RENNINGEN, Germany - DaimlerChrysler is spending almost $70 million in an effort to get its radical Smart car project back on track.
Micro Compact Car, the DaimlerChrysler subsidiary that builds and sells the tiny two-seater, is relaunching the car this month in an attempt to boost sales. The offensive - meant to counter 17 months of almost uninterrupted bad news at Micro Compact Car - calls for new pricing, new advertising and promotions and an extensive dealer assistance program.
The effort is backed by a revamped sales organization and a new product engineering team.
Failure almost certainly means the end of the road for Smart.
The man behind the relaunch -which is called 'Smart take-off' internally - is Juergen Hubbert, the DaimlerChrysler board member responsible for Mercedes-Benz and Smart passenger cars. The easygoing Hubbert, one of the project's earliest backers, has grown impatient with Smart's marketing and engineering troubles.
He has ordered sweeping changes, and has installed what he calls 'car experts' at Micro Compact Car, which was originally a joint venture with Swatch watchmaker SMH Holdings. DaimlerChrysler recently bought out its partner.
'I have now gathered a completely new, highly skilled and motivated team at Smart,' Hubbert said. 'They all have the same goal: Turn Smart into a success.'
He admitted DaimlerChrysler underestimated the difficulties. In retrospect they seem obvious.
Micro Compact Car launched a new type of car, built it in a new way in an all-new plant and has tried to attract a different breed of customer with a completely new sales organization.
'We were trying new things in all these areas, and maybe we were too optimistic in thinking that it would all run smoothly,' said Micro Compact Car President Lars Brorsen, who was recruited two years ago from supplier TRW. 'When was the last time somebody launched a completely new car brand and was successful from the first day?'
Volume forecasts have been lowered sharply since Micro Compact Car launched the Smart last autumn with ambitious plans to build 130,000 cars in 1999 at its plant in Hambach, France.
'This year we are planning to produce and sell 100,000 Smarts,' said Dieter Zetsche, Daimler-Chrysler board member for sales and marketing. 'But if we reach 80,000 sales, we will be satisfied, too.'
NEW AD BLITZ
The new $34 million ad campaign started April 15 in all nine countries where the Smart is sold: Austria, Belgium, France, Ger-many, Italy, Luxembourg, Netherlands, Spain and Switzerland. Colorful double pages in 175 weekly and monthly magazines focus on the car's driveability and its unique features. In Italy, the campaign also is running in daily newspapers.
'We want to concentrate on emotions, the fun-to-drive element, the high-tech equipment like the Formula 1 soft-tip gearshift,' said Juergen Korzer, manager of brand marketing. 'And we want to draw attention to the safety concept and layout: extremely small on the outside, extremely roomy on the inside.'
The original campaign depicted scenes of the Smart in an urban environment, with no practical information about the vehicle.
The TV campaign will debut May 7. More support will come from poster sites and urban lighting displays that point the way to the nearest 'Smart Center' dealership.
Since Micro Compact Car executives say a personal driving experience is the best sales tool, another test-drive promotion will start in early May. The last one ran for two weeks around Christmas, using about 1,000 cars. About 92,000 drivers across Europe tried the Smart. This time twice as many cars will be available, and the promotion will run at least four weeks.
Micro Compact Car's sales organization has been integrated into DaimlerChrysler's new European sales structure. Regional sales offices now report to the national DaimlerChrysler chief executive, not to Micro Compact Car headquarters.
Micro Compact Car's sales and marketing staff has been moved to Renningen from Biel, Switzerland, where SMH is based.
The Smart Center system of direct delivery from the factory will not change. And Smarts will not be sold through Mercedes-Benz or Chrysler dealers.
DaimlerChrysler has formed a task force of 70 to 80 people to help train Smart Center dealers and offer business assistance. DaimlerChrysler will invest $6 million in the support effort.
Smart sales have been especially disappointing in some geographical areas - eastern Germany, for instance. 'But in most cases where sales are slumping, we face a managerial problem,' Brorsen said.
Twenty five percent of the 110 Smart Center owners had never sold cars before. Some sales personnel also had been trained improperly.
'They didn't have the right attitude,' said one DaimlerChrysler executive. 'It was a different approach. A lot of the training they got was abstract - selling mobility. We need to show them how to sell cars.'
