DAIMLER’S EPIC FAIL
02/15/2011
It isn’t very often that you see Roger Penske fail at anything, but selling smart cars in the American market even proved to be too much for Mr. Penske.
Mercedes-Benz USA is going to take over the distribution of smart from the Penske Automotive Group. Interestingly, Mercedes is not buying back the distribution rights, the PAG is essentially giving them to Mercedes, suggesting PAG really took a financial bath on the whole deal. It was easy to foresee that smart would not succeed. For one thing, it had essentially been a failure in Europe, where the cars never sold well, and the brand lost money ever since they started building cars. Some background: back in the DaimlerChrysler days, when Tom Stallkamp, the president of Chrysler, suggested to the board that they drop smart because it was losing money with no hope of every making a profit, he was pushed out of the company. Worse, the cars themselves were not very good. They have a horrible automatic transmission, they don’t ride well, and their fuel economy, about 35 miles per gallon, isn’t that great considering how small they are. Penske brought in Jill Lajdziak, who had been running Saturn, to try and breathe some life into sales. Recently they’ve been hyping an electric version of the smart. None of that worked. He also contracted Nissan to build a version of the Micra for smart to sell, but now that deal has been cancelled, too. Mercedes will soldier on with the brand, waiting for new models that will be based on a platform from Renault, because it needs small cars to meet U.S. fuel-economy regulations. Even so, it’s amazing to see how committed Daimler is to a brand that has lost money for its entire existence.
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