Leipzig Attracts BMW While Nurturing High Tech Startups

The market plaza in Leipzig.

When the German auto maker BMW announced in July 2001 that it had chosen the City of Leipzig out of over 250 alternative locations to build its new production plant the news probably came as no surprise to those already familiar with the advantages of doing business in Leipzig.

Historically, Leipzig has been an important commercial hub of Europe since the first trade fair was charted there in the year 1165. The Leipzig Brühl, where the predominantly Jewish fur traders and furriers had their stores and shops, was famous all over the world. It was this area of Europe that was to spawn an industrial expansion based on mining and the construction of Germanys first rail line from Leipzig to Dresden.

The economic development that followed from this single-track railway was to be an important contributing factor for the industrialization of Saxony and the unification of Germany in 1871.

During the Cold War, Leipzig continued to play an important role as a trade center and commercial bridge between East and West. Since reunification, however, the city has sought to expand its international trade position and redefine its economic base.

Today, after $25 billion invested in the Leipzig region for infrastructure improvements, Leipzig can offer new businesses some compelling reasons to invest there, including:

• a superb educational system

• a motivated and highly trained workforce

• excellent quality of life and culture

• a strategic location (10 million people live within 95 miles of Leipzig)

• modern transportation system

• low real estate costs

• fast regulatory approval process

• major financial incentives

Taken together, Leipzig offered a package that BMW could scarcely pass up. Production of BMW ‘s 3 Series line of cars is scheduled to start at the new plant in the North Leipzig-Plaussig Industrial Estate in spring 2005. Following a short ramp-up period, daily production will reach up to 650 cars.

The new Leipzig Plant will become a part of BMW's worldwide production network joining the list of plants in Bavaria (Munich, Dingolfing, Regensburg, Landshut, Wackersdorf Industrial Estate), Berlin, Austria, Great Britain, the USA and South Africa. In the medium term BMW will create up to 5,500 jobs at the new plant, with a similar number of new jobs being established by automotive suppliers and other service providers in the region. When series production gets under way, BMW will have invested approximately €1 billion in Leipzig.

The Leipzig plant is joining a closely linked network of car and engine plants in Germany, Austria, Great Britain, South Africa and the USA. The individual plants within this network exchange vehicle components and engines in the interest of maximum efficiency. Leipzig is only about 4 - 6 hours by truck away from this network, ensuring that components from other plants can be delivered just in time.

Another world-famous carmaker, Porsche, has also chosen Leipzig as the location for a new plant. As of 2002, Porsche AG will be rolling off 25,000 editions of the “Cayenne” multipurpose off-road sports car.

"Our commitment in Leipzig creates not only 260 new jobs, but has also effects far beyond the city boundary. Other enterprises - above all suppliers for this new [facility] - will orient themselves to Porsche and will invest in the region," said Porsche AG Chairman of the Board Dr. Wendelin Wiedeking. After the series production of the Cayenne begins to roll, customers from all over the world will be able to travel to Leipzig to collect their off-road Porsche directly from the plant. Porsche will provide Cayenne buyers with an extensive customer care program, so that they can learn first hand about the production process, the company and the Leipzig facility directly at the "birthplace" of their new vehicle.

The highlight of this program will be driving safety instructions given at an off-road training course located near the assembly plant that was formerly a military training base. The customers will be given professional instruction on prescribed routes and will gain a practical understanding of the handling and the technical features of the Cayenne.

Besides automotive and manufacturing sectors, business development has also taken new directions in recent years. Companies like Dow Chemical, Hereaus, Bayer and Elf Aquitaine have invested a half billion dollars around Leipzig. About 100 German and foreign banks, as well as regional bank Sachsen LB and the Central Bank of Saxony & Thuringia are all operating in Leipzig, making the city the leading financial center of central Germany for the major German banks.

In media, Germany’s fifth largest public broadcaster, MDR, the Central German Film Promotion organization and the publicly supported media provider “Media City Leipzig” are all based in Leipzig.

Other major companies investing in the region include Seimens AG (telecommunications and electronics), IKEA (furniture) and Quelle (mail order center).

One unique bit of business history is that Leipzig has for many years been a world center for fragrances and food flavorings. Miltitz, Germany, near Leipzig, is called the “birthplace” of the flavor and fragrance industry. Schimmel &Co., founded in 1829, became the leading flavor and fragrance company in existence anywhere in the world. In the 19th century Leipzig was a center of the Essential Oil industry and hence of expertise in the processing of fragrances, drugs and other products.

Extracts and distillates were produced from roots such as angelica and ginger, from aromatic barks such as cinnamon and sandalwood, and from healing and fragrant flowers such as chamomile and lavender.

By the end of the 19th century large plantations of roses and other important flowers and herbs had been established in the countryside near to Leipzig. After the reunification of Germany in 1990 the management of the company recognized that a partner was needed in order to enable the business to grow.

Along with many other businesses that had been functioning in the former German Democratic Republic, the privatization of the Miltitz operations, by now known as Miltitz Duft und Aroma GmbH, was undertaken by a German government department.

A family owned American company based in Chicago, Bell Flavors & Fragrances Inc., seeking to extend its operations into Europe, acquired Miltitz Duft in 1993 and it now operates a company in Leipzig known as Bell Flavors & Fragrances Duft und Aroma GmbH. The company supplies the food industry with flavorings that go into making a wide variety of consumer products ranging from cheese and dairy products to lollipops and chewing gum.

City administrators have been aggressively marketing the fact that after so much competition from other European cities for BMW it was Leipzig that won out. The city motto, “Leipzig up and coming!” (“Leipzig kommt!”), has taken on new meaning. Encouraged by progress already made to expand the economic base of the city during the 1990’s, municipal leaders are now turning their attention and resources to other sectors such as the region’s new biotech and high tech industry.

“With Porsche and BMW Leipzig has managed to land two very major investors,” notes Mr. Detlef Schubert, chief of the city’s Department of Business and Labor. “Internationally, this has caused quite a sensation. Consequently, a powerful and competitive industrial core is evolving once again in Leipzig. In the meantime, more than one hundred banks and financial institutions have established themselves here. The media industry is also experiencing a boom. The city has now started to focus on biotechnology/biomedicine and information technologies. Thus, Leipzig is providing new, innovative companies the maximum support possible.”

For further information, see http://62.16.183.148/eng/index.htm (English version).

A special promotional office has been established called Marketing Leipzig GmbH (email address: info@marketing-leipzig.de). CEO Lutz Thielemann and his staff of professionals can provide companies interested in joining Leipzig’s business community with important information and consultation.—