Chrysler Group on Thursday said it would offer a diesel version of its Jeep Grand Cherokee early next year, the first full-size SUV for sale in the United States with a more fuel-efficient diesel engine.

Chrysler, a unit of DaimlerChrysler AG (DCX), said the turbo diesel engine for the Grand Cherokee would be supplied by Mercedes-Benz, its luxury car brand, and built in Berlin.

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Diesel vehicles represent more than 60 percent of Chrysler sales in Western Europe, but a new generation of diesel engines has yet to catch on in the United States despite improved fuel economy compared with traditional gasoline engines.

With consumer surveys suggesting more car buyers are considering gas alternatives, Chrysler is betting heavily on diesel-based powertrains, which many analysts see as an attractive option to replace the big engines in trucks and SUVs.

Honda Motor Co. announced last month that it would begin selling a new-generation of diesel cars in North America within the next three years, joining Chrysler and Volkswagen AG in backing the gas alternative.

Chrysler said the 3.0-liter diesel engine available in the Grand Cherokee would be up to 30 percent more fuel efficient than a gasoline equivalent.

Diesel engines perform more efficiently than gas engines in part because the fuel mix is more tightly compressed before combustion. But the heavy carbon content of diesel remains a concern for environmentalists.

The new Cherokee model, which will go on sale in the first quarter of 2007, will also run on B5, a blend of 5-percent biodiesel and 95-percent regular diesel, Chrysler said.

Chrysler Group Chief Executive Tom LaSorda, speaking to reporters at a meeting of business leaders and politicians in northern Michigan on Thursday, said the automaker was readying a range of alternative fuel vehicles.

"Stay tuned; we're looking at a lot of other products to bring to the U.S. market," LaSorda said.

LaSorda, who has emerged as a major proponent of ethanol production, said that by changing SUVs and light-trucks to run on a B20 biodiesel the United States could eliminate the need for oil imports from Saudi Arabia.

"I would bet on the next generation having energy dependence and security where people are staying at home instead of going abroad to fight," LaSorda said in reference to the war in Iraq.

Some diesel vehicles are eligible for the same U.S. tax breaks that apply to hybrid electric vehicles, and President George W. Bush has pointed to diesel technology as a way to break what he has called the U.S. "addiction to oil."

LaSorda and his counterparts at General Motors Corp. (GM) and Ford Motor Co. (F) are expecting to meet soon with Bush to discuss energy policy among other topics, the Chrysler chief said.

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