April 4, 2005

Smart announces new business model

Stuttgart, Germany – DaimlerChrysler has announced a new business model aimed at putting the Smart brand on a financially sound basis, with the goal of breaking even in 2007.

The new concept calls for intensified development of the successor to the Smart Fortwo, including fulfilling the requirements for the U.S. market. The next generation of the three-cylinder gasoline engine will also be used by other manufacturers, with resulting economies of scale that will substantially improve the cost position of the engine project.

Cooperation with Mitsubishi Motors on the Smart Forfour will be continued, and Smart roadster production will be terminated at the end of 2005. The smart SUV project will be discontinued.

A key component of the business model is a restructuring program, in which earnings are to be increased by 600 million Euros in the year 2007, and a reduction of fixed costs by around 30 per cent within the next two years, while improving productivity. It also includes a fundamental organizational change, with key tasks in development, sales, procurement, after sales and service integrated into the respective areas of Mercedes-Benz Passenger Cars. The number of Smart outlets will be increased by about 25 per cent using the shop-in-shop concept.

DaimlerChrysler assumes the restructuring expenses incurred in 2005 will total up to 1.2 billion Euros.

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