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The Economic Importance of Auto


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A couple weeks ago the University of Tennessee Center of Business and Economic Research (CEBR) released a study on the economic impact of Volkswagen’s plant expansion in Chattanooga as well as the establishment of the North American Engineering and Planning Center.

Overall, Volkswagen of America is investing $900-million, of which $600-million is being invested in Tennessee.

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The manufacturing facility, where the Passat is currently produced, will be adding an all-new vehicle, a seven-passenger SUV. The SUV is slated to go into production by the end of 2016.

Overall, the 1.9-million sq. ft. plant, which opened in April 2011, will be expanded by 512,886 sq. ft. The body shop will add 149,415 sq. ft.; the pilot hall 25,095 sq. ft.; the assembly area 40,701 sq. ft.; the warehouse 297,675 sq. ft.; and there will be a second line added in the paint shop.

In terms of employment, it is expected that there will be 2,000 new jobs created, bringing VW’s total in Chattanooga to 4,400.

If you’ve ever wondered what sort of impact automotive operations can have, then know this, from the CEBR study, prepared by William Fox and Lawrence Kessler: “On an annual basis, we estimate that operations from the Volkswagen expansion plant and R&D center will generate $372.6 million in new income earned in Tennessee once the expansion is fully operational. Of this income, $271.7 million will come from a combination of new purchases from Tennessee suppliers (the indirect effect), and the multiplier effect. Thus, every dollar spent on operations (i.e. production and R&D) leads to $3.69 of income for Tennessee.”

A dollar spent, $3.69.

Nice multiplier.

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