STUTTGART - DaimlerChrysler has canceled plans to develop a small Chrysler passenger car for Europe, but will go ahead with a successor to the Mercedes-Benz A-class.
DaimlerChrysler's management board also decided to build a Smart roadster and a four-door Smart based on a Mitsubishi platform.
The 2004 replacement for the A-class was debated for several hours at a management board meeting on June 26 and 27 in Stuttgart.
The A-class sells well, but its profitability is disappointing. The future of the 'baby Benz' was also threatened by increasing product overlap within the group.
Some D/C executives argued against replacing the car in the weeks leading up to the June meeting. Sources say the A-class discussion at the company's Laemmerbuckel management center outside Stuttgart went late into the evening of June 26 and had to be carried over to the next day.
'Profitability was a sore point,' said a D/C manager.
But he said the board decided that the group should offer a premium small car along with the extended Smart model range and small cars from Mitsubishi.
Chrysler won't be involved in the group's small-car plans for Europe.
'The Chrysler brand will not be integrated into the small-car strategy,' said the source. 'That leaves the small- and compact-car segment to the Mercedes-Benz, Smart and Mitsubishi brands.'
Development of a Chrysler supermini was suspended when DaimlerChrysler acquired a 34 percent stake in Mitsubishi Motors in April. The front-wheel-drive Chrysler - meant to compete in Europe with cars such as the Volkswagen Polo and Opel/Vauxhall Corsa - has now been canceled.
The project was being led by D/C engineers in the USA, working with counterparts in Germany. The A-class plant in Rastatt, Germany, was a possible production site.
In Europe, Chrysler will continue to concentrate on Jeep products, the Voyager minivan and on passenger cars such as the PT Cruiser that reflect the brand's American roots.
Sales of Chrysler and Jeep models in Europe totaled about 92,000 units in 1999, down slightly from the year before.
A-class will continue
The A-class has sold well since its troubled 1997 debut, when a car toppled over in a high-speed lane-change test conducted by a magazine. But plans for a second generation of the A-class came under close scrutiny in the weeks before the DaimlerChrysler board meeting.
Joachim Schmidt, head of sales and marketing for D/C's Mercedes-Benz and Smart brands, said a successor would be built. But he conceded the profitability problems.
'We are sure we can improve on this aspect,' said Schmidt, speaking at the Automotive News Europe Congress last month.
DaimlerChrysler will focus on lowering development and production costs of the successor. Investment at Rastatt and the A-class plant in Juiz de Fora, Brazil, will be significantly lower.
'All we need will be new tooling and some adjustments to the processes,' said Schmidt. 'We don't need to build new factories as we had to do to launch the current A-class.'
Sources say the next A-class will use more modules, will carry over some tooling from the current generation, and will benefit from greater platform volume as a result of planned derivatives.
Schmidt said the next generation would include 'a whole family of cars, like we did with the C-class.'
A supplier executive source said D/C is pushing for up to 30 percent cost reductions for components on the next-generation A-class.
The Smart roadster approved by the board is scheduled for launch in 2002. The four-door, four-seat Smart will go on sale in early 2004. The car is expected to be about the same length as the current-generation A-class - about 3600mm long.