Auto execs warm hands around VW

Auto execs warm hands around VW

October 30th, 2009 by Mike Pare in Volkswagen

Staff Photo by Mike Pare Representatives of the Chattanooga firm Barcom, a software data collection business, were among companies taking part in a Southern Automotive Conference trade show.

Staff Photo by Mike Pare Representatives of the Chattanooga...

MURFREESBORO, Tenn. -- The economy's rebound likely will lag, but Volkswagen is creating growth opportunities for the region, economic development officials said Thursday.

"Some in Northeast Alabama will work at the plant," said Steve Sewell, executive vice president of the Economic Development Partnership of Alabama.

Mr. Sewell, speaking at the Southern Automotive Conference, said the $1 billion VW assembly plant going up in Chattanooga is bringing the state chances for landing parts suppliers.

Still, he added that business activity has slowed because of the down economy.

"We're seeing some prospect activity but it's a lot different than it was for a lot of years," Mr. Sewell told about 500 auto industry attendees at the conference.

Sterling VanDerSpuy of the Tennessee Department of Labor and Workforce Development said VW is producing a lot of new economic energy for East Tennessee.

He said 15,000 applications for VW production jobs were filed online in the first three days since the automaker started taking them this week.

But, Mr. VanDerSpuy added, Middle Tennessee was hit by the planned shutdown of the Saturn plant in Spring Hill, Tenn.

Whit Hughes, deputy director of the Mississippi Development Authority, said a regional mindset for economic growth makes sense, especially when wooing foreign investors.

"When the economy does improve, they'll be looking for low-cost, high quality options such as our states," he said.

Mr. Hughes said he's looking for an economic uptick in the third or fourth quarter of next year.

"It won't be a sharp recovery," he said.

But, he added that Toyota's planned new plant building near Tupelo, Miss., is about complete and he is anxious to hear when the automaker will start ordering equipment. Chattanooga was a finalist for the Toyota plant before it landed VW. Toyota earlier this year announced it is suspending its project until the economy improves.

Bill Hampton, publisher of the industry publication AutoBeat, said he expects vehicle sales to be flat next year. This year, sales are likely to hit about 10 million units in the United States, he said. That's off significantly from a couple of years ago.

"It will be several years before we get back auto sales to what we had a few years ago," Mr. Hampton said.

He called the planned shutdown of General Motors' Saturn franchise "a tragic result of a company not paying attention to what's happening outside of its world."

The former Business Week bureau chief said the prospects for Volkswagen's new U.S. plant that begins operation in early 2011 are "very good."

"Having a specific vehicle is a good move," he said. VW plans to make a new midsize sedan aimed at the American market at the Chattanooga factory.

Keith Updike of the Detroit-based advisory firm BBK said the good news for the auto industry is that Armageddon didn't come during the economic downturn.

But he said there's overcapacity among auto parts makers in the U.S. Carmakers are picking winners and losers among suppliers, Mr. Updike said.

GM alone plans to reduce the number of suppliers in North America from 1,500 to 1,000 by 2011, he said.

Richard Gossett, an attorney for conference sponsor Baker, Donelson, Bearman, Caldwell & Berkowitz, said financial institutions too are looking at suppliers to "see if you're going to be making it over the crevice."

"Right now, we're all hopeful you as suppliers improve in health," he told a group of company representatives. "There are certainly good signs."


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