Driving More Jobs

Tennessee boasts three auto assembly plants, including Volkswagen in Chattanooga, coupled with more than 900 parts suppliers. But the Volunteer State is poised for even more growth in the automotive sector, experts say.

“Particularly in auto manufacturing, strength attracts more strength,” Gov. Bill Haslam says.

The auto manufacturing industry already has a presence in 80 of the state’s 95 counties, according to the Tennessee Department of Economic and Community Development. For Southeast Tennessee and Northwest Georgia, the industry is becoming even more key to economic expansion.

Dr. Bill Fox, who heads the University of Tennessee’s Center for Business and Economic Research, says that assembly plants such as the VW facility are supplier magnets.

“The really important thing from an economic development perspective about getting an auto assembly plant is all the supplier jobs that come with them,” says Fox. “The multiplier on those kinds of jobs is much higher than almost anything else. There are few parallels.”

A study earlier this year by the UT center shows that the $900 million VW plant expansion now underway will help create nearly 10,000 new jobs in Tennessee alone. The study also finds that VW is adding $372 million in annual income to Tennessee’s economy.

The VW addition of another line in the plant to build a new sport utility vehicle will create 2,000 more jobs at the Enterprise South industrial park factory. The study predicts that nearly 8,000 other jobs will be created in Tennessee from a combination of new suppliers and businesses in other sectors. These include grocery stores, restaurants, shopping malls and construction companies. Fox says the expansion “impacts every part of the state’s economy.”

Mike Randle, publisher of Southern Business and Development magazine, says a healthy U.S. auto industry nationally helps.

“It’s selling cars at record paces,” he says, with the rate almost double the number during the worst of the Great Recession from 2009 to 2010. U.S. car and truck buyers are purchasing new vehicles at the strongest rate since 2001. In June, for example, automakers sold about 1.5 million vehicles, or about 5 percent more than the same month last year.

A stronger economy is aiding the auto industry, Randle says.

“People are making more money, spending more, there are more jobs,” he says. “We’re in that upward situation. It’s an upward spiral where the economy is feeding off of itself.”

At Volkswagen, the company is prepping its plant to produce the new SUV, with production to start in late 2016. Suppliers are adding new plants and investing heavily in the Chattanooga area. Earlier this summer, three suppliers announced plans to hire more than 1,000 people and plow nearly $250 million into new facilities in Hamilton County.

Chinese supplier Yanfeng Automotive Interiors is investing $55 million in a new manufacturing operation it is developing in a 231,000-square-foot leased facility on Bonnyshire Drive. Yanfeng will provide components such as floor consoles, instrument panels and trunk trim for VW, including its new SUV. The company plans to create 325 jobs by the time it starts production in late 2016.

Ooltewah-based RemSourceUSA Inc. is slated to hire 89 more workers, more than doubling its current headcount of 40. It will make injection molded plastic parts and compound rubber parts at a 63,000-square-foot plant in Ooltewah. A part of Remington Industries, which makes floor mats for the auto industry, RemSourceUSA is investing about $4 million.

Spanish auto supplier Gestamp announced it will invest $180 million more in Chattanooga, expanding its existing plant and building another. The company expects to hire close to 600 employees within three or four years.

Christian Koch, the VW plant’s chief executive, said in July, when Gestamp announced its new investment, that the expansion is important to the success of the automaker and its new SUV.

“It’s also great news for the community,” Koch says.

About Yanfeng, Koch says partnering with the Chinese auto parts maker in Tennessee “puts in place a crucial pillar of Volkswagen’s growth strategy for our next phase of development and will allow us to be more competitive moving forward.”

He says Yanfeng’s action is “a strong commitment” to Volkswagen and the state, and it’s part of the fulfillment of the vision that VW would serve to attract suppliers near the plant.

“There are many more good things to come,” Koch says.

In Northwest Georgia, Audia International, a plastics maker, is building a 240,000-square-foot manufacturing plant in a Walker County industrial park. The plant is expected to create 150 jobs initially, although officials believe at number could double with time.

Also in Walker, Nissin Brake Georgia Inc. last year finished up a 50,000-square-foot expansion that brought the factory’s total size to about 150,000 square feet and its workforce to 235 employees. The company invested some $33 million in the addition, officials said.

Haslam says that Tennessee has three major hubs due to the assembly plants of VW, Nissan in Smyrna and General Motors in Spring Hill, and that has meant more suppliers.

“Suppliers and manufacturers will tell you that the closer we can be together, the better the economics work,” he says.

For VW, having more suppliers near the plant means it can become more profitable, the governor says.

“Having a major stamping supplier next door is a big deal,” says Haslam, citing the planned new Gestamp plant that is go to up next to VW’s supplier park.

He says that jobs are created not by the state, but when people put capital at risk.

“We want to show we have the right environment to invest that capital,” Haslam says.

Fox says he believes more auto investment and jobs are coming to Southeast Tennessee.

“My bet is that there will be more coming, and there will be a lot more employment associated with it,” he says.