Stefan Jacoby

Tennessee landed its first automobile assembly plants in the 1980s, but over the past two decades the Volunteer State has watched the next nine major Southern car plants go to neighboring states, including three assembly plants and an engine plant to Alabama.

Last week’s announcement that Volkswagen picked Chattanooga over Huntsville, Ala., for a $1 billion production facility again should secure Tennessee’s top automotive position in the region, some say.

But U.S. Sen. Lamar Alexander, R-Tenn., who as governor a generation ago recruited both Nissan and General Motors’ Saturn automobile assembly plants, has much grander dreams for Tennessee’s automotive industry.

“This decision by Volkswagen, in my opinion, means that Tennessee is on its way within a generation to being the No. 1 state in America in terms of automobile jobs,” Sen. Alexander said. “When an assembly plant arrives, the supplier and their jobs are not far behind.”

Sen. Alexander said Tennessee “is right in the middle” of the Southeast, where most of the new automobile plants have been built in the past 25 years, and should be able to attract many more.

Gov. Phil Bredesen and his chief economic recruiter said they will continue to recruit auto plants. But the two cautioned against putting too much focus on the typically cyclical industry.

“There comes a point with this industry — I don’t think we’re there yet, maybe another auto plant we would be — where it becomes too much,” Gov. Bredesen said.

The governor pointed to Michigan, the home and headquarters of American auto manufacturers, which has been hit hard by a steady erosion of jobs at General Motors, Ford and Chrysler. Last month, Michigan had the highest jobless rate in the nation at 8.5 percent. By comparison, unemployment in Tennessee averaged 6.5 percent in June, according to the U.S. Bureau of Labor Statistics.

“I don’t want us to be in a position where Michigan has gotten itself over the years where your whole state economy is dependent on one sector,” Gov. Bredesen said.

Long way to go

Tennessee, which ranked No. 4 in car production in 2006, still has a long way to catch up with Michigan, which placed first in both car and truck manufacturing jobs and output. Michigan still produces three times more vehicles than Tennessee and has far more suppliers and automotive design businesses.

“I don’t know that Tennessee would ever bypass Michigan, but I think the South probably will over time,” said Ed McCallum, an automotive site selection consultant who has written about the Southern migration of America’s automobile industry. “It’s just easier and cheaper to make cars and trucks in the South.”

Earlier this year, Volkswagen moved its North American headquarters from suburban Detroit to Herndon, Va., just outside Washington. Stefan Jacoby, president of Volkswagen of America, said the ongoing problems at the Detroit-based automakers played a role in his decision to relocate the headquarters.

“We originally moved our headquarters to Detroit from New Jersey because we wanted to be one of the Big Three,” he said. “But if those competitors are shrinking and restructuring, maybe it’s not so good to be near them anymore.”

Less than half

Matt Kisber, commissioner of Tennessee’s Department of Economic and Community Development, said the Bredesen administration’s strategy is to maintain less than half of the manufacturing work force concentrated in the automotive industry “to assure that we have a balanced economy.”

“We don’t want to become too heavily dependent on any one sector,” he said.

Currently, 31 percent of state manufacturing jobs are in or in some way support the automotive industry, according to state data.

Gov. Bredesen and Mr. Kisber underscored that they now are working hard to recruit supplier companies for Volkswagen to the Chattanooga area.

“These are good jobs,” Gov. Bredesen said of Volkswagen. “They’re a mix of white-collar and blue-collar jobs. They will bring a lot of other jobs to the region.”

Research opportunities

U.S. Rep. Zach Wamp, R-Tenn., founder of the Tennessee Valley Technology Corridor, said he hopes the South’s growing number of automobile plants also will spur more research and engineering facilities in the region for the automotive industry.

“We can parlay this investment (by VW in Chattanooga) into a major next-generation advanced transportation research center on biodiesel in Chattanooga,” he said. “Oak Ridge is the center for biofuels research, and we had a summit last summer in Greenville, S.C., of the ICAR (International Center for Automotive Research) partnership with Clemson University. We’ve been working on this for 12 years.”

Gov. Bredesen emphasized that he does not believe Tennessee is anywhere near the saturation point in the auto industry.

“I don’t think it would be healthy for the state to have four more auto plants here,” he said. “But we don’t have four more in the works. One more is fine, and we’re going to continue to recruit on that.”

Staff writer Herman Wang contributed to this report.

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