DaimlerChrysler to Halt Production of Smart 4-Seat Model, Absorb Brand Into Mercedes Division

BERLIN March 25, 2006; The AP reported that DaimlerChrysler AG said Saturday that it plans to end production of its Smart unit's four-seat model and absorb the brand into its Mercedes division to bring it into profit.

The move, which still has to be negotiated with Mitsubishi Motors Corp. and other partners, will cost DaimlerChrysler about euro1 billion ($1.2 billion), the company said.

Abandoning the ForFour model will leave Smart with only its more popular two-seat ForTwo, and "ensure the long-term sustainability of the Smart brand," DaimlerChrysler said.

"Thus, the profitability of Smart will be confirmed, with positive results expected from 2007 onward," it said.

An updated version of the tiny ForTwo is to launch in 2007.

It said the plan included the "complete integration" of smart into Mercedes and would make the fortwo "a long-term and important part of DaimlerChrysler's product portfolio."

DaimlerChrysler provided no information on what would happen to workers at the factory in Born, Netherlands, where the ForFour is made. It said 300 jobs would be lost at Smart's plant in Boeblingen, near Stuttgart.

DaimlerChrysler had hired Goldman Sachs Group Inc. to examine the possibility of selling Smart, which hasn't made a profit since its launch in 1998, but hasn't said whether if found any bidders.

According to its latest figures, the sales of Smart-branded cars were down to 124,300 in 2005 from 152,100 the previous year. Smart already ended production of its two-seat Smart Roadster last year.