(FORTUNE Magazine) – Tune your car radio to a country music station to set the mood. Then head out of Birmingham, Ala., southwest on I-59. Small towns go tumbling by: Abernant, Centreville, West Blocton. Presently you're out in the country. Here's a cow, there's a road-killed armadillo; 18-wheelers whip past; Dot's Farmhouse Restaurant beckons at the next exit. A few more miles, a few more verses of an old Hank Williams song, and there it is, smack in the heart of deepest Dixie--a Mercedes factory. Through a stand of tall pines, you catch a glimpse of that famous three-pointed star, rotating above the dazzling new plant.

Mercedes has touched down in rural, rough-hewn Vance, Ala. (pop. 400). It's about the last place on earth you'd expect to find the buttoned-down German automaker, but Mercedes has managed to negotiate the various speed bumps and slick patches that come with setting up a greenfield factory in a foreign land. Production on a new M-class sport-utility vehicle, priced around $35,000, began at the Vance plant earlier this year, and the first models are due to hit showrooms in the autumn.

The plant has sparked something of a social experiment along a 50-mile stretch from Birmingham to Vance to Tuscaloosa. At homes, bars, the factory, and everywhere in between, Germans and Alabamians are meeting and melding. "It's the birth of a melting pot," says Andreas Renschler, CEO of the Alabama factory and a rebel within Mercedes' staid ranks. Renschler was the perfect choice for this overseas assignment. Just 39 years old, 6-foot-6 and lanky, he has the demeanor of a smart-aleck schoolboy. His style is to shake things up, push people's buttons.

Mercedes had some solid reasons for setting up a plant in the U.S. Back in Germany labor costs are about 50% higher than in the small-town American South. The plant also gives the company a leg up on the crucial American market and functions as a kind of laboratory for future foreign manufacturing ventures. Top Mercedes honchos settled on tiny Vance after considering 150 sites in 30 different states, including Nebraska and such usual Sunbelt suspects as North and South Carolina. To help its case, Alabama pledged a whopping $250 million in tax abatements and other incentives. As part of the package, the Alabama business community came up with an $11 million offering, presented to Mercedes in the form of a single bank check. But the company wasn't about to make a decision of this magnitude solely because of incentives. So Alabama went further, submitting a plan for how it would help the families of German workers adjust to the expat life. "We found in Alabama a surprise," says Renschler. "Every state wants to sell its site. But you must develop a trust level that lets you say, 'Okay, we can really build a factory here.'"

Possessing nothing but the proverbial blank sheet of paper, Renschler set out to create a new corporate culture, separate from headquarters. Starting in 1993, he very deliberately pieced together a team that included U.S. execs with Detroit auto experience, along with a couple who had worked for Japanese transplants in North America. He drafted a perfectly balanced ticket: four Germans, four Americans at management's top tier. The plan was to plumb the assembled American automotive talent for fresh insights about how to run a factory. Those with Japanese transplant experience, it was hoped, could provide pointers on how a foreign automaker might best go about setting up shop in the U.S.

But the members of the management team hailed from very different manufacturing traditions and possessed vastly different ideas about how to do things. They all spoke different languages--GM-ese, Nissan-ese, Mercedes-ese, as it were. Quandaries such as how to configure the assembly line set off fierce debates that quickly grew more complicated than a Donald Trump pre-nup. Duly noted by the Americans was the fact that the Germans' English improved markedly when they got annoyed.

Progress would probably never have been possible had it not been for one of Stuttgart's infrequent directives--a very rigid time frame that was in place from day one. Thus, thrown together like roosters in a gunnysack, the team had no choice but to scratch and peck until it came up with blueprints for a factory and plans for hiring a work force.

Here, Mercedes faced a dilemma. It was drawn to Alabama in part by the promise of cheap labor. But how was the company going to rustle up workers who could make cars to its uncompromising standards? In the end, the automaker learned that it really didn't matter all that much that the work force in Alabama was so different from that in Stuttgart. The trick was not to find people who might have auto skills but those who could be trained.

Mercedes placed help-wanted ads in ten papers around the state. Acknowledging reality, the ads called simply for high school graduates, industrial experience preferred. The resulting barrage was akin to lotto frenzy: 45,000 applications poured in for 1,500 positions. Ultimately, Mercedes looks for people who can get along with others and follow directions. Those modest qualities, the company has determined, are good indicators of whether someone can learn how to do an assembly-line job. A series of job-specific exercises has proved particularly useful at weeding out the untrainable. The exercises are in actuality trick tests, like those a psychiatrist might give to a patient. Applicants often assume they're being tested for one set of skills when Mercedes hiring managers are looking for something altogether different.

Take the tire-changing test. Applicants are given a tire and a series of colored bolts and are told to go to it. Charlene Paige remembers the test well. She took it hoping to escape the Tuscaloosa mental hospital where she had worked as a nurse's assistant for 14 years. "A couple of the guys were doing the test really fast," she says. "They were trying to be very impressive, taking shortcuts."

