Headquarters Move Mercedes Heads South on U.S. Road Trip

The German luxury automaker's decision to move its U.S. headquarters from New Jersey to Atlanta is a result of its rapid sales growth in North America, a former top executive said.
Mercedes heads south.

The decision by Daimler to relocate its Mercedes-Benz U.S. headquarters from New Jersey to Atlanta – the first such move of a German automotive head office to the American deep south – is a reflection of Mercedes’ growing success in North America, a former executive said.

Bernd Gottschalk, a former Daimler management board member and the ex-president of Germany’s VDA auto industry association, said Mercedes simply had outgrown its offices in Montvale, New Jersey, located across the Hudson River from Manhattan.

“What I know from my former colleagues is that the New Jersey office had simply become too small,’’ Mr. Gottschalk said in an interview with Handelsblatt Global Edition. “The question became: Do we add on to our offices in N.J. or build a totally new office, or go somewhere else?’’

Mercedes eventually chose Atlanta because of its lower hassle factor, cheaper cost-of-living, incentives from the state of Georgia and better access to its main port terminal and factory in Tuscaloosa, Alabama, Mr. Gottschalk, now an industry consultant in Frankfurt, said.

What I know from my former colleagues is that the New Jersey office had simply become too small. Bernd Gottschalk, Former Daimler Management Board Member and ex- VDA Auto Industry Association President

In announcing the move earlier this week, Stephen Cannon, the Mercedes U.S. chief executive, said the company was not turning its back on the New York area, its home since the 1970s.

“It became apparent that to achieve the sustained, profitable growth and efficiencies we require for the decades ahead, our headquarters would have to be located elsewhere. That brought us to Atlanta,” Mr. Cannon said in a statement.

But the luxury automaker had been rapidly outgrowing its N.J. headquarters, and had over the past few years had to rent extra office space in the area to house its growing workforce, Mr. Gottschalk,  the consultant and a former Mercedes Brazil president, said.

The move to Atlanta, where the cost of living is significantly lower than in the New York metropolitan area, also factored in Mercedes’ decision to keep and expand its American workforce.

“The faster, easier access to Atlanta played a role in that I think,’’ Mr. Gottschalk said. “The heavy traffic in New York was a negative. I hear that a very big part of the personnel in New Jersey, 60 percent, are going to move with Mercedes to Georgia.’’

 

Bernd Gottschalk, an auto industry consultant in Frankfurt.

 

German automakers have had a presence in the United States since the 1970s, and most have gradually relocated their factories from the industrial Midwest to the South. BMW has produced cars from a factory in Greer, South Carolina, since 1994. Mercedes produces its C-Class sedans and M-Class SUVs in Tuscaloosa.

But only Mercedes has followed up and moved its U.S. headquarters to the south.

“Wages are lower in the south,” said Stefan Bratzel, a professor at the Center of Automotive at the University of Applied Science in Bergish Gladbach. “Local authorities also give incentives to move and the role of unions and works councils is weaker,” said Mr. Bratzel.

Volkswagen, and Japanese automakers Honda and Hyundai, also have plants in Alabama or Tennessee.

In July, about 1,000 Mercedes employees will move south to a temporary office in Atlanta, and a new head office will be built and completed in 2017, the German automaker said. The move will bring its U.S. headquarters’ staff closer to Mercedes’ Alabama plant and the port of Brunswick in Georgia, where it imports many of its vehicles into the United States.

BMW plant in Greer, South Carolina.

 

Ferdinand Dudenhöffer, a business and economics professor at the University of Dusiburg-Essen and an auto industry expert, said Daimler’s location was taken for practical and efficiency purposes.

“Atlanta may be a location where Daimler can extend its activities towards the South and the world – look at the flight connections and it is possibly easier to recruit new workers,” Mr. Dudenhöffer told Handelsblatt Global Edition.

Whether BMW, whose U.S. headquarters is in Woodcliff Lake, New Jersey, will move further south to be closer to its U.S. factories seemed unlikely, analysts said.

“This is a very singular move about Mercedes and I don’t think this is part of an overall trend,’’ Mr. Gottschalk said.

BMW and Volkswagen were not immediately available to comment when contacted by Handelsblatt Global Edition. Volkswagen moved its U.S. headquarters in 2008 from Auburn Hills near Detroit to Herndon, Virginia, a suburb of Washington, D.C.

 

 

Kevin O’Brien is editor in chief of Handelsblatt Global Edition. Sarah Mewes and Gilbert Kreijger are editors at Handelsblatt Global Edition in Berlin, covering companies and markets. To contact the authors: [email protected], [email protected] and [email protected]