Volkswagen AG said Wednesday it has narrowed its list of states competing for a potential U.S. production facility to Alabama, Michigan and Tennessee.

The German automaker said it was still evaluating whether to build a new plant in the United States and would make a final decision this summer.

"We reviewed many excellent sites and the process to narrow down the locations was not an easy one. We look forward to continuing to work with the states of Alabama, Michigan, and Tennessee as the evaluation moves forward," said Stefan Jacoby, Volkswagen Group of America's president and chief executive.

Jacoby said the automaker was evaluating cost, logistics, site readiness and operational considerations as it looks at the three states.

Volkswagen officials have said the surging euro has pushed plans for a new production facility forward. The euro currency has been hitting record highs in recent weeks against the U.S. dollar, making goods exported from Germany more expensive in the United States.

Volkswagen spokeswoman Jill Bratina said the value of the euro was "certainly a consideration in the process." She said the company was not commenting on any particular site in the states.

If Volkswagen decides to open a plant, the company is expected to start building cars within the next two years and initially produce between 100,000 and 150,000 vehicles annually with a maximum capacity of 250,000 vehicles.

Company officials have said the first vehicle would likely be a replacement for the Passat passenger car designed for the U.S. market.

States compete feverishly for new automotive plants, which can inject thousands of jobs and economic activity into their local economies. Toyota Motor Corp.'s plant in San Antonio, Texas, for example, which opened in late 2006, generated 2,000 jobs along with 21 onsite suppliers bringing additional employment.

Automotive analysts said the final location would rest upon a number of factors, including incentives offered by the states and their pool of skilled workers.

"What we've seen in the past is there is no golden mixture that seems to be a guarantee for a win," said Catherine Madden, an auto analyst with the consulting firm Global Insight.

All three of the contenders have a significant auto industry presence. Michigan has been the longtime center of the U.S. auto industry, home to General Motors Corp., Ford Motor Co. and Chrysler LLC.

Southern states have grown in their importance to the industry. Alabama has assembly plants for Daimler AG, Honda Motor Co. and Hyundai Motor Co. Tennessee, meanwhile, has Nissan Motor Co.'s North American headquarters outside Nashville and plants in Smyrna, Tenn., and Decherd, Tenn. GM operates an assembly plant in Spring Hill, Tenn.

Toyota considered a 1,600-acre site in Chattanooga, Tenn., last year for a $1.3 billion assembly plant, but chose a site near Tupelo, Miss. The Enterprise South site was also a contender a year earlier for a $1.2 billion Kia Motors Corp. plant, but the South Korean automaker instead chose to build the plant in West Point, Ga.

Chattanooga Area Chamber of Commerce spokesman J.Ed. Marston declined to comment when asked about any contact with Volkswagen or any interest in the Enterprise South site.

State officials also were mum on a potential VW plant. Liz Boyd, a spokeswoman for Michigan Gov. Jennifer Granholm, would not comment on the report but said the governor was "working hard to grow our economy and create jobs here."

Jeff Emerson, a spokesman for Alabama Gov. Bob Riley, said the state was "very honored" to be a finalist but declined further comment. A spokesman for Tennessee Gov. Phil Bredesen said he could not immediately respond to the announcement.

The Wolfsburg, Germany-based company is the world's fourth-largest automaker and has outlined plans to significantly boost its presence in the U.S., where it holds only 2 percent of the market. Earlier this year, Jacoby said the automaker hopes to more than triple its U.S. sales by 2018 to 1 million.

Volkswagen recently moved its North American headquarters from suburban Detroit to Herndon, Va., outside Washington to bring it closer to its East Coast customer base.

Volkswagen produces VW cars and trucks and also makes vehicles under the Audi, Skoda, Seat, Lamborghini, Bentley and Bugatti names.