Atlanta regains a little mojo with Mercedes win

Stephen Cannon and his top lieutenants at Mercedes-Benz USA had a decision to make as they finished a meal at dining hot spot Rathbun’s in late October.

They’d spent two days in secret meetings around metro Atlanta with politicians, CEOs and school superintendents. Without revealing their corporate identity, they got briefings on the business climate and primers on property values. They even toured some homes for a ground-level view of local real estate.

When the dinner meeting ended, the verdict was in: Atlanta was at the top of the list of places to move the U.S. headquarters of one of the world’s most prestigious brands.

The move, announced last week, is one of the biggest business recruitments for the metro area in years — in sheer brand power maybe the biggest since UPS’s relocation from Connecticut in 1991.

It also comes at a time when metro Atlanta could use a win. The region — battered by the recession and housing bust, dogged by a city schools scandal and bad traffic — is said by some to have lost its luster.

But in the battle for Mercedes it regained a bit of the old mojo, besting Dallas, Charlotte and Raleigh, as well as the company’s current U.S. home in New Jersey.

“We’re making a 50-year bet here and uprooting our legacy to move to Atlanta,” said Cannon, the president and CEO of the Mercedes U.S. division. “That’s a big move.”

It isn’t yet clear how much the state offered in tax credits and other lures that have become the currency of corporate recruitment. The tab will likely be well into the millions over several years. But Cannon said incentives played a relatively minor role.

The general lower-cost climate and geography were more important, Cannon said. The metro area is convenient to Mercedes’ U.S. plant in Alabama, its Sprinter van factory in South Carolina, and to the Georgia coast where its luxury autos arrive in North America.

It didn’t hurt that Cannon had once worked in Alabama and fondly remembered trips to Atlanta for the 1996 Summer Olympics, outings to Six Flags and the convenience of daily nonstops to Germany from Hartsfield-Jackson.

By the time of the October dinner meeting, Gov. Nathan Deal, his inner circle and state economic development officials were hopeful they’d done enough to convince the firm. But for weeks they still weren’t sure if the automaker was in the bag.

Some privately wondered if Mercedes and its consultants were simply using Georgia as a foil to get more incentives out of New Jersey.

The German auto giant finally announced its plan on Tuesday to move its U.S. division headquarters to Georgia from Montvale, N.J. The deal survived a media leak in December and Hail Mary incentives offers by New Jersey Gov. Chris Christie.

In interviews with The Atlanta Journal-Constitution, Cannon, Deal and other officials involved in the negotiations laid out the crucial moments that helped Georgia land the storied automaker.

Exploring a move

The hunt began during an early spring retreat for senior leadership when Cannon formed a task force to explore moving out of New Jersey to save money.

The automaker made its first overtures to Georgia recruiters around that time, and the news quickly filtered up to Deal.

“It was exciting just to hear how they were seriously inquiring and looking at the possibility of coming,” the governor said.

Competition was stiff. Mercedes hired an international real estate firm to help review sites across the Sun Belt and crunch the numbers for staying in New Jersey. By August, Cannon’s executive team decided they had enough of a case to recommend a move to the parent company’s board in Stuttgart, Germany.

“The more we dug into the economics of making that move,” Cannon said, “the more compelling that it became.”

The list of finalists was whittled down by summer’s end, Mercedes officials said. But the option to stay in New Jersey hadn’t been eliminated.

Early on, Georgia recruiters knew something about Cannon that worked in their favor: He had lived in Alabama in the 1990s, opening the Mercedes plant near Tuscaloosa. The father of nine said he had taken his kids to Six Flags and the Olympics in Atlanta, and had logged “a million miles” with Delta Air Lines.

Chris Riley, Deal’s chief of staff, said those memories “resonated” with Cannon, adding, “which is why we should always look at the long picture when pitching any economic development project.”

Cannon said he and others on his team also were impressed with the quality of life and schools in the northern suburbs, where the company is scouting locations.

And Mercedes liked metro Atlanta’s pool of talent — from experienced managers to hungry and well-educated millennials. The headquarters will employ 800 to 1,000 people, though how many will be new hires isn’t clear.

Cloak-and-dagger

By October, the Mercedes team and their advisers were ready to pick a top candidate. They made the pivotal two-day visit to metro Atlanta that culminated in dinner at Rathbun’s, the intown restaurant.

Real estate pros and others who met with the delegation described a cloak-and-dagger atmosphere. No names were given and no business cards were handed out, though one host had an inkling of who the visitors might be because a few had German accents.

The word Mercedes, however, was never uttered.

Richard Dugas, chief executive of homebuilder PulteGroup, which completed its move from Michigan to Atlanta last year, said he briefed the group — without knowing who they were until last week — about his company’s relocation.

Dugas said Pulte’s recruitment was just as secretive and he could relate to the questions asked by the visiting executives.

Dugas’ message to the group: “What’s taking you so long to make this decision? You ought to be here,” he recalled.

Sandy Springs Mayor Rusty Paul received a strange message in the fall: The leader of a major firm wanted to meet with him. But by the time he could set it up, the visiting executives and his team were gone.

Despite the missed in-person connection, that was the start of the local courtship. Soon, Paul’s staff began receiving a series of questions, from zoning practices to local amenities.

“Most of the time, we followed the conversations from a slight distance, helping where possible, but waiting in hopeful anticipation,” Paul said.

Other communities fielded questions, too. Mercedes toured sites around the northern suburbs, including Dunwoody and Alpharetta.

State economic development leaders and the Metro Atlanta Chamber put on the hard sell in a bid to seal the deal.

At one point in the October visit, they collected a small group of Mercedes executives in a private dining room for what Riley said was the “turning point” of the negotiation: A formal gathering pulled together by the chamber and state economic development commissioner Chris Carr and project manager Amanda Shailendra.

Included were some of Atlanta’s leading corporate players — the CEOs of Delta, UPS and Georgia Power among them.

‘Big fish’

“They were used to being the big fish in a little pond in that part of New Jersey. (Montvale is about 30 miles northwest of Manhattan.) It was meant to reassure them that Mercedes would still be a big deal in a big town,” said Riley.

It worked.

Cannon and his team chewed it over at the Rathbun’s dinner. They all agreed, he said, that Atlanta was the best choice.

They still planned final visits to the other cities in the running, and they’d need the go-ahead from the board of the German parent company, Daimler AG. Around Thanksgiving, Cannon hopped on a flight across the Atlantic to make the case for a move.

The Daimler board, he said, had only one condition: The move couldn’t dent Mercedes’ U.S. sales figures.

“The board meeting went as well as a board meeting could go,” Cannon said.

Into December some state negotiators still worried Mercedes’ real aim was to land hefty incentives to stay in New Jersey. Those fears only increased in mid-December when word of the search appeared in the AJC and other media outlets.

Just before Christmas, New Jersey Gov. Chris Christie huddled with Cannon with a pointed question: What would it take to keep the offices in Montvale?

“And I said, ‘Look, this isn’t about us trying to chase the biggest pile of incentives, because that was not the driver,’” Cannon told The Record newspaper in Bergen County, N.J. “We’re making a 50-year decision, and a pile of incentives in Year One, Two or Three over a 50-year decision doesn’t make a gigantic impact.”

A final Christie offer came just days before Mercedes made its move official. Christie would later say that New Jersey can’t compete with lower-tax states like Georgia.

Cannon called Deal around noon Tuesday to give the official word: Georgia had a new headquarters.

Business columnist Henry Unger contributed to this report.

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