When Mercedes chose Alabama for its new plant it helped to bury the state's redneck, racist image
When Mike Sanders ran for mayor of Vance, Alabama (pop. 250) in 1991 he promised voters more jobs. Rarely can a successful candidate have kept his word more splendidly.

Two years after the election Mercedes-Benz chose Vance as the site for a new manufacturing plant, beating back bids from 120 other sites in six American states. "It has sparked a gold rush," says Mayor Sanders. Since the population is expected to multiply by 100 to 25,000 within the next 10 years, the value of land has also risen a hundred-fold. Property speculators are flooding into town.

Until recently the only recognisable sign of life in Vance (pronounced "Veyance", which rhymes with "Benz") was a dusty roadside petrol station. Now there are plans to build hotels, fast-food outlets, a shopping mall alongside the gleaming white factory, a startling vision - a bright angelic mill - that shatters the monotony of western Alabama's dense, rolling pine forests.

"It's like having your first baby," says Sanders. "You're excited. You're happy. But it turns your life upside down."

There was a time when the only issues that complicated the mayor's placid rural existence were complaints about uncollected garbage and reports of stray cows. ("I'm the only one around here who knows exactly who every cow belongs to. I know every dog and every cat, too.") Today Sanders works around the clock, adapting with heroic efficiency to the new demands of raising vast loans, negotiating with contractors to build a new sewage system, studying plans to expand the water supply, and meeting late into the night with his over-stretched town council to discuss multi-million dollar budgets.

The council meets at Vance's Town Hall. This is a grandiose name for a box-shaped construction of faded red brick barely the size of a one- Mercedes garage. Inside, amid the clutter, are a US flag and an Alabama flag, six reclinable leather chairs, a desk the size of a ping-pong table, a Mercedes-Benz Dinky toy, a jar of sweets and a jar of lollipops. On the wall hang a photograph of the All-Activity Vehicle Mercedes will be building, a 1985 calendar and a "No Smoking" sign.

Mayor Sanders is sitting at the big desk simultaneously sucking on a cigarette while crunching sweets and lollipops at the rate of one every 45 seconds. Tall and sun-tanned. with a moustache and generous belly, he dresses in jeans, baseball cap and open-necked shirt. He has large, leathery hands. He is a farmer by appearance and by trade, but has the frenzied air of a high-powered international executive on the verge of a very big sale.

"When I was elected, this town couldn't have cared less what was going on 10 miles down the road. Now we take notice of what's going on 10,000 miles away in Europe. If Mercedes-Benz goes under in Germany, the economy of Vance loses. Suddenly it's important for us that they should be a very successful company. Can you believe it - Vance being thrust into the global economy?"

IN A BOOK entitled One World Ready or Not: the Manic Logic of Global Capitalism, William Greider, a distinguished Washington-based author, explains that the miracle came about only after Alabama and other states of the Deep South started vying with countries of the developing world in the great international job auction. "Multinationals are conducting a peripatetic global jobs competition, awarding shares of production to those who make the highest bids," Mr Greider writes. "If a poor country like Malaysia grants public favours to capital in exchange for jobs, then so will Alabama."

To clinch the Mercedes deal, Alabama's state government made the German car maker an offer it could not refuse: a package of tax breaks and subsidies worth $300m (pounds 190m) for a plant that will be employing, at most, 1,500 people. That amounts to $200,000 per job, three times as much as South Carolina paid BMW to build a plant in 1992.

Consider also that Alabama is largely union free and that salaries are roughly half what they are in Germany, where workers take 30 as against 10 days' holiday a year, then the extra $300m Mercedes had to put up to establish a manufacturing presence within the world's most lucrative market looks like money well spent.

Mercedes's - and Vance's - gain would seem, on paper, to be Alabama's loss. Even though official estimates suggest that between 15,000 and 17,000 new jobs will be created to service and supply the Mercedes plant, it will be many years before the Alabama treasury recovers its investment.

