Smart Thinking: The Little Car that Made it Big 076031943X, 9780760319437

Citation preview

Andreas Renschler,

president of Smart GmbH

~£16.99UK ~ \WY.95US AY SCAN

Smart is daft...and cool, Buyers weren't quite ready for it when it stormed onto the scene in 1998: today, the factory can't buld enough of them. And now that DaimlerChrysler has scored a big hit with the tiny two-seater it plans to drive the brand name into the heart of the car market with roadsters, hatchbacks and SUVs -- wherever it can apply its inventive, exciting thinking. From Germany to Japan and Mexico to Australia, smart has fast become an international phenomenon and is set to hit the USA in 2006, What is not so fast is the production of profit; smart is investing too much in innovative new models to make money yet. For owners meanwhile, there is more fun in a smart than in anything since the Mini. This book is the first full-length investigation of the smart sensation.

Tony Lewin has spent most of his working life driving cars and analysing them and the global enterprises that build them. As a business writer and editor of Financial Times Automotive World he has kept a constant watch on the world's top carmakers for many years. In 2003 he published his first full length work, the widely-acclaimed How.t9 design cars like a pro. SAN

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‘smart thinking...

to all my smart friends and family smart thoughts..... “I have no doubt that it is possible to give a new direction to technological development, a direction that shall lead it back to the real needs of man, and that also means to the actual size of man. Man is small, and, therefore, small is beautiful.”

E, F Schumacher (1911 - 1977), Small is Beautiful

“None of us is as smart as all of us." Phil Condit, former chairman and chief executive officer of Boeing “There's no such thing as ‘hard sell’ and ‘soft sell.’ There's only ‘smart sell' and ‘stupid sell.”

Leo Burnett (1891 - 1971) US advertising guru

This edition first published in 2004 by Motorbooks International, an imprint of MBI Publishing Company, Galtier Plaza, Suite 200, 380 Jackson Street, St. Paul, MN 55101-3885 USA © Tony Lewin, 2004 All rights reserved, With the exception of quoting brief passages for the purposes of review, no part of this publication may be reproduced without prior written permission from the Publisher.

The information in this book is true and complete to the best of our knowledge. All recommendations are made without any guarantee on the part of the author or Publisher, who also disclaim any liability incurred in connection with the use of this data or specific details. We recognize that some words, model names and designations, for example, mentioned herein are the property of the trademark holder. We use them for identification purposes only. This is not an official publication,

Motorbooks International titles are also available at discounts in bulk quantity for industrial or salespromotional use. For details write to Special Sales Manager at Motorbooks International Wholesalers & Distributors, Galtier Plaza, Suite 200, 380 Jackson Street, St. Paul, MN 55101-3885 USA. ISBN O-7603-1943-X Front cover: smart fortwo: DaimlerChrysler media Spine: smart rally: George Lewin Back cover: smart forfour and smart roadster: DaimlerChrysler media

thinking... the little car that

made it big tony lewin

GLENVIEW PUBLIC LIBRARY’. 1930 GLENVIEW ROAD GLENVIEW, ILLINOIS 60025

847-729-7500

ENTERNATIONAL

contents >> introduction: smartéstart

>> part one

4s

>> parttwo

beginnings a3

the flash of genius: enter Swatch mogul Nicholas G Hayek

03 swatchéstruggles Volkswagen's idealistic engineers take up the micro compact challenge

04 swatch&shocks

55

shock number one: new-broom VW boss cancels

roots of the small car idea: a bit of background

02 smart&spark

2

ambitious but accident-prone

smart 01 bubble cars, bonds&beginnings

©

‘elephant’s roller-skate’ 35

0s star&shocks

61

shock number two: Mercedes

takes on the challenge

06 smart&édreams

77

building on ideals — and creating the ideal enterprise

o7 smart&ceremony

55

grand beginnings fora tiny car as national leaders roll in

08 smart&the elk slalom spin-off prompts rethink of company as well as car

i

>>partthree

©

>>partfour

the phenomenon spreads

the brand

builds up

09 smart&smiles

129

the project turns the corner in a blaze of glory, only for it all to go wrong again

