An article in the Wall Street Journal (May 25, 2011) states that  US production enabled VW to drop prices for the Jetta by $ 8,000 thus enabling it to compete with Honda and Hyundai’s cars in the category.  In addition, current auto worker salaries are 50% lower than those at older Toyota plants, at $14.50/hour.  All this, plus a weak dollar, suggests that US manufacturing of VW cars may be an festive way to grow sales in the US market using domestic cost advantage.  Given the fickleness of exchange rates, should capacity decisions be justified by such concerns ? Will US manufacturing and associated claims provide a demand side benefit from customers, or will it just depend on lower prices ? How will competitors in th US react to VW’s decision ?