She felt intimidated. Lacking technical skill--"I barely knew how to operate a hammer," she jokes--Paige had no choice but to go slowly. As one of the last to finish, she walked out certain she had blown her chances of being hired by Mercedes. But it was the guys who suffered a blowout. They'd changed the tires quickly but failed to follow precise directions. And that's what the test was about. Paige got hired, one of the lucky applicants (one in 30) to land a job with Mercedes. She started at $13 an hour, well above the average wage in the area, and has since been promoted to her current position as a team leader in the assembly shop.

Mercedes has an exacting way of building cars, an approach that may not be intuitive to people from other cultures. The company, therefore, makes sure all factory-floor jobs are done in accordance with so-called SMPs (standard methods and procedures) that spell out the exact, proper, and lone way to do every task. The SMPs are drawn up by German engineers and posted at workstations for easy reference by American employees. Everything is spelled out, down to the official way to tighten a lug nut. The American line workers need permission to make even the slightest alteration in their methods. Finished using a hammer or wrench? Little guides, like chalk body outlines, indicate exactly where it is to be laid down.

For the average American, this style takes some getting used to. "The Germans are very blunt and don't beat around the bush," says Paige. "You don't get politeness out of them about work. They might say, 'It looks real bad, and you're going to redo it.' They're such perfectionists." The Alabamians oftentimes find their bosses to be rigid, formal, even humorless.

The Germans, in turn, find the Americans lax, loquacious, somewhat superficial. They point out that feedback is an American concept, yet American workers aren't used to receiving it in strong doses. "They're not used to really open feedback," says Renschler. "The Americans always want to hear that they're doing a good job." Despite all the cultural differences, the Vance factory has proved to be a success. The design, a sleek E-shape with interconnected shops, has proved especially efficient.

Outside the factory walls, the arrival of Mercedes has stirred all sorts of monetary dreams among Vance's residents. "Vance never used to be concerned about anything, anywhere," says town mayor Mike Sanders. "We got thrust overnight from a local into a global economy." But many of the folks who sold property to make room for the factory have expressed anger about the deals they cut, and the rest of the townspeople have been largely bypassed. Just one Vance resident has been hired by Mercedes, and the only new businesses to open up have been a few modest restaurants.

A key reason why Vance hasn't profited much is that the 300 or so Germans in the area live up the road in larger cities like Tuscaloosa. In the interest of fostering local good will, Mercedes has sponsored art exhibits, youth soccer teams, and a performance by the Stuttgart Orchestra. It hosts an annual German wine festival called Weindorf. Mercedes made a contribution to Vance's volunteer fire department, and also set up a video link that allowed students at Vance Elementary and a school in Stuttgart to take a virtual field trip and visit one another.

Tuscaloosa rolled out a host-family program to help Germans settle into the community. It's run by the local development authority and seeks to match up Alabamians with visiting Germans according to interests, age, and family size. Shortly after a new German family arrives, a designated host family shows up on its doorstep often bearing a potted plant. That's the etiquette. It's based on the notion that Germans love greenery yet can't bring plants through customs into the U.S.

Host families fill the visitors in on such need-to-knows as directions for getting around town, doctor recommendations, and the fact that most anything can be purchased at Wal-Mart. Some of the relationships blossom into real friendship.

There's the duo of Billy Minges and Karl Sauer, for example. Minges, 53, is the owner of a local business, Cain Steel. To be good citizens, he and his wife signed up for the host family program. "But that all went out the window when I met Karl Sauer," he says. "It's like we're brothers separated at birth. If you get rid of the accents, we even talk alike." Together, they shoot pistols, fish, and tinker with a Nascar-style race car. Minges even took his friend to a rattlesnake rodeo. Says Sauer: "Now I have more feeling for what's going on in America, in a practical way you cannot read in a book."

American cuisine gets mixed reviews from the Germans. They don't like the local bread, and few have developed a taste for grits. Barbecue is a different matter. Most of the Germans have set up grills in their backyards, and almost all make regular pilgrimages to Dreamland, a bona fide barbecue shack. The menu is simple: ribs, bread, beer, and soda. Dreamland, the joke goes, has come to be known as the most famous restaurant in Alabama--to people in Stuttgart.

It's not certain how Mercedes' M-class will ultimately fare in the marketplace against such established competition as the Jeep Grand Cherokee and the Ford Explorer. Yet the company is clearly gaining valuable experience in how to set up and operate a plant in a distant land, and that experience will be needed soon. It just so happens that Mercedes will start producing its A-class sedan in a factory in Sao Paulo in 1998. So, in the not so distant future, Mercedes may well transfer an employee born in deepest Alabama to its operation in sultry Brazil. And the world gets smaller and stranger still.