• Feb 25, 2011
On or off the track, Roger Penske is a force to be reckoned with. His team has taken the victory lap 15 times at the Indianapolis 500 and his business ventures have made him one of America's richest and most powerful entrepreneurs.

Sure, the dapper, silver-haired septuagenarian has had his failures, but they're few and far between – so it came as a stunning surprise when word came that, just days after officials from the Penske Automotive Group expressed their commitment to stand by the struggling Smart, they were given their walking papers by Daimler AG, which produces the minicar brand.

Apparently, the person most surprised may have been Roger Penske himself, as all indications suggest he may have been blindsided by the decision to pull the Smart franchise.

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Paul EisensteinPaul A. Eisenstein is Publisher of TheDetroitBureau.com, and a 30-year veteran of the automotive beat. His editorials bring his unique perspective and deep understanding of the auto world to Autoblog readers on a regular basis.


[Image: Todd Warshaw/Getty]

The simple fact is that Smart isn't selling well anywhere.
As it stands, Daimler will consolidate Smart operations with its high-line Mercedes-Benz brand. It's a disappointing end for Penske's short-lived subsidiary, which was launched here in the States in 2008, after Daimler spent years dithering, unable to come up with a business strategy of its own that would make sense for Smart.

Not that Penske has had an easy time of it. The brand got off to a good start three years ago, largely due to serendipitous timing. It debuted just as U.S. fuel prices soared to an all-time record. But as soon as pump prices slipped below $4 a gallon, Smart sales hit the skids, last year dipping to barely a quarter of their previous peak.

Who is to blame? Insiders say Daimler managers, all the way up to CEO Dieter Zetsche, have been frustrated by Penske's failure to invest more in marketing. And the lack of a big dollar network TV budget probably hasn't helped. But it might not have done much, anyway. The simple fact is that Smart isn't selling well anywhere.

And here in the U.S., the brand has a lot of challenges. Though small car sales have been climbing in recent years, the Smart Fortwo is simply too small for most American motorists. And too old. The product has barely been changed since the first car rolled into showrooms over a dozen years ago. For those who could accept the idea of driving a Fortwo next to a big 18-wheeler there were other problems, notably including one of the clunkiest transmissions on the road. And the payoff? Fuel economy that's not all that better than substantially bigger vehicles – in some cases, actually worse, like the Ford Fiesta or Hyundai Elantra.

Sources say the move came with little to no warning.
Unfortunately, Daimler killed off everything but the Fortwo, including a bigger, more modern crossover – a sort of Smart take on the Mini Countryman – before the brand launched here. True, a recently-inked deal between Daimler and Renault was to flesh out the Smart product line, but not until 2014.

Desperation often drives creativity, and so in the meantime, Penske's team, led by former Saturn boss Jill Lajdziak, had hoped to fill in the gaps by signing a separate deal with Nissan (ironically, Renault's Japanese alliance partner). A four-seat Smart, developed by Nissan specifically for the U.S. market, was to have debuted later this year. Despite a multi-million-dollar investment, that project has now been scrapped by Daimler, which appears willing to let potential U.S. buyers wait for the Renault project to come to fruition.

Will there be much left of Smart by then? That will likely depend on a variety of factors, including fuel prices, which some experts reckon could surge to $5 or more a gallon as the global economy recovers. But, if anything, there'll be plenty more competition by 2014, notably including Fiat's various 500 models. True, new product often builds demand but Daimler won't be able to get away with a mediocre offering the next time around.

Diplomacy hasn't necessarily been a strong point for the Stuttgart maker.
In typical fashion, the 74-year-old Penske has maintained a gracious air as he describes the transition of the Smart brand to Mercedes. But he has reason to be fuming privately.

The entrepreneur certainly showed no hint that change was in store when he personally put in an appearance, earlier this month, as the first retail customer took delivery of a Smart ED – short for Electric Drive. Nor did Lajdziak, who spent a day at the Chicago Auto Show telling anyone who'd listen just how committed Penske was to the Smart brand.

Did Penske have any advance notice? If so, they kept it well hidden, but sources say the move came with little to no warning.

Why change now? It's anyone's guess why Daimler acted so abruptly. The timing appears to match a global realignment that will effectively make Smart a part of the Mercedes brand. And perhaps the Germans felt they had to ramp up marketing now or forever accept that the little brand was going to slide off the American radar screen.

Then again, as anyone who followed the DaimlerChrysler saga must recognize, diplomacy hasn't necessarily been a strong point for the Stuttgart maker.


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    • 1 Second Ago
  • 32 Comments
      • 3 Years Ago
      Its a niche car that reached market penetration sooner than later...Globally.

      No idea how they plan to make it to 2014 when its this bad already...
      • 3 Years Ago
      Penske is the new Chrysler.
      • 3 Years Ago
      He should consider himself lucky to be free of the clowns at Dumbler.
      • 3 Years Ago
      Roger is a very shrewd businessman.

      The Nissan strategy was win-win: either Daimler lets smart/Nissan proceed and the dealers have a nice product to sell; or Daimler objects to the concept enough to compel them to take back the brand. Status quo was unsustainable for the dealers, and without dealers you can't sell cars.
      • 3 Years Ago
      Ah Daimler management...Zieter and the jungen...what a bunch of clowns. Their handling of Chrysler was a true disaster...incompetence to the point you're left asking, "were they just stupid or were they TRYING to kill the company". So, my hatred for them aside, let's simply point out that selling Mercedes here...high price point (for the most part), low volume...is pretty easy. Our market is huge, so the fact they DO sell cars doesn't mean Daimler management REALLY knows what they are doing.

