"We'll pull the Phaeton from the US market from the summer of 2006, the start of the new model year," a VW spokesman said. The spokesman attributed the decision to the poor sales in the US.

"We have to concentrate first on our core business and on ways of returning to the old level of sales of models such as the Passat, the Jetta and the New Beetle," he said.

VW booked a loss of 907 million euros ($1 billion) in the US and Canada last year and was penciling in a loss of a similar magnitude again this year.

Sales of the Phaeton have disappointed, despite price discounts. Last year, VW sold just 6,000 Phaeton cars, a long way short of the initial goal of 13,000.