DaimlerChrysler envisions that the financial problems of its Smart division will be resolved by 2007, but in line with its new business plan, the Roadster and planned ForMore SUV models have been axed.

DaimlerChrysler envisions that the financial problems of its Smart division will be resolved by 2007 but, in line with its new business plan, the Roadster and planned ForMore SUV models have been axed.

Faced with the prospect of further losses at its Smart division, the DaimlerChrysler board of management recently met to discuss a new business model for the ailing division. The plan calls for the accelerated development of the ForTwo, whose new three-cylinder engine will also be used by other manufacturers.

Production of the two-seater roadster, which was launched in South Africa at the end of 2003 (click here for story) will cease at the end of 2005, while development of the planned ForMore SUV has been halted.

Despite its disappointing sales, the ForFour (click here for news of its 2004 launch in South Africa) will remain on the line-up in a continued partnership with Mitsubishi. The company believes that it would be possible to "reduce fixed costs by around 30 per cent within the next two years, while substantially improving productivity".

Smart's day-to-day running will also be affected as several key areas are integrated into existing structures within the Mercedes Car Group. The monumental cost of restructuring will include "write-downs on plant and equipment, the settlement of obligations to third parties, and other value adjustments" as well as "significant workforce reductions".

The business model developed will be submitted to the company's supervisory board for review, and its decision will be announced at the end of April. Despite the widespread change and weaker first and second quarters, DaimlerChrysler still expects a slightly higher operating cost by the end of 2005 compared with 2004.