Arriving in Chattanooga while the wartime market for rubber and steel is going strong, Volkswagen’s new assembly plant not only will create a new supply industry in the Tennessee Valley — it will help globalize the local marketplace, analysts say.
“It’s more jobs, more investment and more opportunities for companies that now have a local presence to sell to individuals and companies outside our market,” said J.Ed. Marston, vice president of marketing and communications for the Chattanooga Area Chamber of Commerce. “Certainly, the automobile supply industry will supercharge that effort.”
The Chamber now is working with Volkswagen to recruit suppliers for the plant. While local officials have declined to say if VW is courting any particular manufacturers, Mr. Marston indicated Tuesday that the types of industry attracted by VW would be well-suited to pursue outside business with agencies such as the Department of Defense, which contracts with private companies to purchase everything from groceries to jet fuel.
The Defense Logistics Agency, the department’s largest combat support agency, spent $35 billion on sales and services in fiscal year 2007 — $10 billion more than in fiscal year 2003, according to agency spokeswoman Mimi Shirmacher. It is projected to spend $35.5 billion in fiscal year 2008, she said.
A few local corporations were able to secure defense-related contracts last year, according to USAspending.gov. McKee Foods, maker of Little Debbie snack cakes, received $9.25 million, and Chattem Inc., which handles items such as health and beauty supplies, toiletries and drugs, received $3.8 million to supply the Defense Commissary Agency, records show.
New vehicle suppliers in the area could provide more resources needed by the Defense Department, Ms. Shirmacher said. The Defense Logistics Agency encourages businesses of all sizes to enter the bidding process for new contracts, she said.
“The contracts are competitively bid, and selection is made based on best prices and best value,” she wrote in an e-mail.
Talk of withdrawing troops from Iraq by 2011 — the year Volkswagen’s plant and suppliers are expected to open — may change the marketplace for contracted suppliers, said Lawrence Korb, senior fellow for the Washington, D.C.-based research institution Center for American Progress.
“If that, in fact, occurs, you’ll see a gradual decrease (in demand for supplies),” Mr. Korb said.
However, he continued, a shift in focus to Afghanistan and continued needs even in peacetime will ensure that the supply market never will completely disappear.
Defense Department spokesman Chris Isleib confirmed that the government will be looking for supply contractors indefinitely.
“While the quantities required are not as large during peace times,” Mr. Isleib said, “the same types of goods and services are used on a daily basis for maintenance of personnel and equipment.”