The Phaeton is not a good car for the US market, but in Europe, buyers are a lot less brand-conscious. The German brands sold in the US as luxury vehicles are also sold as bread-and-butter sedans in Europe. BMW sells a lot of four-cylinder 520i cars and a lot of six-cylinder 730i cars, not to mention four cylinder 3- and 1-series models.
The brands span a wider range of buyers there, so an uber-VW is not out of the question. If anything, the real folly of the Phaeton is that for almost the same money one can buy a much lighter, faster, and prettier Audi A8 with quattro.