KNOXVILLE, Tenn. — Tennessee’s economy would be hurt by a sharp downturn in the auto industry, but how much is uncertain, a University of Tennessee economist said Thursday.
“We have not experienced a serious downturn in the auto industry since it has taken off in this region,” Dr. Matt Murray said.
“We really don’t know what kinds of dislocations and negative consequences would arise for local and state governments from a serious bust in the auto industry.”
Murray said about 10 percent of Tennessee’s manufacturing employment is directly tied to the auto parts and assembly plants.
“That does not include a wide array of manufacturing industries whose primary products are for other sectors but are also producing for the auto industry,” Murray said.
“That 10 percent figure is a substantial under-statement of the direct consequence the auto industry has on the Tennessee economy,” he said.
“The earnings side of that same employment is quite substantial as well because workers in auto parts and assembly plants are typically paid substantially above the state’s average manufacturing wage. So, when we lose a worker in one of those critical sectors in automobiles, we’re really pulling out a more substantial share of purchasing power than would be the case had we simply lost the average job.”
Economics writer Ken Gepfert, in this week’s Southeast edition of the Wall Street Journal, said the region’s auto industry hasn’t been tested by a deep recession. But “the region’s luck surely will run out in the next decade,” he said.
“The closest we came” was last spring’s strike at two General Motors Corp. brake plants in Ohio, which temporarily halted production at the Saturn plant in Spring Hill, Tenn., and other GM facilities nationwide, Murray said.
Even that “small burst of pain” has some in Tennessee worried about the state’s growing dependence on autos, Gepfert wrote.
“It’s not a cry of alarm,” Murray said, “but a concerned voiced quietly behind closed doors.”
Murray said the state is at some economic risk because of the “cyclical volatility” of the auto industry, “but the payoff is quite substantial. And I think that payoff is what has pulled the industry south.”
The payoff includes very high wages, the development of private sector capital for machines, plants and equipment within Tennessee and other Southeastern states.
Meanwhile, Gepfert said more foreign car companies are on the prowl, sizing up the Southeast for possible manufacturing operations.
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Contact: Matt Murray (423-974-5441)