U.S. sales of Daimler's Smart brand minicar plummet

By Chris Reiter
Monday, January 11, 2010

Daimler's two-year effort to win over U.S. drivers with a thrifty, plastic-clad minicar is running out of steam, adding urgency to the German automaker's effort to find a partner for the Smart brand.

The U.S. debut of the urban two-seater is foundering after a promising start in 2008, when North American sales propelled Smart to its first profit. With just one model, the ForTwo, the brand's U.S. sales plunge 41 percent, to 14,600 cars, last year, more than the 15 percent decline by Daimler's Mercedes-Benz.

"Smart's not a car in the traditional sense. It's a high-style alternative to public transportation," said Jim Hall, principal of consulting firm 2953 Analytics who has worked with General Motors and Toyota on model development. "The problem for Smart is that fashion tends to be fleeting."

Smart's fading fortunes in the United States highlight Daimler's need to find a partner to expand the model lineup and lower costs as it commits $2 billion to boost compact-car offerings. The manufacturer is in talks with Renault and other carmakers on potential "close-knit" cooperation, chief executive Dieter Zetsche said Dec. 17.

"The lack of success in small cars has been a big strategic weakness, and Daimler likely needs a partner to turn things around," said Stefan Bratzel, director of the automotive institute at the University of Applied Sciences in Bergisch Gladbach, Germany.

Cheaper alternatives

The brand sputtered with new models, and consumers favored BMW's Mini. There are better-value alternatives to the ForTwo, which starts at $11,900, Hall said.

Smart's weakening in the United States accelerated in the fourth quarter, when sales totaled 2,174, a 66 percent contraction from a year earlier. BMW's Mini had 10,229 U.S. sales in the period, a decline of 24 percent. In December, Smart sales were lower than GM's Saab, which is in the process of being closed or sold.

"Smart is very important for Daimler," Bratzel said. "If you want to survive as a global carmaker, you need small cars because that's where the growth is, especially in markets such as India and China."

At the Detroit auto Show Monday, Smart will introduce a "chrome yellow" special edition and present a car-sharing project piloted in Austin. The size of the display is unchanged from a year ago.

"We still believe the Smart ForTwo is the right car at the right time in the right place," said Ken Kettenbeil, a Smart USA spokesman.

Penske Automotive Group, the sole Smart distributor in the United States, moved on Jan. 4 to "reinvigorate" sales by naming Jill Lajdziak as president of Smart USA. The former general manager of GM's Saturn aims to bolster awareness of the minicar.

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