By RALPH KISIEL | Automotive News (08:20 Sep. 22, 2003) DRESDEN, Germany -- Volkswagen of America Inc. will begin selling the 2004 Volkswagen Phaeton luxury sedan in December in what has been one of its most bizarre car introductions. VW would like to focus on marketing the Phaeton, and a campaign is scheduled to begin in the first quarter of 2004 when enough cars get to dealership showrooms. Instead, VW officials here and in the United States often find themselves defending their decision with dealers and the press to build a premium sedan with a VW badge. "The Volkswagen label is not wrong on this car," said Jens Neumann, who sits on the Volkswagen AG board of management and is in charge of North American product strategy, during a press introduction of the car here. With the Phaeton, VW is breaking ground in the United States with its first luxury car designed to take on the likes of the BMW 7 series, Mercedes-Benz S class and other luxury vehicles. Two hundred of VW's 607 American dealers will get Phaeton models. VW of America is wrangling over the U.S. sticker price with parent company Volkswagen AG, and is cautious when talking about volume expectations. VW of America expects to sell between 4,000 and 5,000 Phaetons annually - eventually. But in light of the Phaeton's poor European sales since its 2002 introduction, VW is being deliberately murky on its short-term expectations for the U.S. market. The Phaeton was introduced in Europe with V-6 and W12 gasoline-powered engines and a short wheelbase, and VW says it learned from that experience. In the United States, it says, a V-8 is critical. "The lesson learned is that you don't launch with six cylinders and 12 cylinders, where you get nothing, or more than you want," says Frank Maguire, vice president of sales and marketing at VWoA. "We said that we won't take the car unless it's long wheelbase with a V-8. We could never sell a luxury car in the United States without an eight-cylinder engine." Through July, VW has sold a disappointing 2,574 Phaetons this year. The automaker had expected annual global volume to be as high as 15,000 units. VW is banking on its Touareg SUV to pave the way for the Phaeton in the United States. "I'm glad the Touareg was launched in the States before the Phaeton," Neumann said. "That gives people time to get used to the idea that Volkswagen has the technology and knowledge to build a luxury vehicle." VW has begun assembling the U.S. version of the Phaeton in its factory here. The U.S. model will be equipped with a 4.2-liter V-8 that generates 335 hp, or a 6.0-liter W12 that makes 420 hp. The United States will get the Phaeton with a long wheelbase, which was unveiled at the Frankfurt auto show this month. The longer wheelbase provides more room for rear-seat passengers. In Germany, VW has priced the V-8 powered Phaeton at 73,350 euros, or about $82,500. "The challenge is not the product," Maguire says. "It will stand up to anything out there. The challenge is: Will people buy a luxury Volkswagen?" VW's American dealers would like to see the Phaeton with the V-8 priced below $60,000, so dealers can undercut competitors, says Gene Langan, chairman of the VW National Dealer Council. "I think if that car comes in priced right, we have a good opportunity to sell this car," Langan says. "Especially with the response we've had with the fully loaded $50,000 Touareg. We've done very well with that. We've had BMW, Mercedes, Volvo and Lexus customers come in and buy that vehicle and not bat an eye at the price." Fifteen percent of VW customers leave for a luxury brand. So VW will focus its marketing efforts on retaining customers who are in the market for a luxury sedan, and on those it calls "nonconformist buyers" and "transcendent drivers" - buyers who look beyond a vehicle's badge.