By Diana T. Kurylko, Crain News Service
DETROIT (Jan. 7, 2015) — Mercedes-Benz USA L.L.C. will relocate its headquarters to Atlanta from New Jersey to cut its costs and to chase sales growth it foresees in the South, CEO Steve Cannon said Jan. 6.
Beginning in June, Mercedes will move from Montvale, N.J., to temporary offices in Atlanta, where it will build a greenfield headquarters complex by year-end 2017.
Mr. Cannon said the decision was driven by high costs in New Jersey and by anticipated growth in vehicle sales and dealerships in the South, particularly in Atlanta, Houston and Dallas.
“If you believe the trends that most of the U.S. growth will happen there, this anticipates that growth,” he said in an interview Jan. 6. “The great migration from north to south continues, and that's not just companies but our customers.”
Mercedes is the third auto maker to announce a U.S. headquarters switch over the past year.
Toyota Motor Corp. is moving its North American sales, marketing and other corporate operations from southern California and the Cincinnati area to suburban Dallas. And General Motors Co.'s Cadillac brand is relocating from Detroit to New York.
Mercedes also is the second German auto maker to choose Atlanta. Porsche moved its U.S. headquarters from Las Vegas in 1988 and in late 2012 began construction on a new headquarters near Hartsfield–Jackson Atlanta International Airport. Porsche is planning to move employees in to the new headquarters this month.
Mr. Cannon said that because Mercedes-Benz has outgrown its current headquarters in Montvale, N.J., staying there would have required a significant investment. Mercedes-Benz has been based in Montvale — about 30 miles from New York City — since 1972.
“This represents the once-in-a-lifetime opportunity to set up the next chapter of success for Mercedes-Benz USA,” he said.
Lower costs
The Smart small car and Sprinter van brands will also be based in Atlanta. Mercedes-Benz U.S. sales, including those brands, grew 6.7 percent in 2014 to 366,589 vehicles.
Lower costs in the South were a major factor in the decision to relocate, Mr. Cannon said: “It will be a lower cost of living and a lower-cost-of-doing-business environment.”
“This is not a story about who offered us the biggest pile of incentives,” he said. “We had to find a location with a brand new headquarters to position us for the next 50 years of growth.”
The cost of living in the Atlanta area is between 20 and 30 percent lower than in New Jersey, he said: “That is just a structural disadvantage of states like New Jersey and New York.”
“It is our job to anticipate where we need to go in the future; this will drive our efficiency significantly, we will reset our cost base by moving from north to south,” Mr. Cannon said.
Mr. Cannon would not discuss state incentives offered by Georgia because negotiations are still underway on a final site for the headquarters. Mercedes also rejected last-ditch efforts with incentives by New Jersey to stay. He said he met with N.J. Gov. Chris Christie before Christmas.
Other benefits
Atlanta is in the same time zone as New Jersey, which makes it just as easy to deal with headquarters in Stuttgart, Germany. It is also close to Mercedes' biggest import processing center at the Port of Brunswick in Georgia, and its factory in Tuscaloosa, Ala., is only a two-hour drive away, Mr. Cannon said.
Another plus is the Hartsfield-Jackson Atlanta International Airport, a major travel hub.
“We have to become the most efficient company that we can become. We are making massive investments in product, factories in expanding our global footprint and in technology so we can meet a 55.4 mpg requirement in the U.S.” Mr. Cannon said.
“Those are huge costs that we have incurred as a manufacturer.”
‘Tweak the organization'
Mr. Cannon said most of the brand's 1,000 employees will move but admitted “we will tweak the organization as we move from Point A to Point B.”
“We will make small structural changes,” he said. “I am not ready to talk about those. They are not approved.”
Mercedes-Benz will begin relocating employees in June to a 100,000-square-foot temporary facility. Research into best practices showed it is optimal to move employees quickly after announcing a relocation, Mr. Cannon said. Employees were notified the afternoon of Jan. 6.
Critical operations including the data and call centers and certain operations dealing with retailers will not move until the new headquarters is complete, Mr. Cannon said. Mercedes may set up a new training facility in New Jersey, Cannon said, declining to say whether one of the three buildings Mercedes owns in northwest New Jersey would be used.
The temporary offices and the greenfield site will be in the “center perimeter area,” of Atlanta, Mr. Cannon said.
Younger employees will have urban living nearby and those with families and school-age children can live in the northern suburbs, Mr. Cannon said. “This straddles downtown and goes to the suburbs to allow variety for our employees.”
Mr. Cannon said this is the ideal time for Mercedes-Benz to relocate. “Things are good,” he said. “You cannot make a move like this in bad times.”
He said the decision to move was made by U.S. management and approved by the Daimler A.G. board after Thanksgiving. Mercedes also looked at sites in North Carolina, South Carolina, Florida and Texas, he said.
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This updated report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.
