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For many years, Zap! and DaimlerChrysler have been in and out of court over a large order of Smart cars (see this USA Today article from March 2006 for a bit of history). Basically, in 2005, Zap ordered a $1 billion batch of Smart cars but ran into trouble when it actually tried to get their hands on them and sell them. This week, that court battle continued when the Court of Appeal for the State of California heard oral arguments in a lawsuit brought by Zap! against DaimlerChrysler, Smart GMBH and Smart Chairman Ulrich Walker. As our tipster Domenick says, "This could get interesting." Zap! has issued a press release about the court proceedings, and says we should have a decision in the case, which revolves around which jurisdiction should actually hear Zap!'s case, in the next 90 days. Smart itself will begin selling the Smart ForTwo in the U.S. in January.

Here's how Zap! describes the current legal situation:

In the preceding year and a half, the defendants have engaged in activity that inadvertently proves the truth of those initial allegations made against them by ZAP. ZAP's initial complaint alleged that the defendants engaged in unlawful actions in order to eliminate ZAP as a competitor in the California market. Since the trial court dismissal on jurisdictional grounds, defendants have proven their true intentions to bring the Smart ForTwo to California and to eliminate any competition standing in its way. (there's more after the break)

Read more about Zap!'s Americanized Smart car here. We'll keep an eye out for the court's decision when it comes down. Alternately, we'll wait for Domenick to tip us. :)

[Source: Zap!, USA Today, h/t to Domenick]

More from Zap!'s press release:

The lawsuit cites eight different counts, including intentional interference with prospective economic relations, negligent interference, trade libel, defamation, breach of contract to negotiate in good faith, breach of implied covenant of good faith and fair dealing, common law unfair competition, and statutory unfair competition. ZAP is seeking damages in excess of $500 million.

As the Smart Car prepares to launch in 2008, ZAP CEO Steve Schneider noted that DaimlerChrysler and the Smart division, at the expense of ZAP, have parlayed their struggling business unit into what they say could be its best-selling vehicle. Smart Car sought to introduce the car into the United States, but reversed the decision on the grounds that there was not enough demand. They subsequently made the decision to introduce an SUV called the ForFour, which was also reversed and the business unit for Smart in the USA was shut down in 2004.

When ZAP started selling its first units of the Smart Car Americanized by ZAP in 2005, DaimlerChrysler cited record losses in excess of $5 billion on the Smart Car while closing down plants and laying off employees. ZAP had collected signed purchase orders totaling $2.2 billion, representing 156,000 cars and opened discussions with DaimlerChrysler in the hopes of expanding on its business plans by ordering the vehicles directly from the manufacturer. ZAP secured a $425 million revolving credit facility to assist with the purchase of the Smart Cars.


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    • 1 Second Ago
  • 9 Comments
      • 7 Years Ago
      A couple of years ago I was thinking, "Gee, Daimler really should be trying to sell it's Smart cars over here." Mainly, because I was interested in maybe buying one. So, I looked it up on the web. I found a Daimler website for the Smart in America but no, they weren't selling them here. So I thought, "Gee, someone could make a good business out of importing these things." A little more digging and I found ZAP was trying to do that but there were issues with Daimler trying to undermine their efforts. Anyway, I have just been sort of interested in this little debacle since then. It has been hard to find much detail about it.
      I think if ZAP can show it has actual signed purchase orders in the amount claimed, I don't see why it can't have some sort of case. Of course, I'm not a lawyer, nor have I ever played one on tv.
      • 7 Years Ago
      Why would DaimlerChrysler bail on such a huge deal?
      • 7 Years Ago
      Maybe because Zap has no money?
      • 7 Years Ago
      I really can't understand what all the fighting is about. Perhaps Daimler want to bring all the SMARTs they can't sell in Europe over to the US.

      If you go to the www.acea.be (auto constructors association) website you will notice that Smart this year have dropped 15% in sales in Europe up to October. In 2006 SMART dropped a mere 22% in sales across Europe compared with 2005. These figures are compounded, which means that if the trend this year continues through to December, sales have fallen 33% since 2005 (33% mind you, not 3.3).

      But how can SMART sales have fallen to the extent that Europeans don't even want to go near one anymore? I would put down such a huge variation to a car which has a very high reliance on marketing, an absurd price, and which technically leaves a lot to be desired. The marketing bubble burst. Poof!
      • 7 Years Ago
      I'm a lawyer and frankly a monkey could put an appeal such as this one together. Why waste the filing fees? I say this because ZAP's claims include: intentional interference with prospective economic relations, negligent interference, trade libel, defamation, breach of contract to negotiate in good faith, breach of implied covenant of good faith and fair dealing, common law unfair competition, and statutory unfair competition. ZAP is seeking damages in excess of $500 million. Wow...nothing says speculative like these claims. Smoke and mirrors. Go file another press release and lawsuit...perhaps against me for defamation.
      • 7 Years Ago
      if you wonder why America is corporately unfriendly toward electric cars, ask yourself, why do economy versions of cars in Europe get 50 mpg but in USA, the smallest engine version of a car you can get will top out at 34 mpg??? USA is controlled by corporations such as Exxon/Haliburton that thrive on massive oil consumption.
      • 7 Years Ago
      1. Not mentioned is that Zap put a $12,000 to $15,000 greed mark-up on Smart ForTwo's!!! So, Daimler giving the franchise to Roger Penske was a good thing! Zap should crawl back into its hole, and be ashamed for its blatant profiteering on the recent economy trend! Now, with Smart's being sold for the European market price, used Canadian ForTwo's on ebay should be coming down in price!
      • 7 Years Ago
      You have to give credit where crdit is due - ZAP was ahead of the curve in realizing there was a good deal of demand for this micro-cars in the US, even though the conventional wisdom was that bigger is better in both dimensions and horsepower. The problem is that they tried to force Daimler into handing them the franchise, which Daimler didn't want to do for whatever reason.

      @Domenick

      having a signed purchase order is meaningless from a legal standpoint. It just represents that there were supposedly that many vehicles on order from distributors and ZAP was presenting Daimler with a "purchase request." Daimler never entered into any legal agreement to appoint ZAP as a distributor of Smart Cars. ZAP was trying to line up all the distribution and then squeeze Daimler into making them the North American distributor.

      At the end of the day, Daimler entered an agreement with Penske to distribute the Smart Car in the US. Penske has an extraordinary amount of resources dealer management, service, roadside assistance, etc. etc. They are probably the best positioned for nationwide distribution of a new market entrant.
      • 7 Years Ago
      @Darryl I understand that purchase orders hold no specific legal weight. I just thought it might bolster their argument. I doubt they can actually win this but I can't help but cheer for the little guy. It's just who I am.
      I think waiting for Penske might have been a mistake though. The SMART is now three years longer in the tooth and better alternatives will be washing up on our shores soon. I myself am now holding out for a BEV before I purchase a new car. I want to reward an innovator with my business.
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