One of the great industrial comeback stories is that of the Swiss watch industry. Remember how, back in the late ‘70s and early ‘80s people (men, primarily) were sporting their brand-new black plastic digital watches? Suddenly annoying beeps were heard everywhere, particularly in inappropriate places. While the U.S. auto industry execs thought that they were being unfairly hammered by Japanese competitors, Swiss watchmakers were being annihilated. They not only used things like gears and cogs, but they were manufacturing analog watches. Enter Nicholas Hayek, who established Société de Microélectronique et d’Horlogerie which, in 1983, gave the world the Swatch. And with analog watches as fashion statement, the Swiss watch-making community gave the Japanese a run for its money.
About a decade earlier, in 1972, a man named Johann Tomforde, was the project leader for future transportation systems at Mercedes-Benz. And he conceived of an urban vehicle that would be 2.5-m long, a two-seater. Fast-forward to 1981. Mercedes engineers built a concept, the Nahverkehrsfahzrzeug (NAFA), or “Local Traffic Vehicle.” Mercedes executives were becoming concerned with the urban environment for automobiles, so this project continued on such that in 1990 two variant concepts went into development, one the Vision A 93 prototype, which became the “Study A,” and culminated in the production Mercedes A Class, and the other, the Mercedes City Car, a.k.a., the Micro Compact Car (MCC), an electric car that was 2.5-m long.
Meanwhile, in 1991, over in California, at the Mercedes-Benz Advanced Design Studio in Irvine, a group of designers went to work on a Micro Compact Car that was internally designated “MCC 01.” In 1992 a prototype was built by Metalcrafters.
Nicholas Hayek had an idea. He thought that the cost-effective modular manufact-uring processes used to produce Swatches could be applied to manufacturing cars. What’s more, he thought that developing an electric city car would be ideal. He worked with the Biel School of Engineer-ing in Switzerland on an electrical vehicle architecture. He was also meeting with Mercedes executives (having done so, to no avail, with some from Volkswagen). In 1994, Daimler-Benz AG and Schweizerische Gesellschaft für Mikroelektronik und Uhrenindustrie (or the Swiss Corporation for Microelectronics and Watchmaking Industries) formed Micro Compact Car (MCC) AG, with a 51/49 ownership split. In 1994 MCC France was established for the purposes of locating a plant, smartville, in Hambach, France, which had its production launch in 1997, the same year that the production version of the three-cylinder smart city coupe was revealed to the public at the Frankfurt Auto Show. Earlier that year, Hayek had accepted a buyout. In 1998 Daimler-Benz had control over the business that was renamed Micro Compact Car smart GmbH. In 2002, the company was renamed again, smart GmbH.
There were a smart city coupé and a smart city cabrio. In 2002 there was the smart crossblade, a vehicle without doors, roof, or windshield. The following year the smart roadster and roadster-coupe were added. Then in 2004, there was the smart forfour, which, as implied was a bigger (3.75-m long) vehicle for four people. By the end of the summer of 2006, the fortwo, previously the city, was all that remained. And in 2007, the second generation of that car debuted. While smart models had been available in 36 countries, the U.S. had not been one of them.
Coming to America: The Next Generation
Which leads to Roger Penske, chairman of the Penske Automotive Group, an organization with 165 dealerships in 19 states and Puerto Rico and 142 dealerships outside of the U.S. It offers 40 different new vehicle brands as well as used cars. In 2006 the company sold 183,300 new vehicles and 88,700 previously owned. It had revenue of $11.2 billion. On June 28, 2006, Dieter Zetsche, whose title at that time was chairman of the board of management of DaimlerChrysler AG and head of the Mercedes Car Group, stated, “Following the success of the smart fortwo in Europe with more than 750,000 attracted customers and the increasing demand for affordable and fuel-efficient small cars in the U.S.A., we are now bringing this new kind of mobility to U.S. cities. The time has never been better for this—and I am convinced that the smart fortwo as an innovative, ecological and agile city car will soon become just as familiar a sight on the streets of New York, Miami, or Seattle as it is today in Rome, Berlin or Paris.” The brand is being brought to the U.S. by Roger Penske’s organization, a man with whom Zetsche was familiar with for various reasons, including the fact that in 2000, DaimlerChrysler bought all of the shares of Detroit Diesel Corp., including the 48.6% owned by Penske Corp. For his part, Penske said on June 28, “Through our international diversification we’ve seen the benefit the smart brand provides in Europe. We believe the U.S. market will embrace the smart vehicle with its exceptional fuel economy, environmentally friendly features, and advantageous price point.”
