Smart car to be sold in U.S. in 2008

DETROIT – DaimlerChrysler will team with former auto racer and businessman Roger Penske to sell a funky and fuel-efficient two-seat car in the U.S. starting early in 2008, the automaker's CEO said Wednesday.

The decision — announced by DaimlerChrysler Chairman Dieter Zetsche during an appearance in Detroit — is a watershed moment for the company's Smart car unit, which has not posted a profit since it was formed in 1998.

Penske's United Auto Group will be responsible for picking potential dealers and developing and maintaining a Smart vehicle dealership network throughout the U.S. and Puerto Rico. It will focus mainly on highly populated areas and have 30 to 50 dealerships, Penske said.

Smart will sell the next generation of its "fortwo" model, which has been popular in Europe. It gets an average of 40 miles per gallon in combined city-highway driving and will sell for less than $15,000. The company says it can get up to 69 mpg on the highway.

Zetsche said the time is right to introduce Smart to urban Americans who have to deal with congested roadways, $3 per gallon gasoline and a perpetual search for parking.

"We may never see cheap gas again," he said.

But he said the appeal of the car goes beyond gas mileage to attract people who question the status quo and seek individuality.

The fortwo's three-cylinder, 700cc engine has significantly lower emissions than other cars, Zetsche said.

U.S. buyers in the past have been reluctant to embrace such small cars, in part due to safety concerns. But Zetsche said the 1,600-pound fortwo's engineering and safety features should allay those concerns.

"It's outstanding from the standpoint of safety," Penske said, touting its air bags, electronic stability control and performance in offset head-on crash tests.

Penske, who chaired the Detroit Super Bowl XL Host Committee, is best known as the owner of an auto racing team that has won the Indianapolis 500 13 times. His privately held Penske Corp. includes a controlling stake in United Auto Group Inc., the second-largest publicly traded dealership chain after AutoNation Inc.

Zetsche, who personally oversees DaimlerChrysler's Mercedes Car Group of which Smart is a part, had said repeatedly this year that a decision on whether to sell the tiny car — which measures 8.23 feet from bumper to bumper — would come by the end of June.

Zetsche is a fan of the car, despite the fact that some shareholders have called for Smart to be closed.

The move could help generate new revenue for the ailing Mercedes group, which has dragged down the company's overall earnings as it restructures and re-emphasizes its focus on quality.

Other automakers also have begun selling small, sporty cars, including Toyota, which has the Yaris, and Honda, which sells the Fit.

Smart launched the fortwo in Canada in 2004, and last year it sold about 4,000 models, or twice what it had initially forecast.

Last year worldwide, Smart sold 143,000 cars, a small increase from the 139,000 it sold in 2004. It produced 124,300 cars in the same period, down from 152,100 the previous year.