It was reported in August that BMW had canceled plans for a new full-size SUV positioned above the current X5 and X6 to take on rivals like the Range Rover and Mercedes Benz GL. The carmaker’s CEO Norbert Reithofer has now confirmed that development of the luxury SUV, which was to be called the X7, has been discontinued in favor of a range of compact crossover vehicles as well as the introduction of more efficient diesel models in North America.

The new crossover lineup will include production versions of the Mini Crossover and BMW Concept X1 show cars, which made their debut at last week’s Paris Motor Show, while the new diesel models will be added to the X5 and 3-series lineups.

The new Mini crossover is expected to be called the ‘Crossman’ and go on sale in 2010. The X1, meanwhile, will arrive in 2011 and will be marketed as a high-volume model, Reithofer explained to Automotive News.

Before the arrival of the new crossovers, BMW will launch versions of the 2009 3-series sedan and X5 SUV with a twin-turbo 3.0L straight-six diesel engine. In North America the diesel engine will be rated at 265hp (198kW) and peak torque of 425lb-ft (575Nm), and is expected to account for about 15% of sales in the coming years, according to Reithofer.

The decision to the ditch the X7 was made as a direct response to declining profits, falling demand (especially in the U.S.) and tough new emissions and fuel-economy standards being rolled out on both sides of the Atlantic.

During the interview, Reithofer also mentioned future vehicles still under discussions such as the Project i “mega city car” as well as a possible X4 based on the next-generation X3. However, he said neither vehicle had been approved for production.