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Volkswagen Considers South For U.S. Auto Plant

If VW decides to build its U.S. assembly plant in the South, it will join other foreign automakers that are increasingly turning the region into a hotbed of car manufacturing.

CHATTANOOGA, Tenn. (AP) -- If Volkswagen AG decides to build its U.S. assembly plant in the South, the German company will join other foreign automakers that are increasingly turning the region into a hotbed of car manufacturing.

The South offers automakers ample highway and rail systems and proximity to the large market of U.S. consumers. But its main attraction: Existing auto plant workers, even those who are victims of other industries exporting jobs, have rejected overtures by the United Auto Workers.

"Foreign-owned automakers have been a tough nut for the UAW to crack, and the South is particularly difficult," said Harley Shaiken, a University of California, Berkeley, professor who specializes in labor issues.

"That is without question an important part of their location decision," he said.

Volkswagen's plant will be part of the company's strategy to increase its presence in the U.S., where the maker of the Jetta, Golf and Beetle holds just 2 percent of the market.

VW executives have narrowed their site options to Alabama, Tennessee and Michigan. All three states are offering financial incentive packages. The automaker's representatives and economic development officials won't discuss the site search.

A Tuesday meeting of the company's management board in Frankfurt, Germany yielded no decision on where to build. Volkswagen's supervisory board, the equivalent of a U.S. board of directors, is to meet July 15, with an announcement expected soon afterward.

Michigan Gov. Jennifer Granholm told reporters Tuesday that she realizes it will be tough to draw a Volkswagen plant to Michigan.

"But we've put everything we've got on the table," she said, noting that she has met personally with company leaders and that Michigan has the kind of skilled workers Volkswagen needs. "We have been in there slugging."

Industry executives and analysts say there is plenty of room in the South, where foreign auto assembly plants have been locating since Nissan Motor Co. set up shop in Smyrna in 1983.

Analysts say the region can easily provide another 2,000 skilled workers, as can Michigan, where there are autoworkers idled by cost-cutting American companies.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said auto plants can locate within 40 or 50 miles of each other but "10 or 20 miles, that is too close," Cole said.

He said automakers "don't want to be competitive with someone who is a high-paying employer."

Honda spokesman Ted Pratt said Volkswagen or anybody coming into the area "will find what we found: a great quality of life and a great work force."

Honda set up operations in east Alabama in 2001, and the assembly plant Kia Motors Corp. plans for West Point, Ga., will be about 100 miles away. Two likely Volkswagen plant sites in Chattanooga and Huntsville, Ala., also are about 100 miles from the Honda plant.

Pratt said the plants seem "spread apart far enough so we are not pulling from the same labor pool."

Spokesmen with Nissan Motor Co.'s North American plant in Nashville, BMW AG's plant in Greer, S.C., and Honda Motor Co.'s Lincoln, Ala., factory also said their companies have no reason to worry about the region becoming crowded with automaking.

Nissan spokesman Fred Standish said competitors' locations haven't factored into Nissan's decision-making.

Cole said a U.S. location is more competitive than ever in the current global economy and compared to Mexico, U.S. workers are better educated.

Volkswagen's only North American plant is in Puebla, Mexico, where 9,600 union workers staged a five-day strike in 2006 for better wages and benefits.

"They want an educated, motivated work force," Cole said.

The issue with unions isn't wages. Auto production line work in the U.S. pays about $27 an hour in both union and nonunion facilities, Cole said.

Erich Merkle, vice president of auto industry forecasting for the consulting company IRN Inc. in Grand Rapids, Mich., said the issue with unions is they go on strike.

Employees at Nissan's Smyrna, Tenn., plant voted down a UAW organizing effort on a secret ballot in 2001. The union has made failed attempts to get a foot in the door at the Toyota plant at Georgetown, Ky., and last year Honda executives sent letters to employees at its Lincoln, Ala., plant warning that any move toward organizing would "radically change" operations.

UAW officials did not return telephone messages seeking comment.

Attica Scott, coordinator of the Kentucky Jobs With Justice organization that supports labor unions and has worked to organize the Toyota plant at Georgetown, said the UAW has to educate workers about the benefits of "having a voice on the job."

Scott said union representatives help in cases of discrimination and job injuries.

The assembly plants benefit from going where suppliers are.

Merkle pointed out the South already has German suppliers working with Daimler AG's Mercedes-Benz and BMW, and a Japanese supply network sprouted in Kentucky around Toyota's plant.

He said the close proximity is a "savings for both the suppliers and the automaker."

BMW spokesman Bobby Hitt said his company, which has operated in Upstate South Carolina since 1995, and likely its established supplier system, see no crowding on the southern landscape.

Research and education resources that automakers want also are taking root in the Southeast.

Seven universities -- Tennessee, Auburn, Clemson, Mississippi State, Alabama, Alabama-Birmingham and Kentucky -- have joined in an automotive research alliance.

The Clemson University International Center for Automotive Research, with BMW's U.S. subsidiary and Michelin as close partners, already offers master's and doctorate programs in automotive engineering.

Foreign automakers have been pouring money into the region, accelerated in part by the weak dollar.

BMW has announced a $750 million expansion, with plans to add about 500 jobs.

"Obviously at the exchange rate right now, if one has a plant in the United States it is a good time to expand it," BMW's Hitt said.

Kia is preparing to spend $1.2 billion for its Georgia plant, and Toyota is investing $1.3 billion for new operations in Tupelo, Miss., to complement its Kentucky plant employing 7,000.

The economic bounties for winning communities are substantial. Toyota estimates that payrolls for its new plant in Mississippi and related ongoing jobs will total more than $300 million a year by 2011.

Volkswagen no doubt has noticed the success in the region.

Michael Randle, editor and publisher of Southern Business and Development magazine, said Volkswagen learned lessons when its assembly plant near Pittsburgh closed in 1988.

Randle said this time "VW has got to make sure their decision is right."

Associated Press writer Kathy Barks Hoffman in Lansing, Mich., contributed to this article.