that the auto maker would likely be attracted to. While Mercedes said it had not ruled out existing facilities, GM said it has not been contacted regarding its vacant Van Nuys plant.
Lopes said the state is planning to submit a more detailed, site-specific proposal to Mercedes within a few weeks. But there’s one crucial factor working against California.
Unlike local governments, the state of California is not allowed to offer financial incentives, putting the state at a disadvantage in the bidding contest.
