LONDON - Daimler-Benz AG took full control of the troubled Smart car project last week. It bought the remaining 19 percent of shares of Micro Compact Car, the joint venture with Zurich-based SMH Group, maker of Swatch watches.
Both sides say they plan to take what they learned from the controversial project into new automotive ventures.
Daimler-Benz, soon to become DaimlerChrysler, will expand the Smart brand from a single car into a line of micro-compact cars. Smart will be added to the DaimlerChrysler stable along with Mercedes-Benz, Chrysler, Dodge, Jeep and Plymouth.
'We don't establish a brand by having only one product in that brand,' said Enrico Mueller, spokesman for Daimler-Benz in Stuttgart.
The Swatch Group is holding discussions with at least two automobile companies about future ventures.
Nicholas Hayek, chairman of SMH, Swatch Group's parent, would not name those partners or discuss the nature of the ventures. One possibility, he said, would be the development of a 'green' four-seater vehicle. 'We considered our mission as finished,' Hayek said. Swatch's decision to sell out was based on two factors, he added. These were higher than anticipated investment costs, and the joint venture's failure to build the hybrid vehicle that had been originally planned. The hybrid version would have employed a lead-acid battery.
In a prepared statement, Daimler-Benz passenger car chief Juergen Hubbert said: 'Nicholas Hayek has pushed this project onward with much personal engagement and influenced it in an important way. The collaboration with him was an enrichment for all of us.'
SMH plans to continue development of hybrid powertrain technology. If DaimlerChrysler wants to use its powertrain technology in the future, the Swiss company would be happy to license it, Hayek said.
Both sides said the Daimler-Benz decision to buy the remaining Swatch shares in the Micro Compact Car venture was a friendly parting. But the Smart car, once called the 'Swatchmobile,' has been plagued by difficulties.
A test vehicle flipped in the so-called elk test, costing Daimler-Benz extra development money to fix the problem. But the result caused the Smart car to ride hard, drawing much criticism in the European motoring press.
'If you pull out the seat belts, you can use it as a rucksack,' said a reviewer in German's Stern news magazine. Such comments were especially harsh for a vehicle meant to be as much as a fashion accessory as a mode of transportation.
The project drained more cash than either side anticipated. The two partners also had different ideas about how the car should be marketed. Analysts were not surprised when Swatch reduced its holding from 49 percent to 19 percent in September 1997.
'There are probably fewer bigger rolls of the dice around than the launch of this Smart car in the marketplace,' said one analyst.
The two-seater Smart car enjoys no real price advantage over small city cars like the Ford Ka and Renault Twingo. Cities do not yet have the kind of half-parking spaces a tiny vehicle such as Smart could take advantage of, the analyst said.
American businessman Huddy Hyman, whose Haywood-Clarke Automotive Group in Richmond, Virginia, operates three Smart dealerships in Paris and is building a fourth, was in favor of the buyout.
'I think it will be better this way,' he said. 'It's difficult sometimes trying to do something with a partner. With Daimler in control, they'll have a better focus on cars now.'
Lindsay Chappell contributed to this story.