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Location Notebook: Tennessee Automotive on the Road to Prosperity

The automotive industry is making a significant contribution to Tennessee’s economic growth, while partnering with the state’s educational institutions in order to satisfy its need for workers with specialized skillsets.

Q2 2017
The automotive sector, which in this country seemed to be driving into the ditch less than a decade ago, is certainly on smoother pavement today. The road it’s navigating in the state of Tennessee is an exceptional example, and the mood of industry leaders there is like that of a driver with the convertible top down on a warm summer day.

“We’re very excited,” says Bradley Jackson, president of the Tennessee Chamber of Commerce & Industry, which also serves as the Tennessee Manufacturers Association. There are a lot of things that lead to his optimism, including job growth and a healthy unemployment rate, which has fueled healthy state tax collections that give the government the ability to make further positive investments.

With regard to automotive manufacturing in particular, the state’s major original equipment manufacturers/auto assembly plants are each making significant contributions to that economic growth, reports Scott Harrison of the Tennessee Department of Economic and Community Development. Those OEM headlines — and related news involving other automotive players, including a major tire manufacturer — add up to billions of dollars in investment and new jobs by the thousands.

Here are some examples:
  • General Motors has pledged about $2 billion worth of investment in its Spring Hill plant during the past few years. That includes last spring’s announcement of an $800 million investment in a new high-efficiency engine program that would create about 800 jobs. GM spokesperson Toni Rice rattles off a list of eight significant announcements since 2010 that are collectively tied to the promise of about 5,000 jobs.
  • Volkswagen in Chattanooga is beginning production on a new midsize sport-utility vehicle. The company announced that expansion back in 2014, and it’s worth a couple thousand new jobs and several hundred million dollars in investment.
  • And Hankook Tire is quickly making a splash in the Volunteer State. A couple of years ago it announced an $800 million investment in Clarksville, and plans to get production started this year with significant hiring. Meanwhile, last year Hankook announced it would be bringing its North American headquarters to Nashville. That would be the second major tire manufacturer to choose Tennessee for a North American headquarters, following Bridgestone Americas.
In all, nearly 66,000 jobs in Tennessee are tied to motor vehicle manufacturing, plus the manufacture of bodies and trailers, parts and tires, according to statistics analyzed by EMSI and shared by the state. A Tennessee Department of Economic and Community Development automotive white paper elaborates, listing Nissan North America as the largest automotive employer, with nearly 11,000 people on the payroll in Smyrna, Decherd, and Franklin. Denso Manufacturing Tennessee employs more than 4,000 Tennessee workers, who make a variety of electrical, electronic, and fuel management components. And Bridgestone has a half dozen locations that collectively employ nearly 4,000.

With regard to the three big Tennessee automotive companies — Nissan, GM, and Volkswagen — “demand seems to be keeping up, but there are shifts with consumer preferences,” Jackson says. Staying on top of changing consumer demands is, of course, the key to success in any industry. It’s also a significant challenge in the world of automotive manufacturing, because massive assembly plants can’t just turn on a dime when buyers suddenly decide they prefer, say, larger vehicles. That’s what they’ve been favoring again, now that oil prices have been down for a while.

But as Jackson notes, all of Tennessee’s major automotive companies have met that challenge: “All three have shifted their products to accommodate that.”

Recent Automotive and Related Investments in Tennessee

Vehicle manufacturers and parts suppliers are increasingly investing in Tennessee, where they are supported by several community college based training programs.
  1. General Motors

    Spring Hill, TN

    General Motors has pledged about $2 billion worth of investment in its Spring Hill plant during the past few years. That includes last spring’s announcement of an $800 million investment in a new high-efficiency engine program that would create about 800 jobs.

  2. Volkswagen

    Chattanooga, TN

    Volkswagen in Chattanooga is beginning production on a new midsize sport-utility vehicle. The company announced that expansion back in 2014..

  3. Hankook Tire

    Clarksville, TN

    A couple of years ago, Hankook Tire announced an $800 million investment in Clarksville, and plans to get production started this year with significant hiring. Also, in 2016, Hankook announced it would be bringing its North American headquarters to Nashville.

