Slipping into Overdrive

At a futuristic, glass-walled factory in the eastern city of Dresden, Germany's latest luxury car is starting to roll off the production line. The 5 m-long machine has all the performance amenities that customers associate with finely calibrated German engineering, including an optional 12-cylinder engine and a special pneumatic suspension system to guarantee a smooth ride. The price tag is breathtaking too: between $46,000 and $92,000, depending on extras. But this car is not the latest Mercedes or even a top-of-the-line BMW. It's a Volkswagen.

Are they kidding? Not a bit. Volkswagen has spent nearly $900 million developing the new...