- Feb 25, 2011
Penske blindsided by Daimler's decision to take over Smart USA?
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.
Paul 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]
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.
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.
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.