Big Changes in Store for Smart USA

Smart USA at this point is such a non-factor in the US passenger-car market that it barely warrants its own article, but we’ll indulge anyway.  To get you up to speed with what’s happened to this point, Daimler AG wasn’t sure that Smart would be a good fit in the US, so it held the cars out of the US market for years.  Finally, in 2008, Daimler granted megadealer Roger Penske exclusive distribution rights to the Smart brand in the US, which meant only the Fortwo.  Around that time, gas prices shot through the roof, the people who wanted urban runabouts all bought them, and the brand’s sales collapsed to little more than a rounding error in terms of overall US market share.  How does 5,947 US sales in 2010 sound?

Smart USA hired former Saturn General Manager Jill Lajdziak as its president after Saturn closed its doors, and the company announced that it was entering into an agreement with Nissan to produce a larger, B-segment Smart (perhaps called a ForFour), which turned out to be little more than a rebadged Nissan Micra (sold overseas, not in the US).

So now that you’re caught up, the latest news is that Penske and Daimler have terminated their distribution deal.  Instead, Mercedes-Benz USA will assume distribution rights, management, sales and marketing activities of Smart USA.  Roger Penske told Automotive News that his organization just didn’t have the volume or marketing muscle to push Smart effectively.  The move by MBUSA to assume management of Smart means that the US distribution arrangement for Smart is more in sync with the brand’s distribution elsewhere around the world.

The change also means that the rebadged Nissan Micra will never see the light of day with a Smart badge (Smart USA only released renderings of the car, never real photos), because Daimler doesn’t need Smart to have the kind of volume that Penske was looking for in order for the venture to make them money.  Instead, the distribution and marketing costs can be amortized over all of Daimler’s US sales.

So what’s in it for Daimler, aside from more control (as well as protecting the brand’s image from rebadged cars that are totally different from its primary product)?  Primarily, Daimler gains the benefit of Smart’s CAFE numbers, which will allow it to sell more AMGs, S-Classes, GLs, and other large or thirsty vehicles without incurring penalties.  The Fortwo’s 41 mile per gallon highway rating is considerably better than an S63’s 18 mile per gallon rating on the highway cycle.

The news is mixed for the 79 Smart dealers across the US.  Only 58 will survive the estimated June 2011 transition date, with 21 going away.  The 21 dealers who won’t make it are dealers who are not dualed with a Mercedes-Benz franchise.  It seems that Smart will be sold with a distribution model similar to the way Mercedes-Benz handles Sprinter sales after June.  The 58 dealers who do continue, though, should theoretically see the benefit of more attention from the mother ship in Stuttgart, as Daimler still sees a lot of potential in Smart.

Potential doesn’t really sell cars, though, and the company has to figure out how to do more of that quickly.