Mercedes-Benz enters deal to take over Smart’s U.S. distribution from Penske

Article by Christian Andrei, on February 16, 2011

Mercedes-Benz has entered a deal to take over Smart car distribution in the U.S. from Penske Automotive Group, according to a statement from the two companies. In 2008, Penske launched the European microcar brand as an independent distributor. Smart is owned by Mercedes' parent, Daimler AG.

The French-built ForTwo had a good start but U.S. sales have dropped considerably. Under their deal, Mercedes-Benz USA will take over Smart’s distribution rights and management.

Mercedes-Benz USA CEO Ernst Lieb said that negotiations over details, including when the hand-over takes effect, is expected to be completed by July. The 21 Smart dealerships that don’t offer Mercedes products will lose the franchise, meaning that Smart will have 58 U.S. dealers.

Of the 21 dealerships that will lose the Smart franchise, four belong to publicly traded Penske Automotive. Furthermore, a four-door car that Nissan has been developing for Smart USA has been canceled. Smart USA President Jill Lajdziak will stay with Penske Automotive, the nation's second-largest auto retailer.

Lieb said that Mercedes-Benz will consider Smart as a division, comparable to its Sprinter commercial vehicle unit. Mercedes will appoint a general manager for Smart.

While Lieb confirmed that the agreement was signed last Friday, the financial details have yet to be finalized. Mercedes started the discussions with Penske in early January at the Detroit auto show. Penske had a phenomenal start with Smart, selling 24,622 cars in 2008, as gasoline prices hit record highs.

But in the last two years, sales have plunged. In 2010, sales dropped 59% to 5,927. However, both parties assert that the hand-over is not the result of Smart's shrinking sales.

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