Just a few years ago, if someone mentioned Cadillac in the same sentence with BMW, Lexus or Mercedes they’d have been laughed at. I know this from personal experience. In 2004, I asked a development engineer at BMW about Cadillac. In no uncertain terms he told me his company did not consider it worthy of worry. Who could blame him? This, after all, was the same brand that tried to fool consumers with the ill-advised Cimarron and Catera. How could Cadillac possibly compete in the upper echelons?

I wonder what they engineer is thinking these days. Cadillac’s resurrection began with the previous-generation CTS launched in 2002 as an ’03 model. The first product to wear Cadillac’s full-fledged “art and science” design theme, the CTS took exterior cues from F-117 stealth fighter and interior cues from personal computers, and melded them into an entry-level luxury sedan that captured the attention of younger buyers. This placed Cadillac on shopping lists that were once off-limits.

The second-generation CTS transforms Cadillac’s initial efforts and raises the bar dramatically, making this the first domestic luxury sedan that can take on BMW and Mercedes and win. It’s that good.

From a design perspective, the ’08 CTS remains true to the original intent of the “art and science” theme, with more than a touch of refinement. The edges are not as hard and abrupt and the overall style is more emotional and harmonious while retaining its boldness. A nod to Cadillac’s past is expressed in the use of vertical light pipes on the outer edges of the front and rear lamps in homage of the tail fins of the ‘50s, but the rest is fully up-to-date. Inside, the CTS has undergone a revolutionary change through the use of innovations like LED ambient lighting along the door panels and recessed between the upper and lower instrument panels, and a “pop up” navigation system that features 3D imaging of important landmarks. All of this is housed in a space that owes nothing to computer design, and establishes a new visual language for Cadillac interiors.

Under the hood, GM gives buyers the option of a gasoline direct-injected 3.6L V6, a first for domestic automakers. (Mercedes-Benz first offered the technology in 1955 in a far more rudimentary form.) Cadillac says DI reduces cold-start hydrocarbon emissions by 25%, while reducing fuel consumption by 3%; the downfall is DI emits more combustion noise, sounding almost like a diesel—although GM has paid careful attention to keep the noise down by developing a unique injection system isolated from the cylinder head. The available 304 hp are transmitted through a 6-speed automatic transmission, and – in the case of the car driven – mated to an optional ($1,900) Borg Warner AWD system. It’s helped by a revised chassis that is 2-in. wider than its predecessor, making this CTS more sure-footed.

It would be easy to confuse the CTS for something with more cachet than most associate with the Cadillac name, and for that GM’s designers and engineers deserve a big pat on the back. To say the CTS is world-class would be an understatement. This car sets a new benchmark when it comes to luxury and value, and a domestic one at that.