For years American premium cars have been the butt of jokes in the motoring world. Their reputation for terrible handling and substandard build quality often saw them overlooked by the new car buying public in favor of mostly European makes. Meanwhile, traditional German marques have continued to dominate the luxury segment and relative newcomer, Lexus, has also managed to gain a sizeable foothold in the competitive luxury car market.

Thus, those in the market for a well heeled, rear-wheel drive luxury car would more often than not look to BMW or Mercedes, but in this burgeoning segment new offerings from American manufacturers are beginning to measure up to their foreign cousins and once again capture the attention of new car buyers around the world. So as a rear-wheel drive (or optional all-wheel drive) luxury sedan, just how does Cadillac's updated STS measure up against its foreign counterparts who have largely set the benchmark for the segment?

Cadillac STS 3.6L V6 (2008) - picture 1 of 7
Cadillac STS 3.6L V6 (2008) - picture 2 of 7
Cadillac STS 3.6L V6 (2008) - picture 3 of 7
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Cadillac STS 3.6L V6 (2008) - picture 5 of 7
Cadillac STS 3.6L V6 (2008) - picture 6 of 7
Cadillac STS 3.6L V6 (2008) - picture 7 of 7

Since the STS is a large sedan, its main competitors are the 5-series, E-Class or GS models. The Caddy offers three options in terms of engines - a V6, a V8 and a supercharged V8. Perhaps the most significant update from the 2007 model is the extra 47hp (35kW) to be found under the hood in the V6 model, which brings the 3.6L unit's output to 302hp (225kW) and 369Nm (272lb-ft) of torque. The 4.6L Northstar V8, meanwhile, has not been updated and still musters 320 ponies (239kW) at a premium of $9,000 - though you do get extra equipment as well.

Also returning to the Cadillac stable this year is a Platinum Edition STS, which gets gold paint, bigger wheels and extra chrome to appeal to the more traditional Cadillac buyer, as well as a performance STS-V version with a 469hp (350kW) supercharged V8 engine. In terms of sales numbers, our money's on the new V6, which packs in a lot of features for a relatively low price, is the most fuel-efficient, and carries almost as much power as the naturally aspirated V8 version.

The engine update in the V6 has been undertaken without a loss of smoothness - the 2008 STS is noticeably more powerful than the outgoing model without being unrefined, not to mention better sounding and slightly more fuel efficient thanks to the direct injection technology. The engine is also higher revving than the previous model, peaking at 7,000rpm compared to 6,700rpm.

The V6 also gets the same six-speed auto from the V8 rather than the five-speed unit found in the 2007 STS, and shifting through the gears is both smooth and quick. Cadillac claims the V6 STS should be able to hit 60mph in 6.5 seconds, which sounds about right although we didn't do any stopwatch tests.

On the outside there has been a mild facelift and a new grill inspired by the stunning Cadillac Sixteen concept. Pictures don't do justice to the presence of this car on the road. We picked up the vehicle from GM's handy LAX parking service and drove to our nearby airport hotel. As we rolled up to the driveway a crowd gathered around the car and began to appreciate the chrome wheels, stand-out maroon paint, and sharp design. Californians may be some of the largest buyers of German and Japanese luxury cars but it's obvious they still hold a special place in their heart for local produce.

Over the course of our test we discussed the cars with friends and strangers. Some complained about the new grille being too garish, especially when combined with all the bits of chrome that have been slapped on the door handles and bootlid, but others found it to be refreshing from the usual understated look of European cars.

Inside, the instrument panel has been improved and doesn't suffer from the cheap feel of previous models. The steering wheel has been replaced by a smaller one, which improved the feel when driving around town, but the materials as well as the buttons feel like they've been lifted straight from GM's cheaper models. The leather seats, however, are very comfortable and we experienced no back aches even after driving for a few hours. Rear passenger space and comfort is also very good.

A new feature in the ‘08 STS is Cadillac's version of BMW's active steering, which can add up to 12 degrees of steering input to make driving easier, but this is only available on V8 models equipped with AWD. The V6 model, meanwhile, is now available with an optional sports package. Previously this was limited to the V8 version but now the V6 STS can be upgraded to have Brembo brakes, 18in wheels and Michelin Pilot Sport tires as well.

Even with all the performance additions the STS retains all the qualities expected in a Cadillac. It's still a big and comfortable cruiser, soaking up all the bumps and potholes with aplomb, but press the pedal and it turns into four-door performance sedan that can put a smile on your face. Shift the gearlever into its pseudo manual mode and the silky smooth V6 will happily rev all the way to redline. The torquey nature of the V6 means you won't have to rev the engine to within an inch of its life to launch with some decent pace but it's nice to know that you still can.

Sports mode is the setting we left the car in. The handling is a little sharper and the ride a little stiffer but the difference between it and the Touring mode is marginal at best and makes us wonder why GM decided to have two different settings. In either case, the STS tracks well through corners, with crisp turn-in and plenty of grip from the low-profile tires.

The STS has also gained some new safety technology, including a Side Blind Zone Alert system. The set-up uses radar to detect other vehicles located in the car's blind spot and lights up a small icon on the side mirrors to give warning to the driver. In theory this system sounds good, however we found that there were times when the light would be activated even when there was no car, making it difficult to rely on. A second feature is a lane departure system that flashes a light on the dashboard and gives an auditory signal if the car detects you driving erratically. If, however, you find such systems annoying or distracting then they can be easily deactivated.

The 2008 STS has been updated thoroughly, and in terms of bang-for-your-buck you can't look past the V6 version. The car has proven to be dynamically proficient, powerful and comfortable to drive in. Compared to its German rivals, the STS still has some way to go, especially in interior build quality, but it's a marked improvement from previous models and is definitely worth looking at if you're in the market for a spacious luxury sedan.