A triumph of engineering, or hubris?
Ferdinand Karl Piëch(1) was a man of towering ambition, both personally and for Volkswagen Group, the automaker he led as Chairman of the Executive Board from 1993 to 2002 and Chairman of the Supervisory Board from 2002 to 2015. The grandson of Ferdinand Porsche, Piëch was automotive royalty and began his career at the eponymous sports car company before moving to Audi in 1972(2). He ascended to the helm of that company and was credited with turning Audi from a slightly quirky left-field manufacturer into a direct competitor to BMW and Mercedes-Benz, an achievement that deservedly earned him the leadership of the Volkswagen Group.
For many years there had existed an understanding between the German automotive giants that each would occupy its own place in the hierarchy of marques and would not seek to invade each other’s territory. This understanding was shredded by Edzard Reuter, who was Chief Executive of Daimler-Benz from 1987 to 1995. The ruthlessly ambitious Reuter was determined to exploit to the fullest extent what was then one of the world’s most respected and admired automobile marques, and this meant moving downmarket. The scale of Reuter’s ambition was revealed in 1994 with the announcement of the forthcoming Mercedes-Benz A-Class, a direct competitor(3) to the Volkswagen Golf.
Piëch was not going to take this challenge lying down. He devised a plan to reconfigure the Volkswagen Group hierarchy of marques so that Audi would in future be explicitly pitched against BMW as the sporting option, while Volkswagen would be elevated and pitched directly against Mercedes-Benz as the luxury choice. This would, of course, require the development of a full-size luxury saloon to challenge the Mercedes-Benz S-Class.
A more pragmatic chief executive might have based the new model on the existing Audi A8, but Piëch decided that such a car would lack the thoroughbred pedigree to compete at the highest level, so decided instead on a ‘clean-sheet’ approach for the Volkswagen flagship.
Fate also played a part in the development of what would be called the Phaeton: the 1998 tussle between Volkswagen Group and BMW for control of Rolls-Royce Motors left the former with ownership of the Bentley marque and a limited model line-up that was in need of expansion.
A new platform and drivetrain, codenamed D1, would be developed, to be shared by Volkswagen and Bentley. This investment would be amply rewarded by the success of the Continental GT coupé and convertible and the Flying Spur saloon. These (relatively) more affordable models would reinvigorate Bentley and introduce it to a whole new generation of customers.
The Phaeton was revealed, at least in part, at the Frankfurt international motor show in September 1999. Volkswagen exhibited the Concept D, a large five-door liftback that was effectively a Phaeton with a different rear end. This was, to these eyes at least, a handsome, original and well resolved design, with its six-light DLO and Hofmeister-esque kink in the D-pillar. The production model would, however, instead feature a conventional four-light saloon body with broad triangular C-pillars and a rather poorly resolved upper DLO line. The latter followed a smooth arc from the A-pillar rearward before kinking awkwardly downwards at the trailing edge of the rear door glass.
The Phaeton was launched at the Geneva Motor Show in March 2002. Its mechanical specification was a tour de force: it was initially offered with a choice of three petrol engines, a 3.2 litre narrow-angle VR6, a 4.2 litre V8, or Volkswagen’s mighty 6.0 litre W12. Transmission was via a five-speed ZF automatic with Tiptronic manual override, connected to a Torsen differential based permanent four-wheel drive system dubbed 4Motion by Volkswagen. Adaptive air suspension and cruise control with radar activated distance regulation was standard, as was draughtless four-zone air conditioning with no visible vent outlets in the dashboard.
The Phaeton came in two wheelbase lengths, a standard 2,881mm (113½”) model and a lengthened version with a 120mm (4¾”) stretch behind the B-pillar for additional rear legroom. The overall length of the SWB version was 5,059mm (199¼”). Volkswagen built a new showpiece glass-walled factory in Dresden, where the Phaeton was hand-assembled(4). Prospective owners were invited to view the work in the clinically clean and pristine facility. Volkswagen’s total investment in the Phaeton project was estimated to have been around US $1bn.
