Phaeton is the name used to describe the ultimate in automotive luxury in the 1930s, such as the Packard Phaeton or the Duesenberg Phaeton. So it is appropriate that the former chairman of Volkswagen, Ferdinand Piech, who also happens to be grandson of Ferdinand Porsche, named his new upscale luxury Volkswagen the Phaeton.

Why shouldn’t lowly Volkswagen (People’s Car) build a beautiful new expensive luxury car to compete with Mercedes, BMW, Lexus and its own Audi? Nobody in the automotive industry has been able to answer that question. However, Piech went ahead and spent many euros to do just that.

As crazy as his idea was, his engineers went about the task with enthusiasm and produced the 21st century Phaeton.

The 2005 Volkswagen Phaeton is a fine car, as good as anything Mercedes, Jaguar or BMW offer, but only 65 cars sold in the U.S. last month.

Technically, Piech and his team at Volkswagen succeeded beyond their wildest dreams. The VW Phaeton is a beautiful car inside and out. The exterior shape has a subtle luxury look about it, while still breathing “Volkswagen.”

The interior puts it firmly in the Jaguar XJ, Mercedes S500, and BMW 750 series company. It is beautifully furnished in wood and leather, and you just can’t believe the leg room in the rear. You think you are in a limo. Just about anything you might ever want is in this car. Sunshields on all radiation-absorbing windows, heated, cooled and massaging power seats, multiple instruments, navigation system, front and rear climate control, parking warning, wood-paneled cup holders, all-wheel drive and lots more. The surround sound system is one of the best this tester has experienced. It has a six-disc changer in the glove box and speakers everywhere.

You can buy this car with a 4.2 liter, DOHC, 335 hp V-8 or a 6.0 liter, DOHC, 420 hp W-12 engine. What’s a W-12 engine? Well, it’s a Volkswagen invention that has four rows of three cylinders rather than the more normal two rows of six cylinders. The advantage is one of dimensions. The W configuration results in a shorter engine for easier packaging in the car. The test car was equipped with the V-8. This car is available in Europe with a V-6 diesel or a V-10 diesel engine.

The transmission in the test car was a six-speed automatic, with “Tiptronic” manual shift. All of this gets to the ground via VW’s “4 motion” all-wheel drive system.

The result is an ultra smooth, eerily silent drive train. The car floats on air, literally, with a variable stiffness, driver-controlled air suspension. The feeling of a magic carpet is pervasive when driving this luxomobile. Cornering is exceptional for such a heavy vehicle. All of this is achieved by a series of electronic vehicle behavior control systems, with yaw control, anti-lock brakes, traction control, differential lock, engine braking control and electronic brake force distribution. Very rapid acceleration is available by shifting the gear lever. The 5,000-pound car really takes off and makes your heart beat a little faster. It is not an enthusiast driver’s car like the BMW or Mercedes, but it’s almost there.

This tester took the car off road, where it quickly demonstrated its Volkswagen Touareg SUV roots by clambering over some very soft, rocky and bumpy off-road tracks while maintaining its clubroom-like silence inside and its silky ride. Raising the car a few centimeters using its hydro-air lift system allowed rocks to pass by harmlessly underneath. Grandma in the back seat won’t know she isn’t on the freeway.

At night the instruments and all of the myriad buttons and switches light up in red, putting the driver in a holiday mood. It really is a pretty display.

The base price for this elevated Volkswagen is $66,950. As tested with gas guzzler tax, comfort and cold weather package, automatic opening trunk lid, upgraded sound system and parking warning system, the price ended up being $76,355. This is Mercedes Benz S500, BMW 7 series, and Jaguar XJ8 territory.

EPA fuel consumption estimates are 16 mpg city/22 mpg highway. This tester’s experience with mixed freeway and city driving was 17.5 mpg. The warranty is four years or 50,000 miles with a powertrain warranty of five years or 60,000 miles and four years of roadside assistance.

This is a fine car, as good as anything Mercedes, Jaguar or BMW offer, but only 65 cars sold in the U.S. last month. Why Piech thought that anyone with this kind of money would spend it on a car named Volkswagen when they can get a perfectly fine luxury automobile with a prestigious luxury car name to share in cocktail party conversations, or just to be seen in, is difficult to understand.

What should Volkswagen do with this sales bomb? Since Audi is owned by VW, this tester would put new sheet metal on it with an Audi badge and watch it sell.

If you are looking for a luxury car, and owning a prestige marque is not a prerequisite for you, this is a great car to own and drive. You should try it out.

If you are worried about VW’s ability to support such a small number of vehicles with service and parts, I would look carefully at its twin, the Touareg SUV.

Motoring since 1952, Austin Lynas has owned 55 cars and at one time raced mini-sedans in England. An aerospace engineer, he was instrumental in developing the anti-skid systems used in British military aircraft that preceded today’s ABS systems. Lynas can be reached by e-mail at austin@sandiegometro.com.