Smart car doesn't look too clever

IT'S Smart but it's certainly not clever, and it has cost Daimler-Chrysler more than e2bn (£1.4bn) since its launch. Now the question is: how much longer will the carmaker continue to underwrite the underperforming Smart car?

Heralded as the future of urban personal transport when it was launched in 1998, the car was environmentally friendly, ergonomically appealing and space efficient.

But DaimlerChrysler's unique minicar has been revealed in the German media as a costly failure with 2004 losses of about e600m, making the overall dent in its creator's pocket up to e2bn.

Quoting a DaimlerChrysler executive who wished to remain anonymous, the German news magazine Der Spiegel this week carried a report that revealed the extent of Smart's financial haemorrhaging and the confusion surrounding the project's immediate future.

With its parent company posting heavy year-on-year losses, Smart looks to be the latest albatross around the neck of Daimler-Chrysler, which seems to be at a loss as to what it can do to save its minicar brand.

Although there has been no official response to the size of Smart's losses in 2004, Der Spiegel reported that the DaimlerChrysler source thought it likely the company would reduce the scale of the project, dropping plans for a sports utility vehicle while continuing-with development of the next generation of its original two-seater Fortwo.

However, as recently as last week, chief executive J¸rgen Schrempp said that fixing Smart was one part of repairing the damage done to Mercedes-Benz Group's profitability, which fell dramatically in 2004.

'I am not promising too much when I say that we will be in control of the challenging situation at Mercedes-Benz passenger cars within the next 12 months,' Schrempp said.

He added that losses had been substantial and that the issue of Smart's profitability would have to be addressed sooner rather than later. The news of such huge losses comes at a time when Mercedes plans to export the Smart to the US, although no firm date has been announced.

Eckhard Cordes, the new chief executive of Mercedes- Benz Group, said last week that the company was still considering the export of Smart cars to the US despite the ill-health of the brand.

The SUV concept model was pulled from the 2005 North American International Auto Show at the last minute, adding to the confusion about DaimlerChrysler's intentions.