10 smart&serious

143

155

167

exciting new territory

way of thinking

199

web fans, American art experts, racetrack aces, rock stars and

marathon runners figure among smart’s worldwide followers

245

was it all worthwhile? what went wrong, and what went right? and what lessons does the smart experience teach us?

index

187

the model becomes a brandand the brand becomes a new

14 smartéfans

237

new countries point to rosy future—but it won’t all be plain sailing

17 making sense

crossblade, roadster and BRABUS take smart band into

13 smart thinking

16 smart today& tomorrow new designs, new sectors,

now fashionable and selling fast, smart plans to triple its model range

12 Smartémoreimore

15 smart comes of age 215 single model grows into complete brand as forfour and formore join the family

long-awaited sales breakthrough but smart’s fate still hangs in the balance

11 smart&success!

©

acknowledgements

254 256

>> introduction:

Smartisstart >> high hopes, high drama and a cast of colourful characters It was early one bright morning in July 1998 that the smart story finally became real. The backdrop was the sparkling blue water of the Mediterranean, while to the north; partially obscured by a thin layer of smog emanating from the city it encircled like a horseshoe, hovered the rugged grey mass of the Sierra de Montseny. That city was Barcelona, officially Europe’s trendiest, noisiest and most culturally vibrant regional capital, and the venue chosen by Micro Compact Car AG to present its first product — the smart city-coupé — to the most influential opinion| formers among the world’s press.

The event was a pivotal one from almost any perspective you cared to mention. Smart had always been a talking point ever since Nicolas G Hayek, the flamboyant

>> introduction

entrepreneur who saved the Swiss watch industry and launched the Swatch, first put forward his citycar ideas in the early 1990s. Barcelona, meanwhile,

had been enjoying a steeply-rising profile as the must-have

location

for

any _ self-respecting

carmaker’s design studio. At the same time newlymarried

DaimlerChrysler,

step-parent

and

nursemaid to the infant Micro Compact Car brand, was itself much in the public eye following its creation, just two months before, from the fusion of

Daimler-Benz and the Chrysler Corporation. And to the delight of the headline-writers, a succession of management

>> The July 1998 press launch of the smart was in Barcelona:

this was the first time the

dramas already

changes,

had highlighted

convulsing

personality

clashes

the internal

the

young

and

upheavals

micro-car

organisation. Smart’s traumas had made it the stuff

world simecia had beer able

of public debate and, whether it succeeded or failed,

to sample the radical new car

it was guaranteed to be big news. Yet,

in

truth,

on

that

sunny

midsummer

morning any such tensions had been kept well hidden, no doubt soothed by the sangria, the sea air and the stylish presentation the evening before. What mattered more than anything else was the moment that everyone had been waiting for for so long: the much-anticipated, much-delayed and in the end hugely hyped first drive of the revolutionary two-person city car.

After all, there had never before been a vehicle which so daringly sought to overturn people’s perceptions of what a car should be; no design for a generation or more had so deliberately broken so many rules or threatened to undermine so many long-entrenched buying patterns as the tiny two-seater smart. From today’s perspective, with smart having developed into an international brand across more than 30 markets and with several hundred thousand smarts buzzing around the city streets and open highways of the world, it’s is hard to believe the tiny car held such a shock value just six years back; today, the compact, 2.5 metre (98 inch) short

>> smart&start

machine is such a familiar part of our everyday traffic picture that no-one gives it a second glance. In 1998 it spelt revolution, no less. And even aside from the revolutionary nature of the car itself — or perhaps

directly because of that very revolutionary nature — there had until then been few car development programmes which had had such emotion, both positive and negative, heaped on them in such a public fashion. Certainly, no project had ever endured so long and traumatic a period of gestation and, equally certainly, none had been forced to suffer the smart’s ignominy of being kicked around in public before, during and after its birth.

