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Chattanooga: Volkswagen raises expectations, but observers see gradual impact

By: Mike Pare
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Chris Rogers

Volkswagen’s plan to build a $1 billion assembly plant has sent expectations for Chattanooga’s economy soaring, with some saying that VW will recession-proof the city and create or spin off 18,000 jobs.

Others, though, say the plant is a first step, and it could take five years or longer before the full impact of the plant is felt.

In Tupelo, Miss., where Toyota announced a new production facility more than a year ago, work is 30 percent to 40 percent finished. Some observers said the economic impact there is likely to be gradual, although growth prospects are high.

“Everything takes time,” said Chris Rogers, owner of Rogers Realty and Appraisal Co. in Tupelo. Residents are “looking at good things in the future.”

PROPERTY PRICES

In terms of real estate, he said asking prices for property initially went way up in the Blue Springs, Miss., area — a bedroom community of Tupelo where Toyota announced in February 2007 that it was building its plant.

Toyota chose Tupelo over Chattanooga’s Enterprise South industrial park, where VW now has landed.

“Everybody who had 50 acres put a big price on the property,” Mr. Rogers said. “Initially after the announcement, properties came on the market at two, three, four times what they were worth.”

But land sales have been few, with people hesitant to pay the lofty prices, he said.

Residential properties in the area probably have risen 10 percent to 15 percent in price, Mr. Rogers said.

John Milstead, director of planning for Tupelo’s chamber of commerce-like Community Development Foundation, said there is going to be change, but it will occur over time.

“We’ve had a lot of questions in the recent year or so of how fast we’re going to grow,” he said. “It won’t change overnight.”

Real estate will come down “to a more practical level in time,” Mr. Milstead said.

Chattanooga Mayor Ron Littlefield said the VW plant announcement last month also is a first step. He expects to see a lot of transformation in the area within five years, he said.

“Then there is another wave of development,” Mr. Littlefield said.

Mr. Littlefield anticipates, for example, seeing a lot of fill-in development between East Brainerd and Cleveland, Tenn.

“It’s going to be a very different community in five years and then in 10 years,” he said.

Wild Card

Mr. Rogers said a wild card for Tupelo has been the downturn in the national economy. The boost from the Toyota plant and the slow economy have balanced themselves out, he said.

Unemployment in Lee County, Miss., where Tupelo is located, was 7.7 percent in June, according to the latest figures from the Mississippi Department of Employment Security. In Hamilton County, unemployment last month was 6.1 percent, up from 5.9 percent in July, the Tennessee Department of Labor and Workforce Development said.

National unemployment for July was 5.7 percent, according to the U.S. Bureau of Labor Statistics.

VW officials have said they want to start pouring concrete in November at Enterprise South, where the company plans to employ 2,000 workers producing up to 150,000 vehicles annually.

While VW builds the facility, expected to start making cars by early 2011, its officials are in talks with suppliers even as local economic developers try to woo spin-off jobs.

Trevor Hamilton, the Chattanooga Area Chamber of Commerce’s vice president for economic development, said that agency is continuing to promote the area to auto companies interested in doing business with VW or who have done so in the past.

“Volkswagen is working ... and identifying suppliers and vendors,” he said. “We’ll continue to market to the auto industry at large.”

Tom Edd Wilson, the Chamber’s chief executive, told the group’s annual meeting last week that Chattanooga officials who recently visited Greenville-Spartanburg, S.C., to understand how a BMW plant affected that community learned two things. First, he said, the relationship among VW and vendors and suppliers will be the company’s responsibility.

“Getting Volkswagen up and running remains job No. 1,” Mr. Wilson said.

Secondly, attracting auto suppliers to the Chattanooga area isn’t automatic, he said.

“You’ve got to continue to recruit,” Mr. Wilson said.

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