That same day, www.smartusa.com went live and, says Dave Schembri, president of smart USA, they’ve had over three million unique visitors to the site. What’s more astonishing is that 71% of the visitors said that they wanted to be contacted by a dealer. In March 2007, a $99-reservation program was put in place on the website wherein people could secure their place in line for getting a car that wasn’t going to be made available to them for nearly a year (the first vehicles are to go on sale in 2008). Penske, who regularly checks on the status of the reservation program on his BlackBerry, says that they are going back to groups of those who have placed orders (and he and Schembri are among those who have placed orders and he insists that they are not going to be jumping their places in line, nor are they going to allow their influential friends nor celebrities to get preferential treatment), 84% are reconfirming orders and no more than 8% are asking for the return of their deposit. What’s more, they are finding that many people are actually adding options to the vehicle they originally speced, options totaling an average of $1,200.
There are three models being offered. All of them are dimensionally the same: 106.1-in. long, 73.5-in. wheelbase, 61.38-in. wide; and 60.71-in. high. All are powered by a one-liter (or 61-in.3, three-cylinder engine that is rated at 78 hp @ 5,800 rpm and provides 68 lb-ft of torque @ 4,500 rpm. All have a five-speed automated manual transmission (which essentially means that it can be operated as an automatic transmission or manually shifted). All have 15-in. wheels, 11-in. diameter disc brakes at the front, 8-in. diameter drums at the rear, ABS, electronic brake force distribution, traction control, electronic brake assist, and electronic stability program (ESP). There is the fortwo pure, staring at $11,590. The fortwo passion coupe, starting at $13,590. And the fortwo passion cabriolet starting at $16,590. It is worth noting that the pure model is one that takes the definition of “nothing extraneous” to the level wherein not only are the windows manual, but there is no audio system.
According to Penske, at the end of October 2007 the model mix was 3.5% pure, 36.5% passion cabrio, and 60% passion.
Here is potentially the most revolutionary aspect of this whole thing. Penske, who acknowledges that there are possible additions to the lineup (e.g., in Europe there are models with turbocharged gasoline engines, diesel engines, and a “microhybrid’; in the U.K. there is a test fleet of approximately 100 electrically powered fortwos on lease), states, “I told the group we don’t need a lot of fancy extras right now. We have a build-to-order system.” That last line is worth repeating: “We have a build-to-order system.”
smart USA is, in Penske’s words, “The connection from the factory to the ultimate consumer.” All of the design, engineering, manufacturing, development, and other associated activities are handled by the Mercedes-Benz Car group within Daimler AG. smart USA is essentially the distribution network.
In the case of smart in the U.S., each car that is coming over from smartville is a car that has, in effect, been sold. This is not a case of building to inventory, which is ordinarily the case. Consider that whereas the tendency of the majority of car buyers in the U.S. is to buy off of dealers’ lots, here people are waiting months for their specific vehicles. That has a tremendous benefit to the economics of both the manufacturer (Daimler) and the distributor (Penske).
What’s more, the Hambach Plant is capable of manufacturing a vehicle in 3.5 hours (Schembri speculates that it might be possible to establish a European delivery program wherein smart buyers could actually watch their car being built in real time). The smart plant has a layout that is shaped like a plus sign, with the vehicle starting at the bottom, where the frame and cockpit are joined, moving to the left arm, where the chassis and power train are added, moving to the upper arm for exterior and interior trim, windows, and seats are added, then to the final arm where the body panels are attached, and the car undergoes quality control. What makes this all possible is that much of the production work is done by on-site partners: Magna Chassis Systems for the frame (“tridion safety cell”); Siemens VDO Automotive for the cockpit module (including installation); ThyssenKrupp Automotive for the rear axle and final drive module; Plastal for the body panels and trim; Magna Uniport for closure panels.
Go back to the start.
Nicholas Hayek, who revolutionized the watch industry by making watches a fun, inexpensive fashion statement, looked to do much the same for automobiles. Although his participation in the program was comparatively brief, that fundamental approach has been retained. Arguably, the fortwo is going to be bought by people who are more interested in the fashion statement that it makes more than any other aspects (e.g., the car isn’t remarkably fuel efficient, with EPA 2008 consumption of 33 mpg city/40 mpg highway; the car has room for just two passengers; the storage space behind the seats is 7.8-ft3 to the beltline or 12-ft3 to the roof; the stated 0 to 60 mph time is 12.8 seconds; the electronically limited top speed in 90 mph). In other words, just as people buy Swatches for their fashionability, the smart program is not about pure mobility.