I estimate that at this point the Smart project has cost DaimlerChrysler more than $5 billion.
Jerry Flint - ForbesAutos.com – August 29, 2006
2007/2008 Smart ForTwo – Possibly an EPA rating of 40/40 City/highway?
The worst traffic, the tightest parking that I have ever seen is in Paris. Compared to Paris, New York City is heaven, but I saw no road rage over there. Taxies actually stopped to let pedestrians cross the street. I didn't see obscene hand gestures or hear much honking. I suppose the French have not invented words for road rage yet, and they do not do anything they can't pronounce.
But what I did see were Smart cars, lots of them. Now they call the little two-seater the "smart" with no capital S. I will call it "Smart" in this article, to avoid confusion. These tiny cars were easy to navigate through the narrowest streets and squeeze into parking spaces fit for a kiddy bike. People tell me there are even more of these cars in Rome. Paris and Rome are Smart cities. In fact, DaimlerChrysler has sold more than 750,000 Smarts worldwide since its introduction in October 1998. Even the car's full name is cute: the Smart Fortwo.
But make no mistake. Smart is an automobile disaster. The Ford Motor Edsel of the late 1950s was a home run compared to the Smart. Several years ago, one of the highest-ranking Daimler executives told me that Smart losses had reached $3 billion. That was years ago, and they have just taken another $1 billion write-off. So I estimate that at this point the Smart project has cost DaimlerChrysler more than $5 billion.
Why? Because it was a dumb idea to begin with. You might recall the concept came from the Swatch watch people. A cute, little car with side panels that you could change to match your dress. Are you kidding? "Honey, do something for me. I am wearing red to Le Wal-Mart. Could you go out and change the body panels on the car to the black ones, s'il vous plaξt?"
Daimler's board accepted the idea without doing an extensive study. What came out is an underpowered two-seat car. Smart also built a new factory, with capacity to build 220,000 units per year, surrounded by a supplier park with new factories. I figure the annual breakeven was 200,000 vehicles.
No two-seater in the world had sold anywhere near 200,000 units per year. Usually two seaters are sleek, romantic roadsters, and fast, too. That is not Smart. Since its introduction, Smart sales have hovered around 100,000 per year, half the initial production capacity.
In short, the Smart is a car that cannot carry more than two, cannot carry much and cannot go fast. This car is not good for a run down to the Rivera or on the super highways of Europe. True, the Smart is good to park, but people usually buy cars to go places and carry things, not to park.
The new DaimlerChrysler management, headed by Dieter Zetsche, considered killing the car. That has not happened. First, it is always embarrassing for management to admit to a mistake, and second, the factory in France was a symbol of German-French partnership, and it is unpleasant politically for Germans to lay off all those Frenchmen.
Now, instead of being canceled, Smart is coming to the United States. This is actually the second attempt to bring the car to this market. A few years ago, Mercedes set up an operation to sell the car in the U.S. but then cancelled the project. Now management is being smarter about it: Instead of selling the car through its Mercedes or Chrysler channels, they have picked United Auto Group as the exclusive distributor.
United Auto, which Roger Penske runs, will recruit dealers to sell the car. This is a good move. For starters, Penske is brilliant, knows how to hold down costs and how to sell cars. This also keeps any failure risk away from the parent company.
DaimlerChrysler is not looking for big sales; my guess is somewhere between 15,000 and 30,000 units per year, through 30 to 50 dealers, at first. Those are modest numbers and a tiny slice of a U.S. auto market of 16.5 million. For reference, BMW sells 40,000 Minis per year in the U.S.
No doubt, there will be lots of publicity in New York and Los Angeles, featuring celebrities in their politically correct little cars. But the Smart is too small for the U.S. The present model is just 98 inches long. In contrast, the Mini is 144 inches long; a Chevy Impala is 200 inches. I have driven a Smart, and it can get scary. Entering a freeway with a Smart is not a pleasant experience, and you don't want to be alongside a Chevrolet Suburban when the driver suddenly decides to change lanes.
Smart will have a new model when the U.S. deliveries start early in 2008, and it could be a few inches longer, but we are still talking about a tiny car. The present plan is to offer the standard coupe and a convertible. At one time, DaimlerChrysler had planned a larger four-seater and a small utility vehicle for the U.S., but that was a "journey that was not taking us anywhere," said Zetsche, who also predicts Smart will be profitable next year, meaning they have written off much of the cost.
Another problem: The price here for the French-built car could be as much as $15,000, thanks to the strong euro and mandated safety and emissions equipment. DaimlerChrysler currently sells the Smart in Canada, with a diesel engine, at a rate of fewer than 4,000 per year. For about the same money, you can buy a number of regular small sedans, with backseats, trunks and engines with at least 100 hp. In short, the alternatives to Smart are real cars.
You have heard the expression, "rich man's toy"? The Smart is it.