Daimler axes Smart roadster

The German-US car giant DaimlerChrysler unveiled a radical restructuring programme yesterday to try to save production of its innovative yet loss-making Smart car brand. The move will cost the company up to €1.2bn and lead to an estimated 700 jobs cuts.

The German-US car giant DaimlerChrysler unveiled a radical restructuring programme yesterday to try to save production of its innovative yet loss-making Smart car brand. The move will cost the company up to €1.2bn and lead to an estimated 700 jobs cuts.

Analysts said the measures, which amount to an admission by the company that the compact car has been a market failure since it was launched in 1998, would seriously undermine its aim to secure profits of more than €5.8bn this year.

Under the cost-cutting plan, Daimler will end production of the Smart roadster this year and abandon its planned "Formore" sports utility vehicle. Instead the company is to focus on developing a successor to the original two-door model and co-operatingwith Japan's Mitsubishi Motors to produce a four-seat "Forfour" model.

"The new business model aims to put the small car brand on a financially sound basis," DaimlerChrysler said.

The company, whose chief executive is Jürgen Schrempp, also announced measures to cut fixed costs at its Smart production unit by 30 per cent within the next two years. The move is expected to lead to the loss of some 700 jobs at its plants in Boeblingen near Stuttgart and at Hambach in France.

But company officials noted that a complete shutdown of Smart production would lead to more job losses and cost the company far more than the planned €1.2bn. Under the restructuring programme, Smart sales and service will now largely be taken over by Daimler's sister company Mercedes-Benz.

Smart has failed to turn in a profit since its launch, amid a fanfare of publicity, in 1998. German motorists, used to powerful limousines built for the autobahn, have remained sceptical of a car suited principally for city use. In recent years only the revamped and more powerful BMW Mini has managed to secure a significant section of the German small car market.

Last year Daimler sold only 140,000 Smart vehicles - a figure which undercut its already revised target of 155,000. The Smart project incurred operating losses of more than €400m last year. The two-seater Smart had been promoted in the US but has not gone on sale there. DaimlerChrysler had originally planned to launch the brand next year with the now discontinued "Formore."

Some foreign analysts were sceptical that the cost-cutting programme would be sufficient to rescue the Smart brand. "The restructuring scheme is not aggressive enough, DaimlerChrysler has to do more," a spokesman for Credit Suisse First Boston said.

The problems surrounding Smart were the second serious setback suffered by the car giant this week. The group was forced to launch its biggest recall action in company history when some 1.3 million top-range Mercedes Benz limousines were taken back to the workshop to iron out electronics and brake system defects.