By Tim Gaynor and Verna Gates
BIRMINGHAM, Alabama (Reuters) - America's toughest immigration crackdown was meant to drive illegal workers from Alabama.
But after two employees with foreign automakers Mercedes-Benz and Honda were stopped by police in recent days, it is giving many pause for thought. The companies have poured billions of dollars of investment into the state.
Republican backers of the state crackdown say they have been talking to business leaders, and have been considering "tweaks" to some of the provisions of the law which came into force in September.
"I've met with a lot of members of the business community ... and yes that it is a concern about the image we are creating and does it affect economic development in our state," J.T. "Jabo" Waggoner, the state's Republican senate majority leader told Reuters.
"But let me hasten to add, this is a federal issue that the federal government has refused to act on. They have run from the issue ... it may have been an overreach or an overkill, but we had to do something," he added.
As Republican presidential candidates sparred over who can be tougher on immigration in recent weeks, Alabama experienced the downside of taking a hardline stance.
Although legally in the United States, German Mercedes-Benz executive Detlev Hager was arrested in Tuscaloosa in November after failing to provide a passport or driver's license required by the law. The charges were later dropped.
Then this week, a Japanese worker assigned to the Honda assembly plant in nearby Lincoln was ticketed for not having proper identity documents.
The Alabama law, which was passed in June, requires police to detain people they suspect of being in the U.S. illegally if they cannot produce proper documentation when stopped for any reason. A U.S. appeals court has blocked Alabama from enforcing part of the new law, including a provision that permits Alabama to require public schools to determine the legal residency of children upon enrollment but left most of it untouched.
The recent incidents triggered dismay and ridicule in Alabama, where Mercedes-Benz opened a plant in 1993, and was followed by Honda, Hyundai and Toyota. The four have together made, or announced, investments totaling $8.2 billion in the state through 2014.
Mercedes did not respond to a request for comment. Mark Morrison, Honda's spokesman for the Lincoln plant, said the company would take all necessary steps to comply with the law.
Several U.S. states have passed tough laws targeting the undocumented, charging that President Barack Obama and the Congress have failed to act on the issue.
Alabama Republicans who support the state's immigration law say it will help create jobs for legal residents by driving out undocumented workers and their families, pegged at 75,000 to 160,000 by the Pew Hispanic Center.
Waggoner says it would save some of the $280 million he says is spent annually by the state on health and education services for the undocumented.
But some Alabama businesses and civic leaders say it jeopardizes economic development by making it a less-attractive location for firms from overseas, or from other parts of the U.S.
"I don't think that start-up businesses, or entrepreneurs or expansion-type businesses are going to be looking to locate in a hostile area," said Jerome Leader, 79, a Birmingham-based commercial realtor with several empty properties on his books.
"And this immigration law has ... created a hostile and unsavory environment," he said.
Birmingham immigration lawyer Mike Thompson said the arrests of the Honda and Mercedes executives gave the state a "black eye".
"Unfortunately, the ... immigration law is creating an outside impression that the state is not welcoming to foreign persons, documented or undocumented," he added.
In the weeks after the law came into effect, tens of thousands of undocumented farm workers have picked up their checks and headed out of state to avoid the risk of being detained and deported, sources said.
Jerry Spencer, who founded Birmingham-based Grow Alabama, which distributes locally grown food from a network of more than 200 independent farmers, said the labor shortfall left sweet potato and tomato farmers very anxious in the run up to the February planting season.
"There's a great deal of angst and anticipation (among farmers) about the upcoming season, and this has to be settled fairly quickly, or it could be really disastrous," said Spencer, adding that jobless Americans were unable to step in and fill the jobs.
"It became very clear to anybody paying any attention since September that a regular, unemployed American citizen simply can't do this work, and the farmers aren't set up in any way to train them for it," he said. He noted that Hispanic migrant-worker crews are equipped to "walk right in and take the farm over after a basic setup is done."
