VW, Tennessee and Why Manufacturing Matters
Back in July 2008, we were thrilled when Volkswagen announced it was building a new assembly plant in Chattanooga, TN. Of course, any new assembly plant is big news to us, but a new automotive plant? Well, that’s peaches and cream, as a British friend likes to say.
By any measure, the facility has been a great success. Barely two years after it opened, the plant has already produced more than 250,000 Passat sedans. (In contrast, VW’s previous U.S. assembly plant, in New Stanton, PA, produced 1.15 million vehicles during its operational lifetime from 1978 to 1988.)
We figured the plant would have a big impact on the state and regional economies. Now, a new study by economics professor William F. Fox, Ph.D., of the University of Tennessee has found that the plant has exceeded expectations in that regard, too.
In 2008, VW committed to employing 2,000 people. By 2012, the automaker had hired 2,425 direct employees. When indirect employment is factored in, the facility has helped create an additional 9,985 jobs, according to Dr. Fox.
Spending by the plant has also provided positive economic impact. In 2012, the plant spent some $233.6 million with Tennessee companies, and that doesn’t include spending by employees of VW and its suppliers on housing, groceries and other necessities. According to Dr. Fox, the plant’s annual payroll of $159.2 million produced between $483.9 million and $643.1 million for Tennesseans employed by other businesses.
The facility has also produced a windfall for state and local governments. Dr. Fox estimates that the plant has increased state revenues by $31.2 million annually and local revenues by $22.3 million annually. What’s more, the plant has donated $5.28 million to Tennessean schools and universities since 2008, and it has supported many charities, including the Red Cross, the March of Dimes and the Urban League.
While the economic impact of VW’s assembly plant is remarkable, it’s not necessarily news to anyone who has been involved in manufacturing for a while. According to the National Association of Manufacturers, each dollar’s worth of manufactured goods creates another $1.43 of activity in other sectors—twice the $0.71 multiplier for services. The multiplier is even better for jobs—1.58. Thus, a manufacturing plant that employs 100 people actually supports 158 jobs, 100 directly and 58 through employment at suppliers. For high-tech manufacturing, the multiplier is even higher.
This is why manufacturing matters. Is it any wonder that Michigan, Alabama and several other states battled furiously to host the VW plant? What state wouldn’t want the benefits of a major manufacturing facility? Are you listening Congress?