Volkswagen intends to expand its clean-diesel lineup by 2008. The first step will be the returning of the Jetta TDI on the North American market next spring. Also, Volkswagen has under consideration a 2.0-liter diesel engine for the Rabbit.

"This hasn't been decided, but it is under discussion at the moment to put it also into the Rabbit," Krause says. Also Volkswagen unveiled a diesel concept version of the Tiguan small crossover, which arrives in mid-2008, at the 2007 Los Angeles Auto Show.

The Jetta TDI will meet emissions standards in all 50 states, including the most stringent Tier 2 Bin 5 rules limiting nitrogen oxide emissions to 0.05 grams per mile. Previously, diesel sales were limited to 45 states because of emission rules, keeping VW out of key markets such as New York and California.

VW did not build a 2007 Jetta diesel, leaving U.S. dealers without a diesel since 2006 Jetta TDIs sold out. About 30 percent of Jettas sold in the United States are diesel.