SHOW ME YOUR PAPERS STATE
Former President George W. Bush brought the last attempt at an immigration overhaul to a vote in 2007, but it was killed off by Republicans in the U.S. Senate.
While it's not yet clear if any foreign firms have been scared off by Alabama's law, its discomfort has already been seized on by some in neighboring states, hungry to pick up fresh investment.
In an editorial after Hager's arrest, the St Louis Post-Dispatch invited Mercedes-Benz to head to Missouri where Ford and General Motors have expanded operations in the past year. "Our state has many advantages over Alabama. We are the Show-Me State, not the 'Show me your papers' state," the editorial read, reveling in schadenfreude.
"You've got two choices. Either ask your executives to carry their immigration papers at all times, or move to a state that understands gemuchlichkeit (sic)," a misspelling of the German word for "coziness."
The events were also noted in Michigan, the U.S. auto industry's traditional home, whose governor, Rick Snyder, traveled to China, Japan and South Korea in September to drum up new investment.
"We'd be foolish not to want to encourage immigration when we've got so much of the base economy here in Michigan founded by immigrants," said Doug Smith senior vice president for economic development at the Michigan Economic Development Corporation.
PITFALL FOR REPUBLICANS
There are an estimated 11.2 million illegal immigrants in the United States, though since the financial crisis and recession hit in 2008 the number of arrests on the southwest border with Mexico has fallen by more than half.
Alabama, Georgia, Indiana, South Carolina and Utah have all passed "omnibus" immigration crackdowns since Arizona blazed the trail in 2010 with a law requiring police to check the status of all those they arrested and suspected of being in the country illegally - a measure since blocked by a court.
There is some indication nationally that a drive toward tough, enforcement-heavy laws may be slowing, with the ousting in an election in Arizona last month of Russell Pearce, the powerful state senate president who championed the state's crackdown.
But any sign of a significantly softer tone from Republican presidential candidates looks remote as the rivals battle for support from conservatives in early voting states like Iowa and South Carolina.
Presidential hopeful Newt Gingrich has been pummeled by rivals Mitt Romney and Michele Bachmann for suggesting in a televised debate that he was in favor of a pathway to citizenship for some illegal immigrants.
Romney, a former Massachusetts Governor has distanced himself from previous comments he made in the 2008 race backing a comprehensive immigration overhaul.
"Any proposal that has the least bit of moderation or even common sense is a potential pitfall for the Republican candidates," said Mark P. Jones, a political scientist at Rice University.
They have painted themselves into such a corner that it will be very difficult to move back to the center without being seen as inconsistent," Jones added.
FRUSTRATION AT OBAMA
As a fears over the potential damage from the state's immigration law takes hold in Alabama there is growing anger at the U.S. Congress and the Obama administration for not acting to mend a broken immigration system.
Obama has failed to deliver on a campaign promise to push through a comprehensive overhaul, tightening border and workplace enforcement, and easing a path to citizenship for illegal immigrants who paid fines, learned English and went to the back of the line.
"Congress needs to step up, put on the big boy pants and address the immigration issue instead of leaving it to the states," said Lew Watson, the mayor of Lincoln, Ala., where Honda employs 4,000 people. "They've known about the problem for years," he added, speaking hours after the Japanese Honda worker was ticketed on Wednesday.
No further attempts are expected at a large overhaul before Obama seeks reelection next November, while the issue itself will likely be eclipsed during a presidential campaign that will likely focus on the parlous state of the U.S. economy.
But for some, including U.S. Hispanics who as a bloc turned out by a 2-to-1 margin to elect Obama three years ago, patience is wearing thin.
"He's not doing enough, he needs to do more," said Isabel Rubio, the executive director of the nonprofit Hispanic Interest Coalition of Alabama, who declined to say if she voted for Obama. "The Latino community elected him because of what he wanted to do on immigration ... I understand that it's very difficult but he has not delivered," she added.
(Additional reporting by Kelli Dugan in Mobile and Emily Flitter in New York; Editing by Martin Howell in New York)