It's been almost half a year since we've reported that the future of smart could be on the wire. Now, according to the German business newspaper Handelsblatt , that same future will be decided by the end of this year by Daimler, the automotive group that also controls Mercedes-Benz.
The reasons behind the possible and so drastic decision are related to the Smart's inability to generate money.
Daimler does not disclose the financial performance of its brands separately, but in its 20 years of existence (it appeared in 1998), analysts estimate that Smart's losses amount to several billions of euros.
Nor the joint development with Renault for the third generation of the fortwo , sharing the development costs with Twingo and bringing forfour back, seem to have brought the desired profitability.
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The pressure is on Smart's side to deliver results. Dieter Zetsche, current CEO of Daimler, and one of the protectors and advocates of Smart's permanence, will be replaced at the head of the group by Ola Kallenius, current director of development, and a résumé with experience at AMG, where the business model for the powerful and expensive models is cost-effective and justifiable.
According to the sources of the German newspaper, Ola Kallenius will have no problems "killing the mark if necessary". He's under pressure himself — Daimler's profits dropped 30% last year , so that after assuming the leadership of the group, costs will have to decrease and profitability will have to rise, which implies a tight scrutiny of all the group's activities.
The defined strategy of transforming Smart into a 100% electric brand, starting as early as next year, may even be counter-productive to guarantee its future viability, all due to the high costs that this transition will entail.
The future of Smart? Let's leave this quote from Evercore ISI, an investment bank, in a note to its investors:
We cannot see how a German microcar business is able to make a profit; the costs are simply too high.