Monday, June 28, 2010

New Chattanooga Factory to Create Massive Turbines, but Few Jobs

GE competitor Alstom is building a plant in Chattanooga that will manufacture large, 700-1800 Megawatt, steam and gas turbines for electric power plants.  The facility will require 350 full-time workers once it goes in service, as well as $300 million in capital investment, or about $850,000 per job.    This is about 30% higher than the state-of-the-art auto factory Toyota's building in Blue Springs, Mississippi, but reflects the trend in manufacturing of spending more and more on construction, and needing fewer people once the plant is in service.  

In a future post, I'll lay this out in detail, but the capital cost per job created in most manufacturing sectors is rising much faster than inflation, which means if you recruit manufacturing facilities, much of the economic impact is front-loaded.   It also means you need a limited supply of skilled labor, because even with an existing presence in the Chattanooga area, this plant won't be enough to put Alstom in the top 15 employers in that city, which is attractive to turbine makers because of the large Tennessee Valley Authority facility there.

The usual chants about educated labor and multiplier effects came up with the plant's announcement, but with just 350 people, it's not like they'll  need an army of electrical or mechanical engineers.   And with Alstom being a foreign company, many of the profits will be going to France, not recirculated in the region.   In all, the plant's certainly a good thing for Chattanooga, but the economic impact is likely to be far less than many are hoping.

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