GUBBIO, Italy - The company that brought us the hot A4, A6,and A8 has another potential hit on its hands - one that could very easily upstage its Stuttgart and Munich rivals. Audi AG seemingly can do no wrong these days and the all-new Audi TT coupe is another head-turning example.

Built in Gyor, Hungary (after the galvanized steel bodies are stamped, assembled and painted in Ingolstadt), the TT went on sale in Europe last month, and Audi is confident that its front-wheel-drive, 4-cyl. sports car will be as thrilling to own and drive as its obvious competitors, the BMW Z3, Mercedes-Benz SLK and the Porsche Boxster, all with more traditional rear-drive layouts.

"The Audi TT symbolizes everything that we are today, and everything that we aim to become," says Franz-Josef Paefgen, Audi AG board chairman. "The TT proves once again that we are not just any car manufacturer."

Indeed. The TT bursts with good looks and plenty of first-class detail, right down to the appealing use of brushed aluminum on the fuel filler cap, steering wheel, air vent bezels and gear shift selector (the hood also is aluminum). Aluminum is even used on the dashboard support struts, which sport leather knee pads for the driver and passenger.

Other aluminum parts include suspension components, bumper beams, door carriers, dashboard beam and side impact beams.

Audi engineers exerted grey matter even on the car's stainless steel pedals, troubling to fit small rubber inserts. It's all very slick, and it represents a new level of provocative interior design that few automakers, save Volks-wagen/Audi, currently seem able to generate.

The car is built at a rate of about 120 units per day, and Audi predicts that 10,000 TTs will be sold in the U.S. once the full range is on the market, including the 225-hp, high-performance big-turbo version and the TT roadster, which still is a year away. Sales will be split 50/50 between the coupe and roadster versions.

The projected sales figures may seem small compared to the U.S.-built Z3, but they represent a fourth of Audi's current total U.S. sales.

Audi has capacity to build a maximum of 40,000 TTs annually in Gyor, the same plant that assembles nearly every Audi engine, but that would require three shifts working seven days a week, says Stefan Hardl, technical project coordinator for the TT. The plant currently is running two shifts at five days a week. Once up to full speed, production will be at 30,000 annually, he says.

Audi says the decision to build the TT in Gyor was partly due to the lack of available production space at its plant in Ingolstadt. A handy "lack" that is, as labor costs in Hungary happen to be one-seventh of Germany's. German workers earn about $38 an hour, including benefits; the average Hungarian worker's earnings are about $450 per month.

Workers can be seen offloading TT bodies from a train that arrives daily from Germany and moving the freshly painted bodies to the first work station on push carts. At this snail's amble, Audi should be able to build near-perfect-quality cars.

The TT, which gets its name from the "Tourist Trophy," the legendary auto race first held on the Isle of Man back in 1905, is refreshingly true to the original concept initially shown at the Frankfurt Show in 1995, sans the addition of the production car's small side windows behind the doors.

For North America, the rollout is as follows: 180-hp coupe with 5-speed manual in late spring for the U.S. The quattro version of the TT will be introduced when it goes on sale in Canada this summer. The 225-hp TT will not be available in the U.S. until late 2000. Part of the delay is due to Audi wanting the engine to be classified as an ultra low emissions vehicle (ULEV). The TT roadster will come to the U.S. in late 1999.

All TTs will be offered solely with a 5-speed manual transmission until at least 2000 in Europe and 2001 in North America. Audi would have liked to offer an automatic at launch but currently doesn't have a transmission for the 180-hp 4-cyl. engine that it believes is right for the TT's personality; one is currently under development, most likely a Tiptronic, Audi hints.

Meantime, Audi has no plans to ever offer an automatic for the high-performance, 225-hp version of the car: Pretenders need not apply.

The 180-hp engine gets a smaller turbo than the one used in the quicker TT, but the loss of 45 hp won't leave anyone feeling cheated. The 180-hp engine delivers peak torque of 173 ft.-lbs. (235 Nm) from just 1,950 rpm all the way up to 5,000 rpm, just 500 rpm short of the engine's peak power output.

The performance TT comes with a new generation of quattro all-wheel drive, Xenon headlights, 43 cm (17-in.) wheels and an intercooled version of the 1. 8L turbocharged 4-cyl. that boasts 225 peak horsepower at 5,900 rpm and 207 ft.-lbs. (280 Nm) of torque all the way from 2,200 rpm to 5,500 rpm, the kind of power needed to match the looks of this low-slung sports car.

While Audi calls the TT a 2+2 sports car, the rear seats likely will be used as a shelf to hold groceries or a duffel bag. The rear seats, however, do come in handy when folded down, then the TT provides an impressive 19 cu.-ft. (540L) of luggage space.

The TT comes packed with standard equipment, including side air bags for both passengers (a key-operated cutoff switch for the passenger bag is located in the glove compartment), antilock brakes and traction control on the 180 hp front-drive TT version and leather trim seats with ingenious rubber nubs in the cushion to keep the driver from sliding around.

Audi won't say what it cost to develop the TT, only that it was slightly below the development costs of the VW Golf-based A3. The TT shares about 20% of its basic parts from the A3/A4/Golf group platform, including the fuel tank, engine castings and basic floorpan. Even so, engineers went to great length to beef up the TT's suspension.

The result is a highly distinctive coupe - with a highly unique identity.