Hyundai undercuts Lexus, Infiniti and Mercedes with a luxury car that’ll give car buyers another reason to forget the Korean carmaker’s checkered past

The world has turned upside-down. The US government is the hottest ticket on Wall Street, Cadillac builds European sports sedans, Saab markets SUVs, and now Hyundai makes a $42,000 luxury car. Someone e-mail the Bizarro Justice League, stat.

The 2009 Hyundai Genesis has been a long time coming for the South Korean automaker. Years ago, Hyundai introduced to the American market an ignoble range of economy cars that, unadjusted for inflation, cost the equivalent of pocket lint. It’s a different company now. To mangle a Pink Floyd lyric, 20 odd years may have gotten behind Hyundai Motor America, but it didn’t miss the starting gun.

As it enters a new phase of maturity, Hyundai’s digging in for a fight where it hasn’t before (in the US): luxury sedans. The new Genesis seems a million years from the long-discontinued Excel, a car so awful ConsumerGuide once scored it a 3 out of 10 for materials. These days, according to J.D. Power & Associates, Hyundai’s up there with Acura, Audi and Volvo in overall quality. Say the word Excel to a Hyundai executive now, and you’re more likely to get a spreadsheet than a set of keys.

For the past half-decade, industry watchers have seen Hyundai edging its product line upmarket. In 2004 it launched the Azera, a front-wheel-drive, midsize sedan with shades of Buick. In 2006 it introduced the Veracruz crossover SUV, aimed squarely at the pricier Lexus RX300. This year, the rear-drive Genesis sedan arrives in dealerships. Next year, it’ll be a sports coupe producing 300 horsepower. Maybe after that we’ll see a Hyundai that takes off vertically like a Harrier jet. Who knows.

Not quite what you’d call design-forward, the Genesis is attractive in a familiar way, kind of like actress Julie Bowen (Google, if you must). Midway between the Mercedes S-Class and Infiniti M in appearance, the Genesis’s most distinctive bit is that louvered grille, whose wing-like slats assign a curious organic character to the fascia. Inside, the Genesis offers spacial volume equal to that of a Mercedes S-Class. Interior trimmings are tasteful and corporately austere compared to Lexus’s million-button march.

Where the ancient Excel was as technologically advanced as a Bundt pan, the Genesis is a modern luxury car, riding on a new, rear-drive chassis platform. The allocation of drive wheels to the back immediately applies that unmistakable feel of being pushed, not pulled, distinctive of a true executive car. Suspension tuning tends toward the floaty side of the luxury spectrum, closer to the American and Japanese ideal, rather than that hard-soft meatiness characteristic of German sedans. That’s not to say the Genesis is a flaccid ride–it isn’t, quite. The multilink front and rear suspension combines with a shock-absorber system from ZF Sachs called amplitude-selective damping, which the Genesis shares with the Mercedes C-Class. The all-hydraulic system decreases damping over minor “stimulations” like road imperfections, but increases damping during major loading, as in hard cornering. As a result the 4,000-pound sedan keeps fairly flat-ish in corners while retaining composure over rough roadways.

The electro-hydraulic steering is responsive and offers decent feedback, especially in the V6 model. That car uses a slightly different steering setup than the V8 model, whose steering feels overly processed by comparison. Brakes are an exercise in directness and offer plenty of stopping power for all that weight.

Buyers of the entry-level Genesis model are eligible for the company’s smooth 3.8-liter Lambda V6, producing 290-horsepower, although the company expects 20 percent of buyers to opt for Hyundai’s 4.6-liter Tau V8. The V8, a requirement in the luxury segment, cost Hyundai $260 million to develop and produces a substantial 375 horsepower on premium fuel (368 on regular). Each engine links up with a separate six-speed automatic transmission, the V6’s from Aisin, and the V8’s from ZF. Both serve up- and downshifts as smoothly as warm sour-cream frosting. Maybe not exactly that, but we’ve gone a few sentences without inelegant hyperbole, so there you go.

But luxury cars are about the extra stuff you get, and the Genesis comes with the most requested kit. The Genesis 3.8 V6–starting at $33,000 with $750 freight charge–comes with a raft of expected accouterments: automatic headlights, cruise control, power front seats–eight-way driver and four-way passenger; power tilt and telescoping steering wheel; dual-zone climate control; sunroof; seven-speaker audio system with CD player, XM satellite radio and iPod and auxiliary input jacks; leather; Bluetooth capability; heated front seats, and 17-inch alloys. The Genesis 3.8 turns in EPA mileage figures of 18 mpg city, 27 mpg highway.

The Genesis 4.6 V8–starting at $38,000 with $750 freight charge–adds rain-sensing wipers with auto-defogger windshield; eight-way power passenger seat and driver memory settings; a wood and leather interior trim package; auto-dimming rear view mirror, 15-speaker Lexicon audio system with six-disc CD changer (shared with the Rolls Royce Phantom), power rear sunshade, 18-inch alloys and chrome exterior accents. The Genesis 4.6 is EPA rated at 17 mpg city, 25 mpg highway.

Buyers of the V6 can opt for the same features as the V8 by optioning the Premium Package. A Technology Package offered on both models includes cooled driver’s seat; adaptive headlights with auto leveling; front and rear park assist, Lexicon 17-speaker audio system, 6-disc in-dash DVD changer navigation system, XM NavTraffic real-time traffic service; multimedia controller, and a backup camera.

Although brand-conscious buyers will likely steer clear of the Hyundai lot for now, the economic woes of late may work in the company’s favor, bringing in new buyers looking to scale back their free-spending ways. And of course, any Wall Streeter whose paycheck is now signed by Uncle Sam should get a thumbs-up from We the People if they ditch their German iron and show up at work in one.