"We won't be bringing a new product to market before 2007," Smart President Ulrich Walker told Automobilwoche.
The carmaker is going through a 1.2-billion euros restructuring, or $1.44 billion at current exchange rates.
DaimlerChrysler announced its turnaround plan for the unprofitable brand on April 1. As part of the plan, the automaker killed development of the Smart ForMore SUV; said it will stop making the slow-selling Smart Roadster and embarked on a series of cost-cutting measures.
Walker said Smart's fixed costs have been trimmed 26 percent.
The carmaker wants to cut 750 jobs at its headquarters here. So far 400 employees have been dropped from the payroll.
In 2004, Smart had 1,040 employees assembling the ForTwo at its factory in Hambach, France. Only 880 workers will be there by the end of the year. About 60 of the displaced workers are expected to be absorbed into other DaimlerChrysler factories.
While reducing staff in Hambach, the company says it has succeeded in boosting productivity.
"Compared with last year, we are doing about 15 percent better," Walker said.
The company also has saved money by having its information technology, development and purchasing functions absorbed into the Mercedes Car Group, which includes Mercedes-Benz, Smart and Maybach.
The outsourcing of painting operations also has helped.
Altogether, the company is calculating savings of 30 percent by 2006.
Rising sales are supporting the restructuring. This year, Smart will sell more vehicles than last year, Walker said. That is true despite the fact that customer demand for the ForFour small car has been weaker than expected.
Smart is holding production at last year's levels, so that an inventory reduction will result in the middle term.
If sales remain at the current levels, Smart will be profitable by 2007, Walker said.
At the same time, Smart is betting on the expansion of its dealer network.
"Within the scope of the new business model, we are striving for better coverage," said Christoph Koepke, managing director of the DaimlerChrysler sales and marketing organization.
By the end of the year, Koepke plans to sign on about 50 more service operations.
Smart has lost 2.6 billion euros since its launch in 1998, analysts estimate. Losses this year could be as high as 600 million euros, or about $723 million.