Smart says it won't do business with would-be US importer Zap now or in the future - apparently putting an end to confusion generated by Zap's recent announcement that it had ordered $1 billion (E830 million) in cars from Smart.
Ulrich Walker, president of Smart, says there are too many concerns about Zap.
The Santa Rosa, California, company sent Smart an unsolicited order for $1 billion worth of ForTwos. Zap had asked that Smart build the two-seat minicars to meet American safety and emissions standards.
Zap issued a press release on May 24 saying that it had placed the order. Smart, a unit of DaimlerChrysler, promptly said it never sells cars to independent distributors. A flurry of press reports, many critical of Smart, followed.
Even after Smart's statement earlier this month, Zap said it will sell new Smart cars. Zap CEO Steve Schneider would not reveal the source of the vehicles.
Zap says it has the technology to homologate new European Smart cars to US emissions and safety standards and has received federal approval to sell the vehicles in 45 states.
It delivered its first car in May, has been taking orders that it says total nearly $2 billion, and is trying to set up a dealer network.
Schneider says the company got more orders than it expected, and "we found ourselves in a situation where we thought we were heading toward $1 billion over the next 12 months."
Smart acknowledged that it had studied the possibilities with Zap. But earlier this month in Germany during a speech about Smart's future, Walker said there were too many concerns about Zap: "We subsequently decided that we do not want to have any kind of business relationship with Zap either now or in the future, and this is what we communicated."
Walker says Smart wasn't sure Zap could pay for vehicles. There's also concern about the quality of homologated vehicles - and the fear that Smart could end up spending "the same amount many times over on liability suits or measures to build up our brand again in the future," he said.
In its more than 10-year history, Zap has yet to turn a profit. The company had revenues of $4.77 million last year, down 18.1 percent from 2003, and a net loss of $29.4 million, compared with a loss of $5.5 million in 2003.
Schneider says Zap was working on financing for $1 billion in cars.
"We are in the best financial shape," he said. "We have money in the bank. All the Smart cars are paid for. The paper loss, it isn't real money. We have no debt."
Schneider says Zap will proceed as planned and sell new Smarts in the US: "We have tens of thousands of cars and all new."
Zap has about two dozen dealers and has held off making commitments to others until it heard from Daimler-Chrysler, says Schneider.
"I believe Mr. Walker is under a tremendous amount of pressure," he said. "I think we could have helped his situation."
A DaimlerChrysler source says Smart met with Zap in March because Schneider bombarded the company's board members with letters complaining Walker would not meet with him. Schneider says he met with Walker on March 21.
After that meeting, Smart investigated how difficult it would be to homologate a ForTwo car to US standards.
It discovered that even with a change in engine electronics, the vehicle wouldn't pass emissions standards, a DaimlerChrysler source says.
Schneider could not provide Smart with data showing Zap has the technology to meet these standards, according to the source.
Zap also didn't provide a list of 150 dealers it said were interested in selling ForTwos or a list of potential customers who it said had ordered the car, the source said.
Smart says internal investigations have shown Schneider has purchased only used ForTwos in Europe and that there are no negotiations with Smart exporters and distributors.
"All the distribution is ours. There are no free exporters of DaimlerChrysler cars," a Smart spokesman said.
Change in plans
In a recent interview, Schneider said Zap abandoned plans to charge dealers about $100,000 for a franchise.
Instead, it has decided to "get commitments from franchise dealers with noncancelable business orders" for new cars, he said.
Zap sold its first car, a used ForTwo, to a couple in Las Vegas in May for about $25,000. Schneider said he expected to deliver cars in eight additional states earlier this month.