Mercedes dealers opposed Smart in U.S.Group thought tiny car clashed with luxury image

Diana T. Kurylko Automotive News / July 17, 2006 - 6:00 am NEW YORK -- Mercedes-Benz dealers urged DaimlerChrysler AG CEO Dieter Zetsche not to launch the Smart micro-car brand in the United States, says Doug Callahan, chairman of the luxury brand's dealer council.

"We asked them not to bring it to the United States because we did not think it was commensurate with the Mercedes-Benz image," says Callahan, owner of Helms Bros. Inc. He has Mercedes-Benz stores in Bayside, N.Y., and New London, Conn. Dealers also told Zetsche that if DaimlerChrysler, Smart's parent company, chose to launch Smart here, franchises "should be offered to all the Mercedes-Benz dealers and let the dealers make the decision," Callahan says.

But Zetsche went ahead with a plan to bring the tiny Smart ForTwo hatchback to the United States using Roger Penske's UnitedAuto Group Inc. as an independent distributor. Former Mercedes executive Dave Schembri will head Smart USA.Schembri says UnitedAuto stores will be "given preference" when selecting the 30 to 50 stores to sell Smart, with other DaimlerChrysler dealers receiving consideration. He said last week that UnitedAuto has been deluged with requests for Smart franchises.

Showdown in StuttgartDuring a June luncheon at the Mercedes-Benz museum in Stuttgart, members of the dealer council's board told Zetsche they didn't want Smart in the United States.

Paul Halata, CEO of Mercedes-Benz USA, was also there but did not comment on the dealer stand, says Callahan. This was the dealer group's first formal meeting with Zetsche.

The board had voted on Smart before going to Germany because "there was some talk about a third party handling Smart for months," says Callahan. Dealers did not know UnitedAuto was given the distribution rights until the June 28 announcement, he says. Zetsche told dealers that no decision had been made about Smart but that DaimlerChrysler was "leaning toward a third-party distributor," says Callahan.Since the announcement, Callahan and the board informally polled dealers and found reaction to UnitedAuto's getting Smart "split about 50-50." They realize the decision is final, he says. Sales start in '08

The ForTwo goes on sale in the United States in 2008. Schembri, who is launching the brand for publicly held UnitedAuto, would not give a timetable for choosing dealers.UnitedAuto has 296 franchises representing 40 brands, but only seven sell Mercedes-Benz.Two years ago, DaimlerChrysler was setting up a network of about 80 Mercedes-Benz dealers to sell the brand beginning this September. But in early 2005, former Mercedes-Benz Car Group CEO Eckhard Cordes pulled the plug on Smart's coming to the United States. Schembri, then at Mercedes, was preparing to select which dealers would sell the cars.