In fact, in the face of the relentless succession of financial and technical blows sustained by the project, right from its earliest stages, commentators had repeatedly rated smart’s

>>

chances

The early publicity shots of the smart show the design

in its original form — prior to the widening of the rear track and the fitting of the distinctive wider rear wheels

of survival

at 50/50, often considerably less; jealous

Swatch pioneer Nicolas Hayek was the

original inspiration behind the smart project,

but the finished product was almost entirely the creation of Johann Tomforde from Mercedes-Benz

competitor groups were, if anything, even more scathing in their evaluation of smart’s prospects. Even towards the end of the countdown to the 1998 launch, the

raw economic statistics of the smart initiative presented a gloomy picture indeed. All things considered, the fact that the fleet of smarts was lined up in Barcelona at all constituted a minor miracle, a testament to the drive and determination of the key individuals whose belief in the concept had not wavered since day one. Though this cast of often colourful characters changed frequently along the rockstrewn route to the on-sale day, suffering setbacks which would have stopped any other programme

dead in its tracks, the drive, the idealism and the enthusiasm

which inspired the original team’s ideas continued to shine through with laser-like

clarity — and indeed continue to do so today. >> no-one asked the buyers if they wanted a car like this The common awareness of this tortured background served only to heighten the

sense of anticipation and emotion surrounding that first drive. It was, on an admittedly somewhat smaller scale, rather like the first flight of a complex and controversial aircraft project: the champagne corks were ready to pop in celebration of the tremendous technical and logistical achievement of getting the vehicle to the take-off stage in the face of such adversity, but important questions still remained about the commercial viability of the whole programme. In particular, the likely response of potential customers and the broader public to this new form of

mobility remained a big unknown. 10

> smart&start

The design, too, had been through many crises and had been thoroughly refined as a result, and the ingenious smart manufacturing operation was confidently geared up for an output of 200,000 cars a year — even though smart’s Mercedes-Benz parent had always harboured private doubts about this figure. Yet, impressive though those achievements undoubtedly were, it seemed as if no-one had taken the trouble to ask whether buyers actually wanted a car like the smart, especially in such large numbers. Smart’s bullish marketing chief claimed that three million European households would be in the market for one, but hard evidence was lacking.

The omens were hardly favourable. New forms of mobility had always been notoriously difficult to sell to the broader buying public, who were loathe to compromise the creature comforts and perceived safety of their own conventional cars in order to ease inner-city travel or reduce environmental impact for everyone else; there was the firmly entrenched belief that city cars would be slow and dull to

drive and would be entirely unsuited to longer journeys. And besides, times were good, with the main car markets booming, businesses thriving and an air of optimism around, especially in Europe. Why, reasoned the customers, should we want to downsize to something feeble, cramped and crude? Why should we make

sacrifices in our own personal status just when things are going well and we can afford to step up to something better?

Industrially, too, there had always been plenty of danger signs on hand to fuel the anxieties of those who chose to doubt. ‘Small cars, small profits’ had been an incessantly-cited maxim within the car business for many generations, and there had been much speculation within the industry as to exactly why Volkswagen — Hayek’s

>>

Smart marketing chief Hans Jurg Schar came from Swatch and had been brilliantly

successful in making the watch a worldwide phenonenon. At smart he and Nicolas Hayek consistently overestimated the sales potential of the new car

>>

>> introduction »Colour theory.

L »Agile and economical.

‘rtcabes tansthasE>,

Marketing material for smart was bnilhantly

inventive for its time

original partner in his quest to build the so-called Swatchmobile — had pulled out of the joint venture so suddenly. Those nagging doubts were further fuelled by the series

of technical obstacles already encountered under Daimler-Benz’s watch, and by the emergency troubleshooting programmes and personnel changes that had followed in their wake. It seemed that, for all its originality and ingenuity, smart had come to be

regarded as something of a poisoned chalice within the auto industry. Worse, with unfortunate timing just before the June presentation, forecasters Standard and Poors

had predicted a settle-down sales rate of little more than half the smartville plant’s capacity, suggesting that smart would not turn a profit until 2002 at the earliest; worse still, DaimlerChrysler chairman Jiirgen E Schrempp let slip that the profits were unlikely to appear at all during the first model cycle of the city-coupé. So, as that July day dawned expectantly outside the ultra-chic Arts Hotel on Barcelona’s waterfront, the little smart had everything to prove. It needed to do much more than simply demonstrate that it had overcome the engineering and logistical challenges it faced during its formative phase; it needed to show that it was positively 12

>> smart&start

fun — rather than merely average — to drive, and it had to give the impression of a proper grown-up car despite its abbreviated dimensions. But most of all it had prove to a sceptical world that it had the style, the charm and the sophistication that would convince well-heeled buyers to treat it seriously enough to want to buy — or rent — one: more than ever, reasoned company managers, the smart’s future lay as an incremental second or third vehicle in a well-to-do household.

