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  1. #1

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    Why Daimler Dumped Penske Over smart


    Roger Penske and his team - including smart boss Jill Lajdziak - appear to have blindsided by Daimler's announcement about the brand's future.

    But after years of dithering, can the Germans do better at selling microcars to Americans?


    After dithering for years over the future of smart, Daimler AG is about to take a make-it-or-break it gamble on the long-struggling brand.

    In a surprise move, the German maker – which also builds the high-line Mercedes-Benz brand, announced it would pull smart’s U.S. distribution operations away from the Detroit-based Penske Auto Group and operate the American franchise on its own. Penske had been given the distributorship, in 2008, after years of dithering by Daimler, which wasn’t sure how to sell small cars in a market that normally equates bigger with better.

    Roger Penske, chairman of the eponymous Penske Auto Group and one of the most respected figure in the U.S auto industry, says the German automaker’s decision to cancel its distribution agreement with PAG was shaped by a desire to integrate smart more closely into the Mercedes-Benz marketing organization.

    “Going forward, Smart is seen as an integral part of the Mercedes-Benz network,” Penske said, adding Mercedes-Benz also needs the efficiency credits generated by Smart to meet future fuel-economy standards in both Europe and North America.

    The fuel economy standards on both continents and China will undergo dramatic revisions over by the middle of the decade. Operating without high-mileage smart would make it difficult for Mercedes to get to the 2016 target of 35.5 mpg, some analysts fear. And the possibility of bumping that to 62 mpg by 2025 is under study by the Obama Administration.

    In addition, smart needs a major investment in advertising and marketing in the U.S., which goes beyond anything PAG and its independent smart USA organization could afford on its own.

    Thus, Mercedes-Benz is preparing a major advertising and marketing effort to build up the smart brand in the U.S. Daimler originally had elected to use an independent distributor to spread the risk and the cost of introducing the smart cars into the U.S. market where small cars traditionally have been a tough sell.

    Penske’s PAG, one of the largest U.S. automotive retailers, has kept a tight grip on advertising spending and apparently generated some complaints from Germany that the smart USA’s slender marketing budget contributed to the slide in sales in the U.S. over the past two years. The brand is currently selling at barely a quarter of the rate it peaked at, during the 2008 launch year.

    The lack of new product, however, also contributed to the slide in Smart sales. The smart USA organization asked for additional smart electric vehicles but was limited to only 250 units.

    Penske attempted to circumvent the lack of new product by contracting with Nissan for a unique five-door vehicle, which was to be sold only by smart USA’s 70 dealers.

    PAG had already sunk $10.5 million into designing the new vehicle, Penske said. But the project was abruptly canceled, this week, as Daimler announced plans to take over smart distribution.

    Nevertheless, Penske’s decision to spend money on the project indicates the final decision to put smart USA under German control was rather abrupt. Daimler CEO Dieter Zetsche, during a visit to Detroit in January, indicated he was aware of the PAG project, adding the final design would have to meet smart’s design standards.

    At the recent Chicago Auto Show, Penske’s top executive for smart, former Saturn boss Jill Lajdziak, spoke positively about the future of the small car brand, giving no indication a shake-up in the distribution agreement was under consideration.

    Indeed, analysts wonder whether Penske himself was blindsided by the news. The former auto racer himself had traveled to Washington D.C., just days before, to personally deliver the first electric smart to a retail customer. The press release about the sale of the electric smart offered no hints that Mercedes-Benz was going to take over responsibility for distribution of the smart vehicles in the U.S.

    Courtesy of: The Detroit Bureau
    Last edited by SMART MADNESS; 02-18-2011 at 02:31 PM.
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  2. #2

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    Interesting viewpoint from The Detroit Bureau. Sounds like this will be a very good move.
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  3. #3

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    Personally, I see Daimler taking over US distribution from PAG as "over our dead body" reaction to PAG selling an unauthorized vehicle (the Nissan) branded as a smart.

    PAG has been begging for a new model and Daimler hasn't delivered. PAG took the matter into their own hands and got whacked. Might sound odd, but corporations are nothing if they can't control their brand and image.

    My speculation, but I'd put money on it.

    geosynch

  4. #4

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    Excellent article. Thank you for posting.

    My speculation is that in order for sales to go up, M-B USA needs to market the car the conventional way. I always, ALWAYS see M-B commercials, so hopefully they will put the same effort into the smart. I can only hope, for the future's sake of the smart.
    -President of the Smart car Connecticut chapter.

    -Any man who drives a smart car is very, very secure with themselves and does not feel that they need to compensate.

    -It's nice to have over a thousand people come up to your car in amazement and take pictures and ask questions and have these incredible looks when they see the NOS bottle or the purge setup. It makes everything I've done worth it.

  5. #5

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    The hint of a hostile take over is interesting
    WHAT'S YOUR STORY?

  6. #6

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    In addition, smart needs a major investment in advertising and marketing in the U.S., which goes beyond anything PAG and its independent smart USA organization could afford on its own.
    This appears to be the key thing missing. I hope they starting pushing the car, rather than hope people will find out on their own.


    Bob Diaz

  7. #7

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    Flag on the field. 10 yards. Overuse of the word 'dithering'. Just kiddin'. I think it's a good move; I'll to see how it works out....I hope at least it sparks sales and more dealerships.
    Last edited by NukleoN; 02-19-2011 at 04:12 AM.

  8. #8

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    It will be interesting to see what MB does with the smart pricing structure. They are going to have to sell a certain number of smarts to keep from slammed by the EPA for not making their CAFE numbers. Since they make a hefty profit on every MB they sell, they can take a loss on the smart and still be better off in the end.
    2008 Passion coupe
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  9. #9

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    I hope my marketing major can come in handy with M-B USA once they see how passionate I am with smarts.
    -President of the Smart car Connecticut chapter.

    -Any man who drives a smart car is very, very secure with themselves and does not feel that they need to compensate.

    -It's nice to have over a thousand people come up to your car in amazement and take pictures and ask questions and have these incredible looks when they see the NOS bottle or the purge setup. It makes everything I've done worth it.

  10. #10

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    Roger Penske is an "I'll be damned if I don't win" kinda guy. It's already on record he wanted to purchase Saturn's vast dealership network for a hit-the-ground-running distributorship of econo cars from Renault's SSang Yong brand.

    I bet his comeback will be distribution rights to Nissan's Micra badged as... the Nissan Micra. Nissan won't import the micra because they're afraid of how it will be received. But if Penske distributes them from an existing dealership network...

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