The Consequences When Three Elements Collided

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By Wolf Richter   www.testosteronepit.com

Detlev Hager, a German executive of Daimler AG in the US on a business trip, was driving his rental car to the Mercedes-Benz manufacturing plant near Tuscaloosa, Alabama, when he was pulled over by a police officer. The tag on his rental car had expired. When the police officer asked to see his driver's license, he didn't have it on him. He'd forgotten it at his hotel. So he produced his German federal I.D. card, the only document required to cross borders in the 27-country European Union. It identifies his citizenship as "Deutsch." Could he prove that he was in the US legally?

Off to the hoosegow. His passport with the immigration form I-9 and airport stamp was at the hotel along with his driver’s license. Under Alabama's tough new immigration law, HB56, a police officer has to check the immigration status of traffic scofflaws (driving a vehicle with an expired tag, driving without a driver’s license). Sure, it would have been easier and cheaper to accompany the foreign gentleman to his hotel room, politely check his passport and driver’s license, apologetically write up a warning, and go on with life. But that’s not what the law had in mind. No discrimination, just because the guy had a German accent, rather than, say, a Spanish accent. Same treatment for all.

Alas, Mercedes-Benz employs 3,000 people at its plant—a big number for Tuscaloosa’s metro area of only 219,000 residents—and has plans to invest another $2 billion in the state by 2014. Its decision in 1993 to build a production plant there was partly motivated by ultra-low wages in the state. Subsequently, Honda, Hyundai, and Toyota also built assembly plants there. And about 350 automotive-related manufacturers have sprouted up around them.

The arrest of the Mercedes-Benz executive threw a pall over Alabama’s efforts to court foreign companies with tax incentives, low wages, and agreeable union laws. Already, the state’s financial reputation was bruised badly when Jefferson County declared bankruptcy on November 9.

And the new immigration law is highly controversial: parts of it—schools having to check the immigration status of students and parents, for example—have been crushed in Federal Court; other provisions are still tangled up in court. The intention of the law is to keep illegal immigrants out and reserve their jobs for Americans or legal immigrants. It’s a crowd-pleaser for the Republican base, and almost all Republican legislators voted for it. The law soon began accomplishing what it was designed to do: fearful illegal immigrants looked for greener pastures elsewhere, and incoming waves were having second thoughts.

The side effects were immediate: it put the Republican Party at loggerheads ... with itself. Its most munificent supporter, the business community, began screaming. They were losing their unlimited supply of cheap workers who were in no position to complain about anything—the ideal workforce. Business leaders griped about labor shortages—instead of raising wages and benefits to where they’d be attractive to Americans or legal immigrants. And now, to top it off, the arrest of a perfectly legal executive of one of the most prestigious companies in the world, who'd forgotten his passport and driver’s license at the hotel!

The status-quo media used the incident to fire off a broadside against HB56. And suddenly, widespread Republican flip-flopping has broken out. Their conundrum: they don't want their largest donors to turn off the spigot, but outright repeal, which would infuriate their rank and file, isn't in the cards either.

Using the hapless Detlev Hager to attack the law, however, is silly. If the law should be attacked, it should be for the right reasons. Hager was driving without driver’s license, which might have gotten him in trouble in any state—it certainly would have in Germany. And as well-traveled executive, he should have known to have his passport on him. Even Mercedes-Benz admitted as much when it commented that it would educate its people better on what documents to carry in Alabama. Which is always the easiest solution: just observe the law.

Meanwhile, the charge against Hager was dismissed after he produced his passport in municipal court, and Mercedes-Benz spokeswoman Felyicia Jerald told reporters that he'd returned to Germany. No doubt, getting arrested the American way was an experience he'll never forget. And the police officer? I can’t help but think that he was trying to make a point.

In what may be a precursor of a monumental shift, Toyota and Honda are planning to export US-made vehicles to South Korea; it's cheaper to produce cars in Alabama and ship them halfway around the world than it is to produce them in Japan. But to what banana-republic levels will the dollar and real wages have to sink before US manufacturing is competitive with China? The Price of Hope in the Mayhem of American Manufacturing.

Wolf Richter   www.testosteronepit.com