For all of the Phaeton’s qualities, it proved to be a stretch much too far for the Volkswagen brand and sales were disappointing, falling far short of expectations from the off. At a press event in 2004, Audi of America’s chief executive, Axel Mees, was asked for his opinion on the Phaeton’s weak sales in that market and he suggested it was caused by Volkswagen “underestimating the weakness of the [VW] brand”. Mees was immediately sacked for his remark, while the Phaeton was withdrawn from the US market in 2007 after total sales of just 3,354(5) units in five years.
The Phaeton remained on the market until 2016 and was given a number of minor facelifts(6) and equipment upgrades over its lifespan. More significantly, it received diesel engine options; a 5.0 litre V10 in 2003 then a more economical 3.0 V6 in 2004. A new six-speed ZF automatic transmission was introduced in 2003. The VR6 petrol engine was enlarged to 3.6 litres in 2008.
Autocar Magazine road-tested the updated Phaeton in V6 diesel form in 2012 after it had been on the market for a decade, to see how it compared to younger and more prestigious rivals. Its “big Passat” anonymity might be attractive to those who wish to travel unnoticed but, inside, there was too much silver metallic-effect plastic for such a car, and standard equipment was now lacking against rivals. The ergonomics, notably the too-high set seats, were imperfect and the touch-screen software seemed outdated. Rear seat passengers were well provided for, however, with ample space and the car’s four-zone climate control.
The 3.0 litre V6 diesel produced 236bhp (176kW) of power and 369lb ft (500Nm) of torque, enough for sub-8.0 second 0 to 60mph (97km/h) acceleration, although the six-speed torque converter automatic felt a bit slow-witted and short of a couple of ratios compared with the competition. Fuel economy was impressive at 30.1mpg (9.38L/100km) over the duration of the test. Ride quality on the air suspension was good on motorways but more demanding roads revealed the Phaeton’s limitations in both ride and its “soggy” handling. Overall, the Phaeton now felt outdated and had too much of an “airport taxi” image to recommend it, so it was rated at two stars (out of five).
Total sales amounted to 84,253 units over fifteen years, an average of just 5,617 per year, which was barely a quarter of the Dresden factory’s initial 20,000 annual production capacity(7). The Phaeton’s longevity was largely due to the Chinese market, which in the model’s latter years accounted for more than half the plant’s annual output of 4,000 cars. An analysis subsequently conducted by the Sandford C Bernstein investment research company estimated that Volkswagen lost US $38,252 on every Phaeton sold, an eye-watering total loss of over US $3.2Bn(8).
The death of the Phaeton was not quite the end of the story for Volkswagen in large luxury saloons. Demand for such cars from the Chinese market led to the development of the 2016 Phideon, a car similar in size to the Phaeton, but rather less technically ambitious and certainly cheaper to manufacture. The Phideon looks much like an an XL Passat and is based on Volkswagen Group’s MLB(9) platform, with a longitudinal 2.0 litre inline-four or 3.0 litre V6 engine and front or (optional) four-wheel-drive. A total of 65,443 were sold in China from 2016 to 2020 inclusive.
As for the Phaeton, it will largely be remembered as an act of hubris on the part of Ferdinand Piëch and will remain a blot on the copybook of an accomplished engineer and leader.
(1) DTW contributor Christopher Butt has written an insightful obituary for Ferdinand Piëch, which may be found here.
(2) This followed an agreement that no member of the Porsche or Piëch families should be involved in the day-to-day running of the company.
(3) The novel mechanical layout and proportions of the first and second-generation A-Class models might make some readers contest this point, but the A-Class had similar interior space and pricing to the Golf, and it certainly evolved into a direct competitor in its third generation.
(4) Bodies for the Phaeton were assembled and painted at Volkswagen’s Zwickau plant and transported around 60 miles (100km) by road to Dresden.
(5) Sales data from www.carsalesbase.com.
(6) These involved only minor sheet-metal changes that would pass unnoticed by all but the most observant.
(7) An increase in production capacity to 35,000 units per year had been planned from the outset.
(8) It is, however, impossible to disambiguate fully the investment in the Phaeton from that required for its highly successful siblings, the Bentley Continental GT coupé and convertible and Flying Spur saloon, so this figure may be overstated.
(9) Which underpins a number of Audi models and the Porsche Macan.