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By William Kimberley

“Smart has a strong name – a name that has plenty of positive associations and that has long achieved cult status in many markets. Smart is perceived as clever and intelligent, but also as creative and trendsetting. The Smart brand is our most valuable asset. You don’t drive a Smart because your budget won’t stretch to a larger car – you drive a Smart because this car is an expression of your outlook on life.”

This is the view of Ulrich Walker, the president of the company.

However, for all the utterances about Smart being a car of choice and a fashion statement, the company is still not making money, nor has it done so since it started up operations six years ago. However, as the new president, Walker is certain that despite all the stories that have been circulating about the company’s future, it is does have a bright one.

“There are always too many rumours floating around about Smart but we are on track with our reconstruction programme,” asserts Walker. “Looking at the Crosstown hybrid concept shown at the IAA in Frankfurt, it shows that we not only have enough competencies within Smart for future projects based on the Fortwo platform but also new things like hybrid technology.”

The distinctive Crosstown follows on from the hybrid drive concept for the Fortwo shown at the 2001 IAA. It features an electric motor with an output of 23 kW and the 61 ps (45 kW) petrol engine from the Smart Fortwo. This is in contrast to the concept shown four years ago which featured a diesel engine in combination with an electric motor.

“It is based on that we developed a few of years ago while the car itself is based on the new Fortwo successor platform,” says Walker. “Most of it has been developed by Smart but we are using competencies from DaimlerChrysler when it comes to electronics and safety.

“We haven’t decided whether to put it into production. What we are doing is asking customers for their views as well as looking at its market potential. When this is complete, we will then make a decision about putting it into production.”

Another reason for Walker’s optimism about his company’s future is market research showing that the small and mini car segment having a bright future. DaimlerChrysler expects it to make up half of the world market for vehicles in 2010. Up to then, the global market for small cars will grow by an annual rate of almost 4.5 per cent and the mini car market by almost 4 per cent. In comparison, it expects the overall car market to develop comparatively slowly at an annual 2.5 per cent.

“Right now, though, the small car market is decreasing by more than 13 per cent year on year,” says Walker. “On the other hand, if we look at our products we are increasing our market share so it’s a good signal for us. However, I’m personally unclear why the market is shrinking when gasoline prices are increasing and fuel consumption is becoming more important. However, customers are not so sensitive at the moment.” He believes that when the price of fuel begins to hit home that downsizing will become the norm.

While the future might look bright, the immediate past has been rather downcast. Both the Smart Roadster and Smart Forfour were launched into a tough market which still remains difficult for all manufacturers in the segment. While 3.9 million small cars were sold in Western Europe in 2003, it was down to 3.6 million last year. Translated in terms of the Forfour, it meant a potential loss of sales of 10,000 units.

Conditions are even worse in the roadster segment. Whilst the Smart Roadster and the Smart Roadster Coupe performed well in the segment and took second place last year, in terms of overall registration figures, the volumes were so small that it has become unviable for the company to continue producing them with the two models being phased out in December.

It may be reducing its model range, but Smart is expanding its horizons. Following the Fortwo’s successful launch in Canada, Smart now has its sights set on the US. Although a final decision has yet to be reached, the ground has been prepared with the successor to the Fortwo being designed to meet the US registration regulations, insofar as they differ from the European ones.

“We think this car fits the US market very well,” says Walker, “because it’s a lifestyle product and it’s quite different to other products. So we expect it to appeal on the West coast as well as in the larger cities. Gasoline prices have also dramatically increased which is also becoming a factor there in the choice of cars.”

In addition to its focus on the Fortwo and Forfour, Smart is also working to reduce fixed costs – targeting a 30 per cent cut at the company’s headquarters in Böblingen, Germany, for example while also looking at its production facility in Hambach, France.

“We are very happy with the production concept we have at Hambach which is still quite unique,” says Walker, “and we have a very good relationship with the suppliers. What we are now doing is improving the production costs and involving the supplier directly in the development process to develop and produce low cost components. It means that in production, especially in assembly, we will improve our cost position.”

The jury is still out on the brand and its long term future. As far as Walker is concerned, though, is set to break even in 2007 with Smart becoming a significant player in the brave new small and mini car world.