smart: Seeking Strong, Steadfast Partner; Must Have Good Cash Flow
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Will DaimlerChryslers smart Division Ever Enter the U.S. Market?
Over the course of the past year, DaimlerChryslers smart division (lower case intentional) has had a lifeline wilder than energy stocks. The brand first came under fire when financial advisor MorganStanley urged DCX executives to axe the loss-making brand. Dodging the bullet, smart was forced to restructure, slimming down its portfolio, ending production of its sporty two-seat roadster and canceling its formore compact SUV. Even worse, despite efforts to show its products at major U.S. auto shows, uncertain demand and the lack of the formore means that Californias ZAP (Zero Air Pollution) has beaten the official importers in selling the bite-sized fortwo - or at least getting clearance to do so.
The latest news comes from the boardroom, where German newspaper Handelsblatt reports that smart is looking for a new partner. The article stated that a member of the board of supervisors at DCX said, “We have to try to find new cooperation partners for smart production.” Of all global carmakers, the paper suggested Volkswagen as a potential candidate. VWs response: industry rumors and simple speculation.
Could smart survive without a partner? Since day one, parent company Mercedes-Benz has always involved smart, formerly known as MCC (Micro Car Company) with another firm. Originally, the Eco-Speedster and Eco-Sprinter, the two demonstrator vehicles from which MCC was built up upon, was the fruit of a partnership between Mercedes-Benz and Swiss watchmaker Hayek. Hayek bailed, and since then, smart has gone on to tie the knot with Mitsubishi who helped develop the forfour alongside its Colt subcompact.
DaimlerChryslers rough breakup with Mitsubishi has had some ill-effects on its own products. While both sides are on the eve of announcing their new compact cars, engineered and built on a common platform at this years Frankfurt motor show, news is grim for smart. The German small car specialist will continue to build the forfour at Mitsubishis Nedcar assembly plant in Holland, but it is doubtful if the car will survive beyond the first generation. Talks have broken down and subsequent smart-Mitsubishi designs are not expected. Production of future smart vehicles will most likely be localized at its own plant, located in northern France.
Further complicating the situation, TheCarConnection.com reports that DCX may try to kill the smart brand name completely. While this idea was visited earlier this year, it has once again surfaced with news that current CEO Jurgen Schrempp will be replaced by Dieter Zetsche later this year. The website points out that smart was Schrempps “pet”, and that Zetsche would have “less patience with the perennial loss-making division.” However, after investing millions upon millions of euro into the economy carmaker, another restructuring policy that would lump smarts development team in with M-B would be issued in order to cut costs.
In the meantime, smart will continue development of the next generation fortwo. The original design is now seven years old, and despite the addition of a convertible model, more power and a mid-life update, it is now beginning to show its edges.
DaimlerChrysler maintains that it will not abandon its quest to enter smart into the U.S. market officially, and is expected to use the second-generation fortwo to launch the brand when it does. The question now asked, is that with shrinking budgets and a CEO with little patience for money loss, will smart last until then?
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