To arrest one foreign car-making executive under Alabama's new tough immigration laws may be regarded as a misfortune; to arrest a second looks like carelessness.

A judge has acted to put a Japanese employee of Honda Motor Company out of his misery by dismissing immigration charges against him, three days after he was booked under Alabama's new immigration laws that have been billed as the most swingeing in America. Ichiro Yada is one of about 100 Japanese managers of the company on assignment in southern state.

Yada was stopped in Leeds, Alabama, at a checkpoint set up by police to catch unlicenced drivers. He was ticketed on the spot, despite the fact that he showed an international driver's licence, a valid passport and a US work permit.

Key parts of the new immigration law, HB56, came into effect in late September, including the driving provisions. Under them, the police are required to check up on the immigration status of anyone they stop who they suspect of being in the country illegally.

In addition, all drivers are required to carry a valid driver's licence, either from a US state or from their native country if they are from abroad. The law is designed to trap undocumented immigrants – in practice, Hispanics largely from Mexico – who are no longer allowed to apply for driving licences.

Over the past two months thousands of undocumented Latinos have fled the state and many more have ceased driving for fear of being caught and incarcerated.

Yada is the second foreign car executive to fall foul of the new law. Last month police officers arrested a German director of Mercedes-Benz for failing to carry a valid driver's licence. The move exposed Alabama to widespread criticism and ridicule.

The St Louis-based Post-Dispatch newspaper revelled in Alabama's embarrassment by publishing an open letter to foreign car companies encouraging them to pack their bags and move to the rival car-producing state of Missouri.

"We are the Show Me State, not the Show Me Your Papers State," it wrote, telling auto bosses: "You've got two choices. Either ask your executives to carry their immigration papers at all times, or move to a state that understands gemüchlichkeit."

The inadvertent discomfort of foreign car executives is no joke for Alabama, though. Mercedes-Benz, which opened a plant in Tuscaloosa in 1993, and Honda, which came to Lincoln in 1999, are major employers. Honda has 4,000 employees in Alabama with an investment of about $1.4bn.

The new law has already caused a labour shortage in the state's important agricultural sector, with tomatoes rotting in the fields after Hispanic pickers fled. The construction industry has also been heavily hit by whole crews of workers downing tools and disappearing.