Financially ailing dealers, who invested based on expectations of much higher sales, already have received some financial support from DaimlerChrysler, including extension of credit lines. Sources say that $28 million has been set aside this year for support.
Hubbert has revamped Smart's product development department. Helmut Wawra, who joined Micro Compact Car last October, has taken over as development chief. He replaces troubleshooter Gerhard Fritz, the former M-class project leader who switched to Smart more than a year ago and dealt with the worst problems.
Fritz took the job on an interim basis following the removal of Johann Tomforde early last year. Fritz's first task was to develop the 'Trust' electronic stability system to improve traction and balance.
Wawra later upgraded the system to 'Trust plus' after drivers complained of tricky behavior on icy roads last winter.
At Daimler-Benz, Wawra led development teams for the Mercedes-Benz SLK and the C class, scheduled to be launched next year.
When Hubbert first suggested that Wawra move to Smart, Wawra was unenthusiastic. But the 53-year-old gradually warmed to the idea.
'This is a small team with enormous flexibility, fast decision-making processes and a broad responsibility,' Wawra said. 'And Hubbert gives me his full backup. He told me: 'Change whatever you want to turn this project into a real car company.' So I enjoy almost absolute freedom in whatever decision to take.'
When he arrived, Wawra said, he found almost no hierarchy inside Micro Compact Car's 300-person engineering department. The Daimler-Benz veteran quickly brought in four close colleagues from the C-class project.
He also decided to add 80 engineers.
The new management team consists of:
Klaus Badenhausen, former head of C-class testing.
Walter Klinkner, another C-class team member known inside DaimlerChrysler as the 'pope of road-holding systems.'
Horst Dahm, chief body engineer on the C class.
Michael Mauer, the SLK designer, who headed DaimlerChrysler's Tokyo styling studio and now becomes Micro Compact Car's first chief designer.
Sales and marketing chief Klaus Fricke also is new. He replaces Hans-Juerg Schaer, an SMH veteran who declined to move from Biel to Renningen.
Fricke has held sales positions at Daimler-Benz and BMW, and most recently was managing director of German seat manufacturer Recaro GmbH, a post he left last June.
Micro Compact Car recently cut prices and boosted equipment levels - equivalent to a price advantage of about 10 percent across Europe. Prices of the base 'smart & pure' version now start in all markets at 6,900 euros, or about $7,520 at current exchange rates.
Prices could fall even lower. As a result, the Smart - which is not now profitable and probably will not be during its current life cycle - has to be made less costly to produce.
'We have to find cost savings on the production side as we upgrade our product,' Brorsen said. 'Already continuous improvement and the reduction of the number of options (by including them as standard features) have resulted in a cost reduction that equals the price cut.'
Hubbert says more models are in the pipeline. 'We have not created a new brand for just one product,' he said. 'The Smart will develop into a whole product family.'
But it will take time for the promised four-seater to appear, so Fricke's sales and marketing team will have to live for a while with the existing model.
'We will keep the car attractive with new features and new versions,' Fricke said.
New interior options are being discussed. This autumn, a 55-hp, 0.8-liter common-rail diesel-engine version will debut, reducing fuel consumption to 70 mpg. A convertible version will go on sale in 11 months.
A prototype Smart roadster will be unveiled at the Frankfurt auto show in September. If it creates enough excitement, it could go into production next spring. The concept is based on the existing Smart with the windshield frame and the B-pillar forming two roll bars to ensure stability and safety. The wheelbase will be stretched.
The concept phase for an all-new Smart model has only just started.
'It will be a four-seater and therefore bigger than the existing City coupe,' Wawra said. 'But we will have to make sure it does not come too close to the (Mercedes) A class in size or appearance.'
Although Hubbert already has announced the four-seater, some observers say DaimlerChrysler will await the results of the relaunch before committing to a second model.
But the willingness to spend heavily on the relaunch shows DaimlerChrysler is not ready to give up on the young brand.
'It is our best learning opportunity,' Hubbert said. 'Here we can experiment with how development, production and marketing of the future could look. This means that you have to allow mistakes to happen - once. Then you must learn your lesson.'