      After reading the above article and comments about Smart, it bears out how clueless Daimler's managment truly is in regards to the U.S. market.

      Some basic points about how awful the Smart is being marketed: One, price. For the price of a Smart, you're getting a two seater. American consumers can find four-door offerings from many other makers at the same price. Two, Styling/Model Type. Do Americans really want a two-seater? I'd say not for the forseeable future. I'm sure there are U.S. consumers who want a small, "parking-friendly" car...but I don't know any. I'd argue that Americans still want a larger car...even after the recent gas price surges over the past couple of years. Sure the gas price jump put a huge dent in SUV sales, and caused most manufacturers to alter their business model and the reliance on big SUV profits, but it didn't truly change the American consumer's taste for larger cars.

      Three, as pointed out in the article, the Smart is not fuel efficient. If the car is THAT small, and there are cars in the next two larger segments with BETTER mileage, who would buy the Smart? Lastly...Daimler's management picking of Renault to 'fix' the Smart lineup...big mistake. Renault knows no more about our market then Daimler...so it'll be the blind leading the blind. Good luck my fruende.
      • 3 Years Ago
      It's all about US fed mileage requirements to be met in the bear future for the brand collectively. MBz needs the "higher" milage vehicle to raise their stats. That could have been anticipated by the big P group but left unspoken. I love my brabus smart. (BonB) paddle shifts turn the the granny trans into sport response. Very nice transition and nimble too boot. Now I can take my smart to where I service my ml350. Conveniently.
      • 3 Years Ago
      It's amazing how people keep missing the point of the Smart car - it's not MPGs, it's parking. Pure and simple. Saving $40-50 per day in NYC parking garages. On the rare occation you can't find a spot - ICON Parking has a 50% Smart car discount -

      Let's call it $35/day * 260 work days/year = $9,100 savings

      In less than 2 years, the car pays for itself.
        • 3 Years Ago
        The point of the smart lies in the heritage of it's name - Smart Mercedes Art.. Yes the Smart that made all those ugly watches so many kids wanted in grade school... It was designed to be small and compact and a fashion piece, an accessory. You still need to own an SUV, mini-van or crossover to get any real vehicle functionality for the weekend do-it-yourself warrior...
        • 3 Years Ago
        obviously not enough of my fellow NYers wanted Smarts.
        • 3 Years Ago
        Yes. It's about mobility, parking, a true drive-N-go, no fuss vehicle. I recall a black friday's trip to a major store in LA. Most folks were trying to find spaces with their huge SUVs. We zoomed in, parked a in tight corner, bought our stuff and we were gone. The same SUVs were still looking for parking.
        • 3 Years Ago
        Tivosiv: believe it or not, a lot us of don't actually live in NYC, and in spite of my LA neighbor Vuk's anecdote, it still seems to me that a Smart is going to take a whole parking space. It will have a lot of room around it, sure. But it would still be a spot that could be occupied by most any other car.

        For those of us out of the Apple, I just don't see the point of a Smart if your're not getting stellar mileage. And frankly, I still don't understand why you don't get stellar mileage. How much of a dog can that drivetrain be?
        • 3 Years Ago
        tifosiv122, while Manhattan is a very large borough, it is just a single borough in a single city, and most people who work in NYC use public transit. That simply isn't a big enough market to support a car company.
      Carlos
      • 3 Years Ago
      Articles like this make me dislike Daimler even more. I've disliked them ever since they bled Chrysler dry.
        Carlos
        • 3 Years Ago
        @Carlos
        Mini's can be sold along with BMWs because they're marketed at a premium market. The problem with selling Smart cars next to Mercedes Benz is that Smarts aren't knowing for being premium, so would an MB dealer want those "non-premium" customers mingling with their higher end clientel?
        • 3 Years Ago
        @Carlos
        Carlos, I could not agree more. Daimler gutted the value, mandated an insane marketing product and marketing strategy and then blew a hole in the hull leaving Chrysler to sink. I'll never consider purchasing one of their products, ever.
        • 3 Years Ago
        @Carlos
        The people who were going to purchase Smart vehicles already have--the early adopters.

        But they could never attract other buyers because of the obvious product deficiencies, namely styling, engine power, overall untilty and pricing. Pretty much everything about it.

        Oh, and add in that it is an old product with nothing new in the pipeline, and I'm guessing Penske will probably be glad in the long-tern to have Smart off his hands.
        • 3 Years Ago
        @Carlos
        Penske is just as ruthless so I have no pity for neither...One thing is for sure...Smart should of been sold along M-Benz just like Mini Coopers are which would of given them name recognition...
      • 3 Years Ago
      Is anyone surprised that Daimler pulled a stunt like this?
      • 3 Years Ago
      You couldn't turn left at the green arrow signal . the Smart was not heavy enough to set off the sensor.
      anyone else hear that description?
      • 3 Years Ago
      Having seen what Damnler did to Chrysler, if I were in the auto business I would look at any tie up with them as a dubious proposition at best.
      • 3 Years Ago
      Every time I see Paul Eisenstein's picture I just think...

      "We shall say NI! to you again... if you do not appease us."
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