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A Hundai rolls off the assembly line at their plant in Montgomery, Alabama. The state's immigration law could hurt business.

Tess Vigeland: Mercedes, Hyundai and Honda have something in common -- and it's not under the hood. They've each set up shop in Alabama. The state has benefitted from their presence to the tune of roughly $5 billion a year in economic growth.

But Alabama's tough immigration law is bringing new scrutiny to the state's friendliness to foreigners. Gigi Douban reports from Birmingham.


Gigi Douban: Let's say you're a multinational car manufacturer. You want to expand somewhere, but first there are some questions.

Bill Taylor: You're always looking at infrastructure, what types of sites you have available, presence of a university, very motivated work force, very capable workforce.

That's Bill Taylor, president of Alabama's Economic Development Partnership. He's also former CEO of Mercedes Benz in Alabama. Taylor says big companies need assurances before starting up business somewhere.

Taylor: And getting that corporation to understand that it's OK to come here, it's a good place to come.

In Alabama, companies might not be so sure right now. First police here arrested a Mercedes executive visiting from Germany, then a week later a Honda worker from Japan. Both in their cars, both here on business. Alabama's new immigration law, considered the toughest in the nation, says that if police so much as suspect a person is in this country illegally, that person needs to prove otherwise, with documents. And if he or she can't produce documentation, police must detain that person.

Both the Honda and the Mercedes employees were eventually released and the charges dropped. But the incidents stung the state's foreign automakers.

Here at Hyundai in Montgomery, Ala., Sonatas and Elantras roll off the line at a rate of about one per minute. Hyundai opened its Alabama plant in 2005, bringing 2,500 jobs, plus thousands of supplier jobs to the state. After the Honda and Mercedes arrests, the company looked at its protocol for Korean visitors.

Robert Burns is public relations manager for Hyundai in Alabama.

Robert Burns: We wanted to be certain because yes this law was enacted, our legal department went through that law and said, "OK, is there anything that's come through this process that would require us to change our existing detailed process?" And again the answer was no.

But a little reminder couldn't hurt.

Burns: We'd just remind our Korean counterparts, just keep your driver's licenses on you or any other documentation, and you'll be just fine. And that's certainly the case.

Mercedes declined to answer questions for this story. Honda issued a statement essentially saying "Yes, one of our employees was charged in violation of Alabama's immigration law, and the charges were dropped." But a cloud still hangs over the state.

Lori Tansey Martens is president of the International Business Ethics Institute.

Lori Tansey Martens: Given past history, you know there's this stereotype of the South, and again a lot of times it's a very unfair stareotype of the South. It's based on history, but it's there.

She says with competition for foreign business being tight, a state like Alabama can't afford any more dings in its reputation.

Martens: So a case like this happening in Alabama is probably a greater risk, than it is say if it was in Ohio or Indiana.

Officials in Alabama like Taylor of the Economic Development Partnership are more aware of this than anyone. So when foreigners are uncomfortable here, it could put Alabama at a huge disadvantage.

Taylor: So that's maybe a process of taking the blinders off. And if we're going to compete, we'd better understand the whole picture.

Taylor says in this global economy, a slip-up like this could drive away future business.

Taylor: With as many international companies as we have in this state, everything we do is transmitted to all those different countries. It's that transparent. Every action we take.

And let's not forget, he says, automakers are the crown jewels of economic development.

In Birmingham, I'm Gigi Douban for Marketplace.

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