World Class in the Deep South "Al loof." "Serious." "Not youthful." "Definitely, not fun." These were the unfortunate epithets applied to Mercedes-Benz by a market research firm that assesses product personalities. Research among dealers in the United States also revealed that consumers felt so intimidated by Mercedes that they wouldn't sit in the cars at the showroom. To boost sales and broaden the market to a more youthful and value-conscious consumer, Mercedes-Benz US International (www.mbusi.com) came up with a series of inventive, free-spirited ads featuring stampeding rhinos and bobbing aliens. Although the new ads boosted sales, the company needed more than a new mar- keting message to ensure its future growth. What it needed was an all-new Mercedes. Enter the Mercedes M-Class, a sports utility vehicle (SUV). Mercedes placed its M-Class to compete squarely against the Ford Explorer and Jeep Grand Cherokee. Not only was the M-Class Mercedes' first SUV, it was also the first car that Mercedes had manufactured outside Germany. The rough-hewn town of Vance, Alabama (population 400), in Tuscaloosa County is where people hang out at the local barbe- cue joint. And it is the last place you'd expect to find button-down engineers from Stuttgart, Germany. But this small town appealed to Mercedes for several reasons. Labor costs in the US deep south are 50 percent lower than in Germany. Also, Alabama offered an attractive $250 million in tax refunds and other incentives to win the much-needed Mercedes jobs. Mercedes also wanted to be closer to the crucial US market and to create a plant from the ground up, one that would be a model for its future international operations. When Japanese automakers entered the US market, they repro- duced their automobile-building philosophies, cultures, production practices, and management styles. By contrast, Mercedes started with the proverbial blank sheet of paper at Tuscaloosa. To appeal to US workers, Mercedes knew it had to abandon the rigid hierarchy of its typical production line and create a more egalitarian shop floor. Administrative offices in the gleaming, E-shaped Mercedes plant run through the middle of the manufacturing area, and administra- tors are accessible to team members on the shop floor. Also, the plant's design lets workers unilaterally stop the assembly line to correct manufacturing problems. So far, the system has been a catalyst to communication among the Tuscaloosa plant's US workers, German trainers, and a diverse management team that includes executives from Detroit and Japan. Even so, an enormous amount of time and effort was invested in training the US workforce. Explains Sven Schoolman, a 31-year-old trainer from Sindelfingen, "In Germany, we don't say we build a car. We say we build a Mercedes. We had to teach that." The inno- vative production system is a combination of German, Japanese, and US automotive best practices within a young corporate culture. The Tuscaloosa plant uses a "just-in-time" manufacturing method that requires only about two hours of inventory on line and about three hours of inventory in the body shop. French com- pany Faurecia opened a brand new facility to make fully assembled automotive seats for Mercedes-Benz's vehicles made in Tuscaloosa. Mercedes' experience is so successful that Honda, Toyota, and Hyundai followed it to Alabama, and Volkswagen may soon, as well. Mercedes has expanded its Tuscaloosa operations to nearly triple the size of its original factory. The plant now uses flexible manufacturing technology to accommodate the M-Class, R-Class, and GL-Class. Around 65 percent of each vehicle's content comes from Canada, Mexico, and the United States, and engines and trans- missions are imported from Germany. Every vehicle built at the Tuscaloosa plant is for an order from one of Mercedes' 135 markets worldwide. The company is gaining valuable experience in how to set up and operate a plant in another country. "It was once sacrosanct to talk about our cars being 'Made in Germany," said Jrgen E. Schrempp, then CEO of Mercedes' parent company. "We have to change that to "Made by Mercedes," and never mind where they are assembled." Thinking Globally 7-19. What are the pros and cons of Mercedes' decision to aban- don the culture and some of its home-country practices? 7-20. What do you think were the chief factors involved in Mercedes' decision to undertake FDI in the United States rather than build the M-Class in Germany? 7-21. Why do you think Mercedes decided to build the plant from the ground up in Alabama rather than buy an existing plant in, say, Detroit? Explain. Sources: Patrick Rupinski, "Riley Joins Officials to Welcome Auto Plant," Tuscaloosa News (www.tuscaloosanews.com), April 8, 2010; "Love Me, Love Me Not," The Economist (www.economist.com), July 10, 2008; Mercedes-Benz US International website (www.mbusi.com), select reports.