Struggling with Smart Shortages

March 14, 2008
We’ll find out next week whether the little 2008 Smart fortwo coupe wins honors as the World Green Car of the Year. But a successful nod at the 2008 New York Auto Show could actually compound the problems being faced by the Mercedes-Benz sibling brand.

After a slow and painful ramp-up that cost its parent, Daimler AG, billions in losses, the French-made Smart is suddenly running on all cylinders. That’s ironic, as its surge is directly hinged to the long-delayed launch of the two-seat fortwo in the United States. With a preliminary order bank of up to 30,000 customers, Smart is already struggling to meet demand. Actual deliveries have slowly been ramping up from the 1,400 cars handed over to customers in January.

Smart officials would like to get their hands on more fortwo coupes and convertibles. But, for now, Daimler is answering, “hold on.”

“We have to learn how sustainable demand is,” cautioned Daimler CEO Dr. Dieter Zetsche, during an exclusive conversation with The Car Connection. “If we see it is sustainable – which is likely – we would have to decide what to do next.” The options include:

• An additional shift added at the Smart plant, in France’s Alsace-Lorraine region;
• An expansion of that plant;
• An all-new assembly plant.

It would likely be the end of this year, or early 2009 before a decision is made, added Zetsche, on whether and how to handle demand for the Smart fortwo.

A large share of the credit for Smart’s strong start goes to Roger Penske, the racing legend and business entrepreneur, who actually operates the automaker’s U.S. distribution network.

Ironically, Penske almost never got his chance. Daimler has tried numerous times to develop a marketing plan for North America, which it has always seen as critical to Smart’s viability. Short of sales targets, the German company was forced to order a draconian turnaround plan in February 2006 that left the minicar brand with just one model – updated just in time for the U.S. introduction.

After fighting to save the brand, Zetsche is clearly pleased to see the brand being so well-received in the U.S., telling TheCarConnection, “If we didn’t have the fortwo, today, we’d have to invent it.”

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