- The Washington Times - Wednesday, March 2, 2005

Mercedes-Benz’s plan to bring its smart vehicles — small vehicles designed to attract urban youth — to the United States is looking iffier by the day. The iffiniess first developed in the weeks leading up to the North American International Auto Show in Detroit in January. Earlier in the fall, smart’s U.S. office confirmed that the show would serve as the launching pad for the newest brand from Mercedes-Benz. The German automaker had already announced plans to set up a network of 80 Mercedes-Benz dealers in the nation’s top 50 cities to sell the smart brand under a separate franchise and had begun recruiting those dealers.

The Detroit show was also to have been the stage for the worldwide debut of a thinly veiled prototype of smart’s first vehicle to be sold in the United States, the formore. The small four-door, four-seat — thus the name — all-wheel-drive utility built in Brazil was to have gone on sale in the second half of 2006 as the first smart model in the United States. In the weeks leading up to the big introduction, word began to leak from Germany that the formore concept would not, after all, be shown in Detroit.

The company spin was that the press had gotten it all wrong about the concept introduction. As it turns out, however, one side internally was arguing it was too early to show the concept with its launch still two years away, while the other side was insisting it was none too soon to lay groundwork for the brand. About the same time, word also leaked that Mercedes-Benz had stopped development of the formore, which may be canceled altogether.

More recently, the company has said the financial losses at smart, which has never made money, are unacceptable and all options are being considered to make smart turn a profit.

Ultimately, smart did have an exhibit at the Detroit show, displaying models not intended for the United States, but ones sold in Europe and Canada.

But the Detroit show may be as close as the smart cars get to U.S. soil — at least under the auspices of Mercedes-Benz. Smart was conceived in the 1990s by Mercedes-Benz in Europe as a vehicle to draw young, hip, urban drivers to the Mercedes brand. It also was an experiment in how to manufacture and retail cars in an innovative manner. In the beginning, in fact, the Swatch watch company was a partner in the venture, which generated the idea to sell the smart cars in displays the way Swatch watches are sold. Indeed, some smart dealerships in Europe are glass towers that display the colorful smarts on various levels.

The original factory where smarts were built was an innovative cooperative venture with suppliers. Final assembly was done in the center hub, with suppliers producing parts in the airport-terminallike spokes that fed into the hub. But smart has never delivered the sales Mercedes-Benz expected, to say nothing of a profit. The original target of 300,000 unit sales a year has been scaled back to 155,000 in 2004. And the goal to make a profit has been pushed back two years to 2006, the year it is supposed to go on sale in the United States.

The impact of smart’s losses is being felt companywide.To complicate matters further, a Northern California electric vehicle maker, Zap, has won approval from the Environmental Protection Agency to sell two-seat microcars, named fortwo, in the United States. It claims it has a few million dollars’ worth of orders for the microcar.

Zap does not buy smarts through DaimlerChrysler, but through a partnership with an individual who gets the cars from dealers in Europe and imports them to the United States, for modification to meet U.S. crash and emissions standards.

Zap intends to sell 15,000 smart cars a year in the United States and have 150 dealers signed by the middle of 2005. It expects to sell the fortwo for $15,000 to $25,000, substantially more than the approximate $10,000 base price in Europe.

I would say the handwriting is on the wall. It seems all that is left is for Mercedes-Benz to officially announce that the smart plans for the United States are off.


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