  4. Nissan North America

    Smyrna, Decherd, and Franklin

    A Tennessee Department of Economic and Community Development automotive white paper lists Nissan North America as the state’s largest automotive employer, with nearly 11,000 people on the payroll in Smyrna, Decherd, and Franklin.

  5. Denso Manufacturing

    Maryville, TN

    Denso Manufacturing Tennessee employs more than 4,000 Tennessee workers, who make a variety of electrical, electronic, and fuel management components.

  6. Bridgeston

    Nashville, TN

    Bridgestone Americas has a half dozen locations in Tennessee that collectively employ nearly 4,000.

  7. Motlow State Community College

    Tullahoma, TN

    An advanced manufacturing program pairs Bridgestone with Motlow State Community College. The partners have developed a mechatronics program based on the Siemens Mechatronics Systems approach.

  8. Chattanooga State Community College

    Chattanooga, TN

    Another noteworthy mechatronics program is the Volkswagen Academy that connects Chattanooga State Community College’s Engineering Technology Division with Volkswagen Group of America’s Chattanooga Operations.

Meeting Workforce Challenges
Other challenges facing manufacturers and the state are complex, too. As in practically every state, providing an adequate, well-trained workforce isn’t something that just happens. “The challenge is recruiting the right people. Labor is a top-tier cost,” Jackson points out.

Automotive manufacturing labor is not a low-skill option—that’s no different from most other manufacturing sectors. Tennessee, says Jackson, has been tackling the challenge of workforce development head-on in recent years, aiming a lot of resources at programs intended to steer high school graduates to further education or training, while also enticing older Tennessee residents whose educational pursuits may have stalled to get back in class and wrap up some sort of degree or certificate.

Specifically, Jackson points to the state’s Drive to 55 program, which aims to ensure that at least 55 percent of Tennessee’s adult population obtains a degree or certificate by the year 2025. A centerpiece of that effort is a last-dollar scholarship endowment that promises every high school graduate the opportunity to attend, at the very least, community or technical college free of tuition for two years. A separate initiative offers ongoing educational funding for adults with incomplete degrees or certificates.

Educational institutions and automotive manufacturers have further responded to the workforce challenge with a number of partnerships aimed at building the right skillsets in Tennessee workers. There is, for example, and advanced manufacturing program that pairs Bridgestone with Motlow State Community College. The partners have developed a mechatronics program based on the Siemens Mechatronics Systems approach. Another noteworthy mechatronics program is the Volkswagen Academy that connects Chattanooga State Community College’s Engineering Technology Division with Volkswagen Group of America’s Chattanooga Operations.

From a workforce perspective, there are other factors that work in the state’s favor, Jackson adds. For example, “Tennessee is a right-to-work state and has been for a long time,” he says.

Staying Competitive on a Tax Basis
On top of workforce issues is the ongoing challenge of ensuring that the state is competitive with regard to operational costs, including taxes. Jackson observes that some states have been moving toward a single sales factor formula for taxation, which offers tax advantages to manufacturers that do a lot of business across state lines (that certainly applies to Tennessee automotive manufacturers). Business leaders, he says, have pushed recently for Tennessee to keep up with that movement, so as not to fall behind other states.

Interestingly, some tax advantages can complicate the business of economic development. Tennessee is a state free of income taxes, which is certainly a positive attribute, except when it comes to competing against others floating incentives that have something to do with lowering income taxes. In general, Jackson says, it’s not always easy to compete in the high-stakes incentives battles when bigger states start throwing dollars around. That said, “The point of most incentives is for short-term cash flow,” he points out. “Businesses are very strategic,” and Jackson believes that those examining the longer-term costs of operations are finding Tennessee to be competitive.

He’s also proud of the cooperative spirit shared by those involved in economic development. “We have really good coordination between local economic development agencies, the state and partners such as the Tennessee Valley Authority, and others who work together on deals,” he says. “The TVA is a big factor for energy-intensive manufacturing.”

It certainly doesn’t go unnoticed. GM documents related to last year’s $800 million announcement, for example, note that “the Tennessee Valley Authority worked with government and company representatives in helping secure this investment announcement.”

It all adds up to a promising picture. “We’re very optimistic about where automotive is going,” Jackson says. “We see continued operations growing and expanding here.”

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