updated 6/5/2006 11:33:47 AM ET 2006-06-05T15:33:47

Less than a week after announcing plans to offer the first diesel-powered full-size sport utility vehicle in the United States, DaimlerChrysler AG’s Chrysler Group said it is halting production of the diesel version of its small Jeep Liberty SUV.

The Liberty’s diesel engine doesn’t meet tougher federal emissions standards taking effect next year, and Chrysler said it wasn’t cost-effective to replace it with a newer version.

“Our initial plan was always to offer a Jeep Grand Cherokee diesel as long as the Jeep Liberty diesel tested well” among consumers, Chrysler spokeswoman Dianna Gutierrez said Monday. “It’s still a strong seller, it’s got great benefits to it — better fuel economy, more towing power ... but emissions standards for 2007 became more stringent.”

Chrysler has opted to not develop a cleaner diesel engine for the Liberty, Gutierrez said. “We couldn’t make a credible business case for such an investment, especially for a limited production number of vehicles.”

Sales of the Liberty diesel have exceeded Chrysler’s expectations since its introduction in the 2005 model year. More than 11,000 have been sold, the company said.

For 2007, the Toledo, Ohio-built SUV will be available only with a gasoline engine. However, Gutierrez said, “We are still committed to diesel technology.”

Chrysler Group President and Chief Executive Tom LaSorda introduced the diesel-powered 2007 Jeep Grand Cherokee during last week’s Detroit Regional Chamber Mackinac Policy Conference on Mackinac Island. The company also will offer a 2007 Grand Cherokee with a 4.7-liter V-8 engine capable of running on E85 ethanol, a blend of 85 percent ethanol and 15 percent gasoline.

Diesels accounted for only about 3 percent of U.S. vehicle sales last year, compared with 50 percent in Europe. But Chrysler is betting that will change as cleaner diesel fuel reaches the U.S. market this fall and more consumers discover diesel’s improved fuel economy and power.

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