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Hans-Werner Aufrecht wore a $2000 Hugo Boss suit and a bemused smile as we strolled down a sidewalk in Beverly Hills. It was 1989, and Aufrecht's AMG Hammer, a Mercedes-Benz E-class transformed into a 380-hp hot rod by his small German company, had become a sensation in America. The Hammer's new showroom in Beverly Hills was a long way from the old mill near Stuttgart where Aufrecht and his partner, Erhard Melcher, had started in 1967.

Seventeen years later, things have gotten even better for AMG. Mercedes-Benz acquired AMG as a wholly owned subsidiary in 1999, and production climbed from 500 cars a year to last year's total of 20,000 AMG vehicles (half of which were delivered to the United States). But although AMG is proud of its range of high-performance Mercedes-Benz models, it's been trying for some time to leave behind its image as a mere installer of hot-rod equipment.

A potent new 6.2-liter V-8 is AMG's renewed declaration of independence from the Mercedes-Benz mothership. AMG tells us its engineers have produced a DOHC 32-valve V-8 that is one of the most powerful and highest-revving large-displacement automotive engines in the world. It exceeds even the engineering standard set by the familiar 604-hp, 6.0-liter, twin-turbo Mercedes-Benz V-12 in the new AMG S-class. Among other features, the new, aluminum-block V-8 has a stout crankcase, a low-friction coating for the cylinder bores, variable cam timing, a bucket-style valvetrain compatible with an elevated 7200-rpm redline, and a cast-magnesium intake manifold that features variable-length intake tracks.

AMG is using this V-8 as the centerpiece of a new image-building campaign, and it has even constructed a replica of the AMG-built Mercedes-Benz 300SEL that recorded the company's first competition success in 1971. Yet the most significant aspect of today's AMG is its development department of 100 engineers. Mercedes-Benz now brings this department into its own development program as soon as a new vehicle is planned, and this head start has enabled AMG to roll out an entire range of vehicles instead of just a few select models.

Volker Mornhinweg, the chairman of Mercedes-AMG's management board, sees AMG as a technology company, not simply a performance tuner. “We are experts in our engine and suspension specialties, but we also do brakes, special electronics, aerodynamics, and interior design,” he says. “We have a business plan, and we do our own sales and marketing. We are a car company, not a performance division.”

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