Image: VW headquarters
Carlos Osorio  /  AP
The Audi/Volkswagen North American headquarters in Auburn Hills, Mich.
updated 9/6/2007 2:06:52 PM ET 2007-09-06T18:06:52

Volkswagen is moving its North American headquarters out of the Detroit area — the nation’s automotive capital — to the suburbs of the nation’s capital and will cut 400 jobs in the process, the German automaker said Thursday.

Volkswagen of America’s move from Auburn Hills, Mich., to Herndon, Va., will begin in April 2008 and be completed by the end of next year, the company said.

It said that 600 of the current 1,400 staff will remain at Auburn Hills in call center and technical services positions, while 400 jobs will be transferred to Virginia. About 150 employees in Michigan are expected to move to Herndon, Volkswagen of America President and CEO Stefan Jacoby said.

The remaining 400 jobs will be cut, the company said.

Jacoby said the company scouted 14 different locations but settled on northern Virginia, which offered $6 million in economic incentives.

He said he wanted to get Volkswagen’s headquarters closer to the company’s customer base, which is strong on the East and West coasts and particularly strong in the Mid-Atlantic region. He also said Virginia’s reputation as a business-friendly state and proximity to Dulles International Airport, a major international hub, were strong factors.

“We need to be in the heart of our customer” base, Jacoby said in an interview. “This decision is not a rejection of the state of Michigan. We will remain a major force in Auburn Hills.”

Jacoby said he did not think it would be difficult to find qualified auto executives and senior staff in the Washington area, given the educational levels in the region.

Headquarters for affiliated brands and services, including Audi of America, Audi Financial Services and Volkswagen Credit, will also move.

Volkswagen’s is trying to boost its presence in the U.S. market, and Jacoby said he wants to do a better job of developing and marketing cars that will appeal to American consumers.

Volkswagen AG is the world’s fourth largest producer of passenger cars and is Europe’s largest automaker, but accounts for just 2 percent of the U.S. auto market, said company spokesman Steve Keyes. The U.S. market accounts for a little less than 5 percent of Volkswagen’s worldwide sales.

Volkswagen CEO Martin Winterkorn said that “the U.S. market has top priority for Volkswagen.”

The company’s decision to move its North American headquarters highlights the disparate economic fortunes of the Washington area and Detroit. Metropolitan Washington has one of the lowest unemployment rates of any metro region, at 3.3 percent, while Detroit, with an 8.4 percent unemployment rate, has the nation’s highest. Fairfax County, home to the new headquarters, has the highest median household income of any county in the nation, according to the most recent census estimates.

Virginia Gov. Timothy M. Kaine said the $6 million incentive package is typical for a deal of this size. The governor said he was particularly pleased to add a major automotive company to Virginia’s corporate roster following the loss of a Ford Motor Co. manufacturing plant in Norfolk, which closed earlier this year.

Volkswagen does not have an assembly plant in the United States but has expressed interest in building one. Kaine said he hoped that Volkswagen would pick Virginia if it chooses to expand.

In Lansing, Michigan Gov. Jennifer Granholm met with Jacoby on Wednesday evening after a report in The Detroit News that VW was considering the move. Neither commented after the meeting.

Shares of Wolfsburg, Germany-based Volkswagen were barely changed Thursday, edging down less than 0.1 percent to 150.22 euros ($204.52) in Frankfurt trading.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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