Chrysler Group will bring to North America its second diesel-powered SUV next year, but not before taking its breakthrough diesel product off the market.

The auto maker will announce today (June 1) its ’07 Jeep Grand Cherokee will be available with a 3.0L V-6 CRD (common-rail diesel) engine – the same mill that powers the vehicle in Europe.

But the Jeep Liberty CRD, North America’s first diesel-powered midsize SUV when it debuted last spring, ends its high-profile run with the ’06 model year, Ward’s learns.

Chrysler confirms the move, saying the Liberty’s 160-hp 2.8L I-4 CRD will not meet pending Environmental Protection Agency emissions standards.

However, Liberty CRD production for Europe, where it is called the Jeep Cherokee, will continue. And plans to build a European diesel version of the all-new Dodge Nitro SUV, which shares a platform with the Liberty and is expected in showrooms next year, also are unaffected.

“The EPA standards that came out for ’07 are definitely tougher, and we would have to make engineering modifications to the engine and other parts of the vehicle,” a Chrysler spokeswoman tells Ward’s.

“We just couldn’t make a credible business case to do it – especially for a limited-production vehicle,” she says.

Similarly, the diesel-powered Grand Cherokee, which is expected in showrooms by first-quarter 2007, will be available only in 45 U.S. states because it will not meet stringent emissions requirements in California, New York, Massachusetts, Vermont and Maine.

Chrysler gives no indication of its price.

Though built by Mercedes-Benz, the Grand Cherokee’s new 215-hp CRD will not feature the tri-star brand’s revolutionary Bluetec emissions-reducing technology, which is scheduled to debut this fall for the Mercedes E-Class car line.

The ’07 Mercedes-Benz E320 Bluetec features a 210-hp, 3.0L V-6 direct-injection turbodiesel engine that reduces carbon dioxide (CO2) emissions by combining exhaust gas recirculation with components such as an oxidizing catalytic converter and a particulate filter.

Unlike the Grand Cherokee’s 3.0L CRD, however, Bluetec’s performance is contingent on the availability of low-sulfur diesel – which is scheduled to start flowing from U.S. refineries today (June 1).

Chrysler also is to announce today that the ’07 Grand Cherokee will be available with an ethanol-capable 4.7L V-8.

The Grand Cherokee’s diesel, which generates peak torque of 376 lb.-ft. (510 Nm) between 1,600 and 2,800 rpm, can be ordered on the Laredo, Limited and Overland trim levels.

Chrysler anticipates the engine also will make the Grand Cherokee the class leader for towing capability and driving range, with ratings of 7,400 lbs. (3,357 kg) and 425 miles (684 km), respectively.

North American Grand Cherokees will continue to be assembled at Chrysler’s Jefferson Avenue plant in Detroit. The diesel engine is being built at Mercedes’ Berlin Marienfelde plant in Germany.

The Liberty CRD’s engine comes from VM Motori SpA in Italy. DaimlerChrysler AG, corporate parent of both Chrysler and Mercedes, has an ownership stake in VM Motori.

The last North American diesel-powered Liberty was built May 20 at Chrysler’s assembly plant in Toledo, OH, also the future site of Dodge Nitro production.

Chrysler had projected sales of about 5,000 diesel-powered Libertys. To date, however, deliveries total more than 11,000.

“It definitely exceeded our expectations,” the spokeswoman says, adding the decision to end production of the Liberty CRD should not be misconstrued. “We are definitely committed to diesel technology.”

The move to end North American sales of the Liberty CRD comes hard on the heels of a similar decision by Volkswagen of America Inc., which confirms it will drop several diesel cars next year.

Absent from VW’s ’07 lineup will be diesel versions of its Golf, Jetta and Beetle models, a spokesman says.

But VW will continue to offer its Touareg cross/utility vehicle with a 5.0L V-10 diesel, as well as a special-edition ’06 diesel Jetta, which will carry over into next year. Like the ’07 Grand Cherokee, availability will be limited to 45 states.

And in 2008, a new diesel-powered Jetta featuring a 2.0L 4-cyl. TDI will arrive in U.S. showrooms.

As with Chrysler, stricter emissions regulations forced VW out of the diesel market – for now.

“It wasn’t for lack of trying,” a spokesman says, adding “legions” of VW engineers tried in vain to coax the auto maker’s existing technology into compliance.

Meanwhile, American dealers have mixed reaction to the demise of the Liberty CRD.

“Love ’em,” says Nick Schnelle, new-car manager at John Elway Chrysler Jeep on Broadway in Littleton, CO. His customers were drawn to its peak torque of 295 lb.-ft. (392 Nm), compared with 235 lb.-ft (319 Nm) for a Liberty equipped with the standard gasoline-fueled 3.7L V-6.

Mike Wagner, sales manager of Minneapolis-based Bloomington Chrysler Jeep Inc., is encouraged by the prospect of future diesels. But he will not miss the Liberty CRD.

“I had maybe a couple calls on dealer trades,” Wagner tells Ward’s. “I let ’em have them because they were collecting dust over here.”

While Chrysler maintains the Liberty CRD is a “strong seller,” it currently is being sold with a $3,000 dealer incentive and a $2,000 consumer cash incentive. Zero-percent financing also is available for 60 months, while the auto maker is offering 3.9% financing for 72 months.