Grading the Phaeton

By Hannah Wallace October 31, 2004

Let's begin with a word association game.

Gucci. High-end fashion.

Godiva. World's best chocolate.

Wal-Mart. Low prices, huge inventory.

Mercedes-Benz. Luxury vehicles.

VW. The people's car. Inexpensive, reliable, thrifty and fun transportation at affordable prices.

Stop right there.

While the first four brands might be content with their associations, Volkswagen AG wants us to think otherwise. It wants us to think of the VW Phaeton W12 and V8 as luxury car competitors for Mercedes-Benz S models or the BMW 7-series.

Now, that's a leap in association!

And the attempt to associate VW with luxury is probably doomed, at least in the short term. Those who can spend $106,615-the sticker price on the tested Phaeton W12-are most likely educated, affluent and older. When they think VW, they fondly remember the Beetle they paid $1,999 for in college. In fact, the most frequent response to the Phaeton was: "That's ridiculous. What was VW thinking? What makes this thing worth $106,000?" In a week behind the wheels of both the $72,365 V8 model and the $100,000-plus W12 model, I never found out.

I found that I was driving a fine luxury car, one with potent power, pathetic fuel mileage, a roomy rear seat area-and nothing at all pioneering.

To understand what's on the table here, you need to know that Volkswagen AG is the parent company of VW, Audi and that British stalwart, Bentley. Audi is a German carmaker with a line competing against BMW, Mercedes-Benz, Lexus, Acura and Infiniti. It hasn't always done well. A few decades ago, the word "abysmal" could be attached to the reliability and durability of some Audi models.

But that changed. Audi improved. It concentrated on quality construction and posh interiors that were almost Jaguar-like. The newer A4, A6 and A8 models are competitive in the luxury market.

In the meantime, VW did one thing right: It brought back the beloved Beetle as the striking New Beetle. Excitement was rampant, on a par with that for DaimlerChrysler's likewise retro PT Cruiser.

The problem with offbeat designs, however, is that those attracted to them soon buy one. Alas, their number is limited. Sales of both the New Beetle and PT Cruiser fell after the initial first-year sales spike.

So in the depths of corporate Volkswagen AG, a decision was made that would affect both Audi and VW. Audi would become the performance brand; VW would focus on luxury and comfort.

Talk about 180-degree thinking.

VW had a history of torrid "pocket rockets" (small performance cars), continuing right up to today's R32 model. Audi had a history of luxury cars that never caused a rise in blood pressure or a faster heart rate.

To begin the transformation, VW and Porsche collaborated on a luxury/performance sport utility sold this year as the VW Touareg and Porsche Cayennne. For a car, VW took underpinnings from Bentley and the result is the VW Phaeton.

Just like that, VW had one of the world's most expensive sport utilities and two luxury cars, the V8 Phaeton and V12 model.

VW built a factory in Dresden, Germany, to assemble the Phaeton. Each travels down an assembly line, elevated above workers, turning this way and that for easier assembly, above a clean floor, viewable through walls of glass. The assembly plant is called The Transparent Factory and VW spent $186-million Euros to build it.

So what did we get from the gamble and the investment?

With the Phaeton, we get a car with nondescript styling, a long-wheelbase car that returns 12 mpg in the city on premium fuel. The speedometer goes to 200 mph, as if a road existed somewhere to legally reach that speed. We get 18-inch alloy wheels, a $2,000 high gloss paint job, and a slap-in-the-face $2,000 gas guzzler tax levied by Uncle Sam.

We also get a limp 4-year, 50,000-mile warranty.

We do not get a rear-view camera with the navigation system. We do not get adaptive cruise control. The headlights don't turn and in fact leave a dark spot in the driver's lane as the car turns left. This is below the bar set by Mercedes-Benz and Lexus, particularly.

Yes, it's nice inside a Phaeton. The car is filled with luxury and convenience items, with safety features, with posh design touches. But so are competitors.

VW had years to prepare the Phaetons for the marketplace. The surprise is that the German company didn't stun with the world with technological competence. Instead, it spent money mortgaging a glass factory and gambling on an always-dangerous change of direction.

I can tell you from a week behind the wheel that 5-inch VW badges front and rear don't shout "I paid a ton of money for this thing." And at this price level, the lack of prestige associated with driving a VW could spell doom for these pricey models.

Wanna bet your Rolex on it?

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