VW still has some cache with the young, but has been largely displaced by the Japanese.

Volkswagen of America held a party yesterday for its bigger and cheaper Jetta in New York City.

By all accounts, everybody had a swell time at the unveiling of the 2011 version of a sedan that dates back to 1979 when a trunk was grafted onto a hatchback Golf model. An all-new Golf was introduced last year in Europe.

The “all-new” Jetta starts at $16,000, about $2,000 less expensive than the smaller Jetta it replaces. However, executives admit that the actual starting price will be $17,000, if you include the optional automatic transmission that most Americans prefer.

The Jetta pricing and increase in size reflect the less than swell time that VW has been having trying to compete against far larger and more successful Japanese and Korean brands in the United States. Year-to-date, the Jetta has sold about 46,000 models while, for example, competing Toyota Corolla and Honda Civic models are each selling at well over 100,000 units during the same time period.

At 182.7-inches long, the five-passenger Jetta compact is more than 3.5 inches longer than its predecessors. In addition, an extended wheelbase is said to provide the “best in class” rear leg room of 38.1 inches, a 2.6-inch gain.   

The 2011 and future Jetta models will be built in Mexico. (See Mexican President Visits VW’s Puebla Plant) VW is also preparing a larger sedan for assembly at its new plant in Tennessee, which is due to open during 2011. The $1 billion facility – annual capacity of 150,000 vehicles – will produce a new mid-size sedan designed for the United States. The Chattanooga plant is the first currency hedging move by VW since VW abandoned its Rabbit (Golf) factory in Pennsylvania in 1988 after a four year run that saw continuously declining sales of a mediocre hatchback.

“Today marks the beginning of a new era for Volkswagen and for Jetta,” said Stefan Jacoby, CEO of Volkswagen Group of America. “The all-new 2011 Jetta is a class-up driving experience with the kind of styling, design and power under the hood normally found in more expensive luxury cars. At an extremely attractive price, this car is sophisticated, fun to drive and practical,” claimed Jacoby.

Four engines will be available in the U.S. and Canada, including a 2.0-liter turbo-diesel direct injection (TDI) with 236 lb-ft. of torque (320 Newton-meters). With it, VW says Jetta accelerates from 0-60 mph in 8.7 seconds. Additional engines include three gasoline versions – 2.0, 2.5 R5, and the 2.0 TSI.

All Jetta engines will be offered with a manual transmission as standard equipment. An automatic transmission will also be available with each engine version as an option. On the new 2.0-liter TDI and 2.0-liter TSI, Volkswagen will offer the 6-speed dual clutch design – one of the most fuel efficient automatic transmissions.