Mercedes will bolster Smart's marketing

STUTTGART, Germany--Now that Mercedes-Benz controls Smart in the United States, the strategy for the microcar brand hinges on aggressive marketing, more special-edition vehicles, and greater opportunity for buyers to customize their cars.

"Our goal is to at least increase our sales slightly in the U.S. compared to last year," Smart Vice President Annette Winkler said.

"Slightly" won't mean very much.

Last week Mercedes-Benz agreed to take over U.S. Smart car distribution from Penske Automotive Group, ending a three-year relationship with Daimler, parent of both Smart and Mercedes.

Penske launched the European microcar brand as an independent distributor in 2008. But after a fast start, U.S. sales of the ForTwo, which is built in France, have plummeted.

Penske sold 24,622 cars in 2008, as gasoline prices reached record highs. But sales have tumbled, falling to just 5,927 in 2010.

In the end, the parties realized Mercedes could provide more marketing opportunities for Smart. And strengthening the Mercedes link will help dealers cope with the fact that Smart offers just one product.

Because the brand wasn't scheduled to receive a new vehicle for two or three years, the Penske organization had initiated development of a Nissan-based four-door car, dubbed Project Quattro, that was to be built in Mexico. That project has been canceled.

"If Smart continued as a free-standing network, they would need a second model to make it viable," Ernst Lieb, CEO of Mercedes-Benz USA, said in a statement. "By integrating it into Mercedes-Benz, there is no need."

The 21 Smart dealerships that do not also have Mercedes products will lose the franchise, leaving Smart with 58 U.S. dealers. Four of the 21 dealerships that will lose the Smart franchise belong to the publicly traded Penske Automotive.

To increase sales, Winkler said, Daimler will add special-edition models, offering "almost unlimited" exterior and interior configurations on future models.

Smart will spend more on dealer training and expand its marketing to position the brand as an environmental alternative. "We will continue establishing Smart as a green, premium lifestyle brand," Winkler said.

Mercedes also will expand its Car2go car-sharing program to more North American cities. Currently, the Smart car-sharing program operates 200 cars in Austin, Texas. That number will increase to 300 cars this year.

Penske will handle termination of the 17 non-Mercedes-Benz dealers. Penske said the closings will include the buyback of signs, equipment, and cars, in accordance with the franchise agreement.

(Source: Automotive News)