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Leipzig offered greater labor flexibility than did BMW's existing plants and was closer to them and BMW's suppliers. And a big advantage was that the workers all spoke German, thereby avoiding the need for tricky and costly translation.

DaimlerChrysler offered similar reasons when it chose to site its joint engine plant for the Smart and Mitsubishi Colt in Kolleda in eastern Germany. It had looked at 49 locations.

BMW 's move has highlighted the reluctance of German carmakers to embrace the rush east.

Although Fiat and Peugeot Citroen have made big investments in Eastern Europe, BMW, DaimlerChrysler and Porsche have stuck to their home turf when it comes to big car assembly plants. Even Volkswagen, Europe's biggest carmaker, produces relatively few cars at its plants in Slovakia and Poland compared with its German factories.

High wages have long put the German car industry at a disadvantage. Even in Leipzig, workers will be paid close to the normal industry levels. Wages at the proposed Czech site would have been a third of those BMW will now pay, said Steffen Henning of Berlin's Industrial Investment Council, eastern Germany's investment promotion agency.

The company has negotiated more flexible working hours with IG Metall, the engineering union representing the workforce. Depending on demand, the Leipzig plant, which has been in production since March but will not reach full capacity until next year, can be in operation 60 to 140 hours a week.

BMW also will be able to transfer workers between Leipzig and its other German factories when demand for some models is stronger than for others.

IG Metall is realistic about the concessions it has made. Unemployment in the Leipzig area runs at 22%, almost double the national average, reflecting the severe economic problems that have plagued eastern Germany since reunification in 1990.

BMW also is using its new plant to implement a recruiting policy aimed at attracting unemployed and older workers. A quarter of the workforce will be drawn from both groups.

The modern Leipzig BMW plant, which eventually will employ 5,000 workers, offers hope for the future. "This investment … is Leipzig's lucky break," said Siglinde Merbitz, Leipzig representative of IG Metall.

Henning predicts that the opening of the BMW plant will help alter negative images of eastern Germany both in the western half of the country and around the world.

Depopulation and the shrinking of the region's industrial base remain huge concerns.

But there is far more at stake than just the local area's prosperity. If BMW fails to show that it pays to stay in the country, even more German manufacturers could decide to look east.

Read more about this BMW story here

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