Return of the VW Phaeton

VW PhaetonVolkswagen AG plans to bring back the Phaeton luxury sedan to the U.S. as the carmaker looks to reignite flagging growth in one of the few markets it has been unable to crack.

The Phaeton, the brand’s most expensive model, could be shown to U.S. consumers in January as VW prepares the car’s return after pulling it seven years ago because of weak sales. The reintroduction, which would complement the rollout of new sport-utility vehicles, is aimed at showing off VW’s engineering prowess as the lift from the mainstream Passat sedan fades.

“A brand as large as Volkswagen needs a halo project in the upscale segment,” Chief Executive Officer Martin Winterkorn told Bloomberg at a conference in the company’s hometown of Wolfsburg this month, confirming that the Phaeton will return to U.S. showrooms. “We’ve seen what happens to brands that don’t have that kind of project.”

The Phaeton, a pet project of VW Chairman Ferdinand Piech, last year sold about half the volume worldwide that the company initially targeted.

The U.S. comeback is part of a plan to spend $5 billion over the next three years to boost sales in the U.S., where deliveries have started to slip after a two-year burst following the 2011 rollout of the Passat and Jetta sedans that were redesigned for American tastes.

The Crossblue concept, a seven-seat sport-utility vehicle that would compete with the Ford Explorer and Toyota Highlander, was shown at the Detroit car show this year. It’s intended to be a big seller alongside the Tennessee-made Passat. The U.S. push is critical to VW’s strategy to surpass General Motors Co. and Toyota Motor Corp. in global deliveries by 2018.

A new version of the Phaeton may be presented at the Detroit auto show in January to test the response for an eventual rollout, three people familiar with the matter said. The car would share underpinnings with the Audi A8 sedan and a hybrid version is planned, said the people who asked not to be named because the discussions are private.

The Phaeton started at $66,700 before VW withdrew it. In Germany, the car starts at 70,000 euros ($92,100). It would likely mean the Phaeton would cost more than Hyundai Motor Co.’s Equus, which starts at $59,250. It could also rival the $75,100 A8 from VW’s Audi unit.

The return of the Phaeton “would be a bad decision,” said Jesse Toprak, an analyst for TrueCar Inc., which tracks U.S. auto sales. “No one spends $80,000 on a Volkswagen. The company already has luxury brands that can cater to that segment,” such as Audi.

The 2006 withdrawal of the Phaeton from the world’s largest market for upscale vehicles was a move by Wolfgang Bernhard, the head of the VW brand at the time, to stem losses in the region. The decision helped trigger his departure because the move called into question Chairman Piech’s strategy.

The Phaeton was started by Piech while he was CEO.


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