US: Penske ends distribution of Daimler's Smart brand cars as sales plunge

Bloomberg News - Penske Automotive Group Inc., the second-largest U.S. automotive retailer, is ending its distribution agreement with Daimler AG's Smart car brand after sales of the fuel-efficient model plunged.

Daimler's Mercedes-Benz USA is expected to take over the sales, marketing and warranty administration for the brand by the end of the second quarter, the companies said today in a statement. Penske also will cancel development of a five-door small car for Smart that was being provided by Nissan Motor Co., said Anthony Pordon, a spokesman for the retailer.

Smart deliveries fell to 5,927 last year, a 76 percent drop from 2008, when the brand debuted in the U.S. with its Fortwo small car. Mercedes may be folding the Smart business into its U.S. operations to help meet fuel-economy standards that rise to as much as 62 miles per gallon by 2025, said David Whiston, an analyst at Morningstar Inc. in Chicago.

"Penske is getting rid of an underperforming brand and likely will still retain a lot of profitable parts-and-service business," Whiston said in a telephone interview.

Penske, based in Bloomfield Hills, Michigan, has 10 Smart stores in its portfolio of 325 franchises, Pordon said. Six of those stores sell Mercedes vehicles and may continue to retail Smarts, he said.

Mercedes will decide how many Penske-owned dealerships will be allowed to continue selling Smarts, Pordon said. It's too early to determine whether the move will have a financial impact on Penske, he said.

Daimler last year moved Smart's headquarters to Germany, where the unit would be managed as an independent brand under the Mercedes-Benz cars unit. Daimler is based in Stuttgart.

The Smart Fortwo gets an estimated 41 mpg in highway driving, the companies said today.