Early on they earned a reputation for being expensive, slow, powerless, dirty, junk; thanks mostly to GM. GM for whatever reason, didn't want to invest much in a diesel engine, so they cobbled one together from gasoline engine plans, with different heads, crank, cams, etc. The engines were terrible, and it was a well known failure. Maybe it will be forgotten with the death or dementia of the last baby-boomer.

https://en.wikipedia.org/wiki/Oldsmobile_Diesel_engine

http://www.popularmechanics.com/cars/news/vintage-speed/top-...

1) They developed a negative reputation as being stinky, noisy, and complete dogs when it comes to performance.

2) Something to do with the sulfur in US diesel. Up until somewhere around 2005, US diesel had more sulfur than, for example, Europe. I think the issue was that diesel passenger cars would have trouble passing emissions requirements due to the fuel. (Trucks generally have more relaxed requirements)

Edit: Ah, here we go:

http://en.wikipedia.org/wiki/Ultra-low-sulfur_diesel#United_...

Start at the paragraph beginning with "The allowable sulfur content..."

From what I gathered from a quick look at Wikipedia, probably the biggest factor is that diesel engines are best used for high-torque, low-speed applications.

Because they used to stink and rattle.

The capital expense of a turbo diesel engine is unattractive given low U.S. fuel taxes. If fuel costs approached European levels, Americans would go nuts buying them.