>> ready for the off

Outwardly, at least, the signs that morning looked good. The driveway of the Arts Hotel buzzed with unaccustomed sounds and unusually eager activity as, instead of its familiar silent swish of chauffeur-driven S-Classes, the place hummed to the very

different note of dozens of tiny three-cylinder engines as the visiting journalists were being talked through the smart’s controls by impeccably trained student guides specially hired for the occasion. There were many sophisticated features to learn, quite remarkable considering this was the tiniest car anyone had driven: the central ignition switch, the six-speed

sequential gearbox with automatic

clutch, the

automatic mode for the transmission — all were innovations unheard of at that time. Ona visual level the smarts scored well too: bright and attractive with their black or silver frames and colourful body panels, the stubby 2.5-metre two-seaters looked chic and provocative rather than out of place in that rich-man’s environment of stretch limos and supercars more than double their size — the automotive equivalent of a

daring Jean-Paul Gaultier suit at a stuffy black-tie dinner. From inside the smart — again a new experience for most of the journalists — it

was hard to believe you weren't in a bigger car: most of the correspondents expressed spontaneous astonishment at how much space there was for tall drivers, and how exciting and original the interior design and equipment were. Again, this fed directly into the impression

that this was

a serious, grown-up

car for

discriminating drivers, not a cut-price runabout for those who couldn't afford

anything better. Only by turning your neck and noticing the rear window just

centimetres behind your head did you realise that this was indeed atiny tot in a crowd of giants. So far, so good. The smart had shown itself stylish, potentially trendy even, in 13

>> introduction

high society: it certainly gave out the right visual messages to stand a strong chance

of catching on with its image-conscious target buyers. Next was to be its second big test, and the one that would matter the most to the biggest number of people — how it would acquit itself in the mad mélée of traffic swirling around the Catalunyan capital, and whether it would be as fun to drive as its funky profile promised. Inching out for the first time onto the Barcelona backstreet, it certainly felt alert

and agile: the busy engine just behind the seats made the tiny car seem urgent and eager, and the excited waves and stares of pedestrians, cyclists and car passengers added a certain ego element to the experience. However, it wasn’t long before the first

of a series of disappointments began to become evident, disappointments which, crucially, made the car rather less fun than expected. More ominously, some of the shortcomings seemed to point back to compromises made at various crisis phases in the design’s history — yet another unwelcome reminder of the troubled times the

The smart tower was

another marketing masterstroke, giving smart centers a distinctive and uniform

identity

> smarté&start

programme had been through. Most

“911 who

did

noticeably, it wasn’t just the battered

that trip noticed

state of the Barcelona streets that

how the crowds

was to blame for the uncomfortably

appe ared to welcome

bouncy ride, but also the smart’s

the smarts”

suspension

which,

in a move

publicised

the year

before,

well

had

been

stiffened up significantly in order to prevent the car tipping over in the elk test made notorious by the

Mercedes A-Class. Now onto broader streets and surrounded by faster, more aggressive traffic, the little smart at last began to show its true competitive

spirit. It had to be driven with real firmness, admittedly, and the slowness of the sequential transmission was a big irritation, but there was real fun to be had

outpacing and outmanoeuvring the big boys: here was proof that three cylinders and just 600cc could indeed — if only just — keep up with engines twice or even three times the size. Next came a section where the smart enjoyed a totally unfair advantage over anything but a moped or mountain bike: through the narrow,

bustling and labyrinthine alleys and archways of Las Ramblas — Barcelona’s famous Latin

quarter

—

the

convoy

of smarts

threaded

unobtrusively, the car’s compact dimensions

its way

confidently

and

allowing it to make tight turns

impossible in a Polo or Passat, and leaving a good baby-buggy’s width either side for pedestrians. All who did that trip noticed how the crowds appeared to welcome

the smarts — in contrast to the general resentment shown towards big cars in that tight environment. Heading north out of the city centre and up towards the mountain foothills, the smart worked hard but willingly to make the climb, its gearchange responding to our

growing experience in co-ordinating the lever and accelerator to make a smooth shift. However, the hillside road’s hairpin bends revealed a very different drawback: dull

steering responses. Once again, measures taken to guarantee immunity against rollover had served to take the edge off the car’s handling, resulting in slow-acting steering and a generally lethargic feel when changing direction. 15

