As a supplier of robotics equipment for the automotive industry, Tennessee Rand Co. could pick up valuable business from suppliers to the planned Volkswagen assembly plant in Chattanooga.

But along with that business opportunity, VW’s $1 billion investment at the Enterprise South industrial park also will challenge Tennessee Rand and hundreds of other area employers eager to keep their best workers.

Although Volkswagen hasn’t disclosed the wage rates for its Chattanooga plant, the German automaker promises to be “very competitive” in recruiting some of the best workers from the local job market for its 2,000-employee plant. Experts predict that could lure some of the region’s best workers away from other businesses and tend to bid up the prevailing wage rates in Chattanooga.

“Overall, VW should be good for Chattanooga and our business, but there is always a chance they could recruit some of our workers, and they probably will put some upward pressure on wages and benefits,” said Darren Kilgore, vice president of operations for Tennessee Rand in Chattanooga.

VW supporters hope the new assembly plant and its suppliers will bring more workers of all types to Chattanooga, giving local employers a richer labor pool. The impact from Volkswagen and its suppliers on Chattanooga’s labor market also could be less than other auto plants have had in the Southeast over the past 25 years because of Chattanooga’s bigger size and the relative decline in automotive wages in recent years.

Nonetheless, David Cole, chairman of the Center for Automotive Research at the University of Michigan, said Volkswagen’s new plant “will have a significant impact on the area” by luring workers from other businesses and attracting automotive suppliers to the market who will need to hire thousands of workers.

“Typically an auto plant needs to have an educated and motivated work force and is usually the highest-paying employer in the market for production workers,” he said. “The idea being is that they want to cherry pick the work force.”

In Chattanooga, where production wages average 6.5 percent less than the U.S. average and overall wages at the end of last year were 12.3 percent below the U.S. median, VW could have its pick of many of the best local workers if its wage rates match those of other auto plants, Mr. Cole said.

“Most of the people who will be hired by VW now work at other places,” Mr. Cole said. “There won’t be many people hired right out of college or high school. One of the unintended consequences we have seen in these other areas is that other employers find that 20 percent of their best employees are gone, and this is tough.”

If VW follows the example of other auto assembly plants when it begins production in late 2010, it is likely to pay most of the 2,000 workers it will hire over the next two years 10 percent to 90 percent more than the average pay for other manufacturing workers in Chattanooga, according to automotive industry and labor market experts.

Mr. Cole said automotive suppliers typically pay 20 percent to 30 percent less than assembly plants, but they also could bid up local wages if they decide to locate close to the Volkswagen plant to ensure just-in-time delivery of their products.

Flood of applicants

Unlike most of the other 10 automotive assembly plants announced or built in the South in the past 25 years, VW picked an urban county, Hamilton County, to locate its 2,000-employee plant. Within 50 miles of the plant site, there are 468,339 employed individuals, including 90,349 who work in manufacturing jobs. Eight area colleges and universities graduate thousands of potential industry workers every year, according to the Chattanooga Area Chamber of Commerce.

To recruit Volkswagen to Chattanooga, local officials pledged to build a Chattanooga State facility at Enterprise South to train VW hires.

If other auto plants are typical, Volkswagen is likely to be swamped with job resumes from prospective workers from around the nation. When Kia Motors conducted a 30-day blitz to get applicants for the auto plant it is building in West Point, Ga., more than 43,000 people applied for 2,500 production jobs. The number of applicants was nearly 13 times the entire population of West Point.

Among those applying for Kia jobs, 30 percent had a college degree and nearly three-fourths had at least three years of work experience, according to company personnel director Randy Jackson.

In Chattanooga, Volkswagen received 4,150 hits on its job Web site in just the first three days of advertising the first 50 purchasing jobs.

Volkswagen enters Chattanooga as the city weathers its weakest job market in more than 11 years. Unemployment in metropolitan Chattanooga in June rose to 6.1 percent, its highest level since June 1997.

“We have been experiencing in the past few months an uptick in unemployment, and we’re certainly hoping that Volkswagen can help absorb some of the recent layoffs and job cuts,” said Trevor Hamilton, vice president of economic development at the Chamber of Commerce. “Our wages right now average somewhat below the national average, and we can expect some upward wage pressure on some types of jobs. But only time will tell the full impact Volkswagen will have in the region.”

Changing auto market

Historically, the U.S. auto industry has paid factory workers some of the highest manufacturing wages, thanks to contracts with American carmakers negotiated by the United Auto Workers union.

When Nissan opened its Smyrna, Tenn., plant in 1983, the Japanese automaker paid workers nearly as much as the UAW contract rate to help ensure the union didn’t organize the plant. Despite repeated efforts to unionize the Smyrna facility, Nissan has remained union free as have all of the other foreign-owned auto assembly plants that since have located in the South.

Nissan has never had a layoff at either its Smyrna assembly plant or its Decherd engine plant. But last week, Nissan said it is offering buyout packages to 6,600 workers at the two plants.

Some of those displaced Nissan workers could end up trying to work for VW in Chattanooga. But wage rates at VW might end up being below the top hourly rate of $24.92 for Nissan production workers.

Faced with ongoing financial and market share losses, the Big Three domestic automakers negotiated with the UAW last year for lower wages for “noncore” autoworkers hired to replace retiring union members. Some of those wages start as low as $14 an hour. Honda in Indiana and Toyota in Tupelo also are hiring new workers in the $15- to-$17-an-hour range, although such workers usually move up to higher rates over time.

Stefan Jacoby, president of Volkswagen of North America, declined to discuss details of what VW will pay workers at its new Chattanooga plant.

“I can’t give you that this year,” Mr. Jacoby said. “I will tell you that we will definitely be an attractive employer.”

Willkommen VW

Ray Childers, president of the Chattanooga Manufacturers Association, predicts VW likely will encourage some employers to improve either their pay or benefits packages. But Mr. Childers, a former personnel manager for DuPont, said VW should help Chattanooga’s overall economy and competitiveness.

“I don’t expect that Volkswagen is going to come in here and start dominating the overall labor market,” Mr. Childers said. “As I have always said to employers, you need to provide a competitive wage and benefit package and treat your employees with respect. Those that do that will not lose a lot of folks.”

Mr. Cole said some VW suppliers may opt to locate in nearby communities outside Chattanooga to tap into a different labor market.

“If they get too close to an assembly plant, if their customer needs people and not just parts they will draw some of the best people over to the assembly plant,” Mr. Cole said.

Despite the potential competitive threat for workers, Chattanooga’s biggest employers said they welcome VW’s entry into the local market.

“Volkswagen will be bringing many technical manufacturing positions with its new facility,” said Mike McKee, president of McKee Foods Corp., the maker of Little Debbie snacks and the region’s biggest manufacturing employer with nearly 3,000 local workers. “With those will come highly skilled workers to expand the foundation of Chattanooga’s technical employment base. Our hope is that training programs that target these technical skills will follow and create a better supply of employees that will benefit all area manufacturers.”

BlueCross BlueShield of Tennessee, Chattanooga’s biggest private employer with more than 4,000 local employees, also welcomed the addition of VW into the market.

“There may be some workers that we could lose to Volkswagen, but most of their jobs will be different from the work that we do,” said Ron Harr, vice president of human resources for BlueCross. “We really think a rising tide will lift all boats in our market. It could be a plus for us in many instances, because as new workers and families are drawn to our area, there are likely to be a lot of spouses of skilled autoworkers that will be looking for jobs, and we may be able to hire many of those people to help meet our labor needs.”