Daimler's Smart not so Clever in size-obsessed US

Daimler AG's two-year effort to win over U.S. drivers with a thrifty, plastic-clad minicar is running out of steam, adding urgency to the German automaker's effort to find a partner for the Smart brand.

The U.S. debut of the urban two-seater is foundering after a promising start in 2008, when North American sales propelled Smart to its first profit. With just one model, the "ForTwo," U.S. sales plunged 41 percent to 14,600 cars last year, more than the 15 percent decline by Daimler's Mercedes-Benz.

"Smart's not a car in the traditional sense, it's a high- style alternative to public transportation," said Jim Hall, principal of consulting firm 2953 Analytics who has worked with General Motors Co. and Toyota Motor Corp. on model development. "The problem for Smart is that fashion tends to be fleeting."

Smart's fading fortunes in the U.S. highlight Daimler's need to find a partner to expand the model lineup and lower costs as it commits $2 billion to boost compact car offerings. The manufacturer is in talks with Renault SA and other carmakers on potential "close-knit" cooperation, Chief Executive Officer Dieter Zetsche said Dec. 17.

"The lack of success in small cars has been a big strategic weakness, and Daimler likely needs a partner to turn things around," said Stefan Bratzel, director of the automotive institute at the University of Applied Sciences in Bergisch Gladbach, Germany.

Cheaper Alternatives

The brand sputtered with new models, and consumers favored Bayerische Motoren Werke AG's Mini. There are better-value alternatives to the ForTwo, which starts at $11,900, Hall said.

Smart's weakening in the U.S. accelerated in the fourth quarter, when sales totaled 2,174, a 66 percent contraction from a year earlier. BMW's Mini had 10,229 U.S. sales in the period, a decline of 24 percent. In December, Smart sales were lower than GM's Saab, which is in the process of being closed or sold.