F. H.

DaimlerChrysler to Bring Teeny Two-Seater to U.S.
The company's Smart car, available in Europe since 1998, is to go on
sale here in early 2008.
By John O'Dell
Times Staff Writer

June 29, 2006

The tiny Smart car is only two-thirds the size of a Mini Cooper, but
DaimlerChrysler has big plans for it.

The German automaker, which has been selling the two-seater in Europe
since 1998, said Wednesday it planned to introduce the Smart in the U.S.
early in 2008.

With a fuel-sipping three-cylinder engine that gets about 60 miles per
gallon on European highways, the Smart could be a big hit here. But
first Americans will have to be convinced that something so small can
hold its own against pickup trucks and sport utility vehicles that could
carry the 1,600-pound Smart in back.

Dieter Zetsche, DaimlerChrysler's chief executive and former head of its
U.S.-based Chrysler Group unit, is betting that $3-a-gallon gasoline and
crowded streets and highways will help overcome concerns about size.

At just 8-feet, 2-inches in length, the Smart ForTwo, as the model is
called, can be parked in half the space occupied by a full-size pickup.

DaimlerChrysler's Mercedes-Benz unit, which builds the Smart at a plant
in France, designed it to stand up to much larger vehicles, Zetsche
said. The passenger cabin is framed in high-strength steel that is
designed to work like the safety cage of a modern race car, isolating
passengers from the shock of a collision.

"We are very confident about the safety features and structural
integrity" of the Smart, Zetsche said in a telephone interview Wednesday.

The Smart has never made a profit. Zetsche is betting that a redesign
and stepped up marketing in Europe next year will turn things around and
that U.S. sales in 2008 will provide even bigger profits.

The next-generation Smart ForTwo will be sold in the U.S. through a
dealership chain to be established by United Auto Group Inc., the
brand's U.S. distributor and marketer and the second-largest operator of
new-car dealerships in the U.S.

Zetsche said United Auto, led by former auto racer Roger Penske, expects
to have 30 to 50 dealerships ready when the Smart is launched and will
continue expanding until the U.S. market is covered. He said the Smart
would be promoted as a commuter car in urban areas and as convenient
transportation in leisure communities.

One of the risks the Smart brand faces is pricing. There are several
small cars in the U.S. market, such as the Honda Fit and Kia Rio, that
have room for four or five passengers and are priced in the same range
as the Smart.

Zetsche said the car would be priced under $15,000.

DaimlerChrysler hopes to sell 20,000 Smarts in the U.S. in 2008. Philip
Reed, a senior auto industry analyst at Edmunds.com, said he believed
the company would easily achieve that goal. "It will sell not only
because of its fuel economy and equipment but because of its looks and
appeal."

The Smart isn't totally new to North America. DaimlerChrysler began
marketing the car in Canada in 2004 and last year sold 4,000 Smarts there.

And a Northern California company, Zap, began importing and distributing
a version of the European Smart to the U.S. about a year ago. The cars
are converted to meet U.S. safety standards and exported by a private
firm with no connection to DaimlerChrysler.

So far, Santa Rosa-based Zap has sent about 200 of the cars to various
dealers, who sell them for prices starting at about $20,000.

"We knew from the start that it was only a matter of time" before
DaimlerChrysler began selling the cars in the U.S. at a lower price,
said Zap spokesman A.J. Gilbertson. But until 2008, he said, Zap has the
only Smarts around.

*

(INFOBOX BELOW)

Big and small

A comparison of the Smart and the Hummer H2

Hummer H2 Smart
Curb weight 6,400 lbs 1,600 lbs.
Length 15' 9" 8' 2"
Width 6' 9" 4' 11"
Height 6' 7" 5'
Seating 6 2
Cylinders 8 3
Fuel tank 32 gal. 10 gal.
Horsepower 325 60
Miles per gallon* 8 to 13 40 city/60 hwy.
Price (in thousands) $50+ under $15


*Estimated by industry sources.