#726 – New report highlights Volkswagen’s economic weight in Tennessee, U.S.

Posted on | The Agurban

Last month we shared with you a report about the multiplier effect of manufacturing jobs (Agurban Issue 723). This week we want to share with you a specific example of how the multiplier effect has such a positive impact on a city/state/region’s economy.

New report highlights Volkswagen’s economic weight in Tennessee, U.S.
February 25th, 2019 by Mike Pare, Times Free Press

Volkswagen’s Tennessee footprint supports about 16,400 jobs in the state through the automaker’s Chattanooga assembly plant, supplier network and other impacts, a new study says. Also, about $73.8 million in state and local taxes stemmed from the German automaker’s presence in Tennessee in 2017, according to the Ernst & Young report commissioned by VW.

In addition, VW’s economic output, which typically measures the value of all sales of goods and services, in Tennessee was $8.56 billion that year, the report said. The study doesn’t include an $800 million expansion in Chattanooga VW revealed in January that is to add 1,000 more jobs. A new electric vehicle facility will make an SUV starting in 2022, VW officials have said.

The state next month is expected to release the financial incentives awarded to land the latest expansion by Volkswagen, which has an assembly plant employing about 3,800 people making the Passat sedan and Atlas SUV. VW already is the most richly incentivized company ever in Tennessee, having received more than $800 million in federal, state and local perks since landing in the Volunteer State in 2008.

The new Ernst & Young report includes not just VW’s Chattanooga operations, but the automaker’s dealership and corporate activities in Tennessee. The figures also include the indirect and induced impacts related to VW’s suppliers and sales to employees living in the state.

“As an auto manufacturer with production facilities in Tennessee, Volkswagen contributes to the U.S. economy through a deep supply chain that supports employment across a range of supplier industries,” said the report.

Charles Wood, the Chattanooga Area Chamber of Commerce’s vice president of economic development, cited the supply chain and the impact of auto plant jobs.

“It has a long-term impact on the community,” said Wood after VW a few weeks ago revealed the new electric vehicle plant that’s to go up at Enterprise South industrial park.

Chattanooga Mayor Andy Berke said construction jobs related to the expansion will provide work for people in a variety of trades. “It’s a huge deal for our city, to capture the investment and bring to the market 1,000 jobs” at the new facility, he said.

Herbert Diess, Volkswagen’s chief executive officer, said the company has “a great relationship with the state of Tennessee. Since we broke ground with the plant in Chattanooga, we have written a great auto story for America with investment of $2.3 billion,” he said.

That figure doesn’t include the proposed $800 million, which would put VW’s investment over the $3 billion mark.

“Volkswagen is 100 percent committed to the U.S.,” Diess said. “It’s continuing to invest in the U.S. to broaden our manufacturing and R&D footprint.”

Experts said that auto manufacturing tends to have the largest economic multiplier of any industry because of all of the supplier and other spinoff jobs an assembly plant generates.

Bill Fox, director of UT’s Boyd Center for Business and Economic Research, has said that at each of the three major auto plants it has studied in Tennessee — at Nissan in Smyrna, General Motors in Spring Hill and Volkswagen in Chattanooga — the economic benefits have exceeded its initial projections and the plants have been a key source of growth for the state.

The Ernst & Young report said that VW drove 126,249 jobs in 2017 with its operations not just in Tennessee but in Virginia, where its U.S. headquarters is located, and support and research sites in Michigan, Illinois, Oregon and California. Volkswagen’s Chattanooga facility has the highest employment multiplier of the company’s U.S. operations. For each job, employee and contractor, at the Chattanooga facility, 13.6 total jobs are supported across the U.S., the report said.