But it turns out that Alabamians do not live by bread alone. They need nourishment for the soul as well. Talking to Mayor Sanders in Vance, and to people in the neighbouring cities of Birmingham and Tuscaloosa, the same lament cropped up continually: the rest of America sees Alabama as an under-educated, unsophisticated, impoverished backwater condemned to bear for evermore the stigma of the state's notoriously racist past.

"In the rest of the United States, in the rest of the world, people consider Alabama to be a state of losers," says Mac Parsons, a former Democratic state senator who initially spoke out against the Mercedes deal. "This dates back to the Civil War and that's why Southerners are so defensive. The stereotype is that because we talk slower, we must think slower."

Senator Parsons changed his mind about Mercedes when he saw how proud the company's arrival had made Alabamians. "When the announcement was made it was like a redemption. It broke our negative self-image. The value of Mercedes is not what it's done for the economy but what it's done for the people of the state. You can't measure the returns in economic terms because they're intangible. It's a high price-tag to pay for overcoming an inferiority complex, but it's worth it."

To celebrate liberation from a hundred year-old hang-up, the government of Alabama placed a giant Mercedes emblem, the three-pointed star inside a circle, over the state university's football stadium, which is like putting a brand name on a shrine. The then governor proposed renaming the highway between Montgomery, the state capital, and Birmingham the "Mercedes-Benz Autobahn". Although that proposal did not take off, and the emblem has now been taken down from the football stadium, Mayor Sanders has affixed a Mercedes emblem to the bonnet of his Chevy pick-up truck.

"I know that it's hard to argue logically against those who say that to get Mercedes here we sold the store," he says. "But if nothing else it'll get people to see we're not a bunch of red-neck racists. It's obvious that Mercedes-Benz is not going to go to a place that has no quality."

What a Mercedes car does to the self-esteem of its owner, the Mercedes plant has done for the self-esteem of the people of Alabama. But those who wish to see the state flourish hope that this gigantic act of group therapy will also persuade other big multi-nationals to follow the German example.

DARA Longgrear's job is to promote investment in western Alabama. As executive director of the Tuscaloosa Industrial Development Authority, he played an important role in bringing Mercedes to Vance. He acknowledges that "Mercedes is primarily a psychological event", but when he travels the world in search of business he no longer needs to spend all his time building up the credibility of his area. "We've seen a major shift in perceptions," he says. "When I'm sitting on a plane and I tell the person next to me that I'm from Alabama they will no longer think: 'Oh yeah, that's where all those racists are.' Now they'll say: 'Ah, yes, that's where you produce Mercedes-Benz cars.' It's a wonderful association, worth every million the state invested."

Mr Longgrear casually mentioned that he could catch a plane that very morning to Stuttgart and be back home in time for dinner the next day. Scoffing at the insular rhetoric fashionable among many politicians in Washington, he asks: "How can any thinking person today not realise the importance of thinking in a global way?"

But this is not only a matter of business, or of a release from indignities past. He assumes a fervent, evangelical tone: "What is so wonderful is that the lowliest Alabamian is going to be in a world-class surrounding working with foreigners. Maybe they'll send him to Germany. Maybe Hans will come to his home, and Hans's kids ... How much will that change his talk at dinner, the aspirations of his kids?"

At night, after insisting on paying for my dinner out of his "public relations" budget, Mayor Sanders, the global economist, is driving home along the highway from Tuscaloosa. He turns off at a sign that reads "Vance". "We didn't use to have our own exit from the interstate. Now we see it and we feel real proud."

He stops outside the perimeter and gazes, as if not quite believing what he sees, at the white colossus, fantastical under floodlights, like a Hollywood vision of a city on Mars.

"Beautiful, isn't it?" he muses. "That makes us real proud too. Before, you lived in Vance and people didn't know where this little town was. Hell, even people in London, England, are going to know who we are now."