smart May Be Riding High in Canada but Sales Suffering in Europe

Making matters worse, DaimlerChrysler's premier Mercedes-Benz brand is suffering losses as well, partly due to a

Inside the first North American smart showroom, the modern, minimalist motif is in line with smart's efficient approach to motoring. (Photo: DaimlerChrysler Canada)

significant new product launch throughout 2004 and improvements made in product quality. The positive spin is that this 30 percent loss should turn around once current owners trade in their old M-Bs for new ones, but sales have not been at record highs so future profits remain questionable. Also adding to the setback, is the euro's strength against the U.S. dollar, which has been on a downward slide throughout this year.

What to do? While DaimlerChrysler's almost retired CFO Manfred Gentz commented that DaimlerChrysler was "taking a hard look at the smart business", during an October 28th interview, most analysts believe the brand will see stronger profits once its forfour arrives in North America in 2006, along with the formore mini sport utility which follows suit in all of

In a ceremony held on Parliament Hill, Ottawa, on October 22, 2004, Mercedes-Benz Canada's President and CEO, Marcus Breitschwerdt officially handed the keys of two smart fortwo coupes to Transport Minister Jean-C. Lapierre. (Photo: DaimlerChrysler Canada)

its global markets. But still, Gentz, the DCX executive who was also instrumental in pushing for the automaker to stop funding Mitsubishi Motors Corp. earlier this year, was clear during his interview that eliminating the smart brand altogether was not out of the question, by adding, "We have to consider all possible alternatives".

So why the sudden panic? Actually, the CFO's concerns about smart are no surprise to anyone, especially investor analysts. While DCX won't divide up smart financials specifically, analysts believe the microcar division has cost the automaker approximately $1 billion USD in initial investment and since its inception in 1998 has run up tab of over $2 billion in losses.