Volkswagen Group of America is considering a luxury vehicle as its technical and environmental flagship, as well as a family of small cars, CEO Stefan Jacoby says.

On the high end, that could mean combining the features of a Phaeton-like sedan with VW's turbodiesel technology, Jacoby says.

"For Volkswagen to be a bigger thing, we must offer a broader range of vehicles to meet the needs and wants of a diverse American customer universe," he says.

Jacoby is leading the charge to turn VW around with vehicles more suitable for U.S. buyers.

VW has an ambitious plan to increase sales to 800,000 units by 2018. Last year, it sold 230,572 vehicles in the United States.

Jacoby didn't provide details about the flagship. But he and other VW executives have hinted at returning the ill-fated Phaeton luxury car to the United States in a different guise — without many luxury features and only in the shorter wheelbase.

The smaller Phaeton could premiere in several years when the range is redesigned. A source said VW would not bring back the current-generation Phaeton.

The Phaeton was yanked out of the United States in 2006 because of slow sales that even incentives as high as $10,000 did not revive.

The only Phaeton model sold in the United States was a $70,000-plus, long-wheelbase version.

A shorter, cheaper model with an optional diesel engine is available in Europe. VW brought only the most expensive Phaeton, as well as the high-priced Touareg SUV, here to try to elevate the brand into the ranks of German premium players.

Those plans failed. Although the Touareg is still on sale here, its U.S. sales have dwindled to 8,812 in 2007, far below VW expectations.

Jacoby says the Touareg and the coupelike Passat CC luxury sedan will be part of the brand's lineup of premium vehicles. The CC will be priced below $27,000, says Jacoby.

VW's small-car possibilities center on the up! concept family. VW has shown versions of the up! at the Frankfurt, Tokyo and Los Angeles auto shows and is deciding whether to launch up! vehicles in the United States.

German executives say the larger-wheelbase space up! blue at Los Angeles is the likely size for the United States.

The space up! blue is a rear-wheel-drive mini-minivan with a length of 144.9 inches — still considerably shorter than the old Microbus. VW has hinted that a diesel version could be on sale here in two to three years.