Ditching smart is Smart Move for Penske
By Michelle Krebs February 15, 2011
Automotive entrepreneur Roger Penske makes few bad bets, but, from the start, his acquisition of the distribution rights for the smart brand from Germany's Daimler AG seemed a questionable one.
On Monday, the Roger Penske-led Penske Automotive Group, which launched the smart brand in the United States in 2008, announced with Daimler that the U.S. rights for smart would be turned over to Daimler's Mercedes-Benz. The transition should be complete by June 30..
The companies said the move was being made because of organizational changes within the Daimler/Mercedes-Benz companies. While it wasn't confirmed by any of the parties, pulling smart under the Mercedes-Benz umbrella may help the Germany luxury car maker meet more stringent U.S. fuel-economy standards in 2016.
The decision must have been a fairly recent one. At the Detroit auto show in January, Roger Penske told me he absolutely was not giving up on smart; he had too much invested into it, he said. Additionally, he promised that the media would get a look this spring at the five-door small car that was being made for smart by Nissan, likely in Mexico. Under the new distribution arrangement, the Nissan-built car is canceled. Interestingly, Penske also said he was acquiring Mini franchises, which could be seen as competition for smart, through his retailing organization, the second largest in the country.
In a one-on-one interview, smart General Manager Jill Lajdziak explained how 2010 – the year in which smart experienced sales decline from abysmal 2009 – was a re-grouping year, one in which the Penske group got smart inventories back in line. She suggested 2011 would be better with an upgraded interior in the fortwo and an available electric version of the twofour, along with the introduction of the Nissan-built model.
Whatever the case, Daimler did Penske a favor, providing a graceful way out of the failing smart brand. Last year -- a year in which the auto industry generally began to recover from the recession -- smart sales dropped by about 76 percent to just under 6,000 units. In the three years since smart went on sale in the States, the Penske group sold about 45,000 smart fortwo cars; worldwide Mercedes, which also has struggled with the brand, has sold about 1.2 million since 1998.
What seemed obvious was that the smart, not a very pleasant car to drive, had an extremely limited audience -- and seemingly everyone who wanted one got on in the first year.
Ditching smart is a smart move for Penske.
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