VW says to make hybrid parts on its own

A Volkswagen official told German auto magazine Auto Motor und Sport magazine that VW will produce its hybrid drive trains itself, according a report by Reuters. Other manufacturers have bought their hybrid drive trains, but according to the article quoting VW executive Werner Neubauer, VW sees this as an opportunity to gain a competitive edge.

The Parties have speculated about the location of a hybrid drive train assembly plant in Chattanooga. The VW drive train assembly plant in Mexico will supply the Chattanooga auto assembly plant with gasoline and diesel drive trains. Though VW officials have said that the Chattanooga plant might produce hybrid vehicles, the Mexico plant (according other blogs read by the Parties) is not set to manufacture hybrid drive trains. That fact is implicitly confirmed by Mr. Neubauer when he says that VW is considering "expanding its plant in Mexico or building a new site in the United States." It makes complete sense for that drive train assembly plant to be located in Chattanooga.

The speculation about a Chattanooga-based hybrid drive train assembly plant arose as the Parties tried to figure out Congressman Zach Wamp's math in the days following the original announcement about the VW plant in Chattanooga. The Parties were trying to evaluate the impact of the announcement on the Chattanooga real estate market, and were researching what types and how many total jobs would come from the jobs at VW.

Wamp (and others) said that the plant would yield 14,000 total jobs from the 2,000 jobs at VW. The Parties considered that number extraordinary. That many jobs would require a 7x multiplier of the jobs at VW. Economic impact studies of other plants have indicated valid multipliers at between 3.75x and 4.25x. The UT/CBER projections by economist Dr. William Fox had a multiplier of about 5.25x, using base data from the US Department of commerce. The 7x number was 30% to 40% higher than the next highest numbers used by any intelligent analysis.

The Wamp number at 7x could be explained a few different ways: 1) irrational exuberance; 2) plans that were not yet public. If the 14,000 job number was irrational, Rep. Wamp probably would have been the only one to use it, yet others did (though the Parties acknowledge that multiple people can quote a single, overly optimistic source).

On the other hand, perhaps the number is rational. Assuming the 14,000 job result and Dr. Fox's 5.25 multiplier, to validate the result, the Parties calculate that VW would have to employ about 2,700; using a 4x multiplier from other sources, VW would have to employ about 3,500. Those numbers are between 700 and 1,500 more jobs than VW originally announced. The employment numbers for drive train assembly plants fall squarely within that range. If such a plant were to be built by VW close to its announced auto assembly plant, then the Wamp number would make complete sense.

The Parties look forward to the prospects of Chattanooga hosting a hybrid drive train plant. It would be entirely consistent with Chattanooga's efforts toward sustainable manufacturing.