WASHINGTON (AP)--Tennessee and Alabama should be favored over Michigan to land a new Volkswagen (XETRA:VOW) assembly plant, analysts said Thursday, based on the auto industry's migration into the Sun Belt and concerns about labor's influence in Michigan.
Volkswagen (XETRA:VOW) has confirmed that it is considering the three states for a potential plant, offering a crown jewel of economic development that could help the states expand their auto industry presence.
Lured by incentive packages, an eager work force and a lack of unions, several Southern states have attracted automotive plants during the past two decades.
Three auto companies have already landed in Alabama. Daimler AG (NYSE:DAI) (DAI) builds sport utility vehicles in Vance, Honda Motor Co. (NYSE:HMC) (HMC) produces minivans and SUVs in Lincoln, and Hyundai Motor Co. (Korea:005380) (005380.SE) brought its first U.S. assembly plant to Montgomery, where it builds the Sonata passenger car and the Santa Fe SUV.
Tennessee is the home of Nissan Motor Co.'s (NASDAQ-SMALL:NSANY) (NSANY) North American headquarters near Nashville and has plants in Smyrna and Decherd. The state also has a General Motors Corp. (NYSE:GM) (GM) assembly plant in Spring Hill.
Erich Merkle, vice president of auto industry forecasting for the consulting company IRN Inc. in Grand Rapids, Mich., said Alabama is the likely front-runner followed by Tennessee. He said Alabama may have an edge because Mercedes-Benz has had a successful run in the state and "there's a German supply base that's already pretty well-established."
But he noted that Tennessee has come close to bringing an auto plant to a 1, 600-acre site in Chattanooga in recent years. The region was a contender for a Toyota Motor Corp. (NYSE:TM) (TM) plant that is being built near Tupelo, Miss., and a Kia Motors Corp. plant that went to West Point, Ga.
Michigan, meanwhile, could be undercut by the long-standing dominance of the United Auto Workers in the state. VW executives have been evaluating potential sites at a time when GM has faced a local strike at a plant near Lansing, Mich., and threats of strikes elsewhere.
Industry analysts have speculated that the strike threats are part of a UAW strategy to urge GM to pressure supplier American Axle and Manufacturing Holdings Inc. (NYSE:AXL) (AXL) into ending a long contract dispute.
"That's the big risk of coming to Michigan or anywhere in the North.
