Watching the Cars Roll By.(Volkswagen factory in Dresden, Germany)

It's hard to imagine a less likely location for an auto plant than the center of one of Europe's oldest cities. But Volkswagen's sleek new $162 million Glass Factory sits smack in the middle of Dresden, Germany. It is the first successful, modern attempt to re-integrate heavy industry into urban culture, contradicting a century of urban- planning wisdom that required factories to be isolated from residential and leisure zones. When VW starts rolling out its new luxury Phaeton model later this month, the company hopes the city's cultural charms will help lure a more upscale consumer. Dresden was ideal for the experiment: its city center, where blocks bombed in World War II still stood empty, desperately needed innovative development. Michael Manser, former president of the Royal Institute of British Architects, says the practice should become more common. "Now that factory work can be done without colossal dirt and filth, there seems very little reason to separate homes from industry," he says.

Not everyone in Dresden agrees. About 17,000 residents petitioned against the factory when it was first proposed in 1998. They are far more interested in seeing Dresden's center gradually restored to its former baroque glory. Locals who hid in the cellars of its ornate palace during the Allied bombing raids of 1945 joked that if they couldn't live there, at least they would die surrounded by splendor. Those who survived saw ugly concrete tower blocks spring up when East Germany fell under Soviet domination. Plans to build a car factory seemed merely like the latest indignity, explains the plant's architect, Gunter Henn, who fled the city with his family when he was 6. Henn argues that in addition to baroque culture, the city historically has been known for it industrial innovation--even if the only car most Dresdeners knew firsthand was the flimsy little East German Trabant, produced in a stinking factory in nearby Chemnitz. VW wanted to be different. "That was [our] challenge," says Henn. "Can the building and the work here be integrated into the town so it's not a noisy place, it's an esthetic place?"

So far, the answer seems to be yes. Henn maintains that his factory, built on a wasteland formerly occupied by a decrepit exhibition hall, has given Dresden a beautiful public space in keeping with the city's culture and history. Indeed, Dresden's state, Saxony, was the hub of early 20th-century German car manufacturing. Moats that surround the building echo those in the old city center. The factory's transparency helps it blend into the old town. "You can look through this building and on the other side you see these housing areas; you look through it and connect the restaurant with the working area, so you have different combinations of atmospheres," Henn explains. Inside, glazed pods and pavilions create distinct spaces for amenities like a piano bar and conference rooms. From every part of the structure, the assembly line is visible. VW anticipates that when the factory opens to the public in March, locals will enjoy coming to concerts and exhibitions in the main atrium or visiting the factory restaurant, a cocoon of burgundy leather chairs and smoked-oak floors.

But by opening up the plant so completely, VW also aims to revolutionize the way people think about cars. Though beer and chocolate factories have long offered guided tours, heavy industry is one of the last to become a source of public entertainment. The Magna Center in Sheffield, England, a former steelworks turned science- adventure park, ...