>>

Press comment at the

smart’s launch was lukewarm, most criticism

focusing on the car's poor ride and high price

>> outfoxing the fat folk Back down in the city the smart felt more in its element, slotting straight back into its routine of outfoxing the clumsy full-sized commuters, sneaking into gaps too small for the fat folk, and generally playing the part of a cheeky challenger. At the end of the day the heated debate among the assembled commentators ranged over a broad spectrum of topics. There was general agreement that the smart was attractive to look at, well assembled and with a particularly successful interior; equally, disappointment with the car’s bouncy ride was a shared criticism. Most

agreed that while they had enjoyed aspects of the driving — especially being such a centre of attention for Barcelona’s café society — the smart deserved to be much more fun to drive, particularly if it was to appeal to the young and affluent. Yet underlying each of those observations was a more fundamental concern, and one which had very little to do with the technical performance of the actual

vehicle. Could it be that the smart, for all its cleverness, was a solution to a problem that no-one was particularly bothered about? After all, the limitation of only having

two seats seemed a major price to pay for the only provable advantage of the car’s

short length, that of easy parking. And even then, there was no certainty that 16

>> smartéstart

Europe’s major cities would permit parking at right angles to the kerb, the whole reason for the smart being designed with a 2.5-metre length. Feeding into these concerns was the thorny issue of price. While it was clear to all that the smart was a well made product and came with the reassurance of the mighty Mercedes-Benz brand — the worldwide benchmark for quality — behind it, the announced price of €8200 ($8850/£5330) had drawn gasps from some audience members at the presentation. That figure positioned even the most basic smart on a par with basic-transport big-sellers such as the Ford Ka, Renault Twingo and Fiat Seicento, all three of which offered a full complement of four seats and two of which also possessed the assets of fun and style — precisely the qualities the smart sought to major on.

So, not unnaturally, those same commentators returned home from Barcelona to write reports about smart considerably less optimistic than those they had expected to write. Here was a model with a troubled upbringing, which had serious practical limitations, which was not as much fun as everyone had hoped, and

which, to add insult to injury, was to cost more than competitors which did most aspects of the city-car job rather more effectively. Right then the outlook

indeed looked bleak. The smart’s one

potential

redeeming feature — its fun-to-drive content — had proved to be a damp squib; it

had neither practicality nor price on its side, and it was not even able to offer the promise of best-in-class running costs. Nevertheless, even the most

resolute

pessimists did agree on something: the smart did have two undeniable strong suits — its chic and fashionable style and the fact that it was backed, albeit at arm’s length, by the might of the Mercedes-Benz organisation.

In the end, of course, it was indeed these two strengths that did finally save smart. Mercedes-Benz took the brand decisively in house, eventually selling smarts through its own shiny silver dealerships. More importantly still, Mercedes was able

to take the engineering in hand and address the smart’s dynamic drawbacks whilst skilfully nurturing the inspiration that had guided the design from its very earliest moments. Remarkably for such a once-conservative institution, Mercedes proved able to understand and exploit the vital spark that made smart different, that made

it not so much a brand, more a way of thinking, a cheeky, anti-establishment 17

Ittookthe expertiseofthe Mercedes-Benz dealer network to give smart the market presence needed to unlock its potential

gesture that nevertheless remained safe, respectable and dependable.

Today, four years into the millennium, smart cars are at last selling in the large volumes confidently predicted by the brand’s founders a decade ago. Some social commentators

have

even

been

inspired

to declare

these buyers

the ‘smart

generation, just as their parents were part of what, in Germany at least, found itself

labelled the Golf generation; the thread that links the two is not just the choice of car but what it symbolises in the sharing of social values, lifestyle and cultural outlook. Now, as smart prepares to expand into the more mainstream markets of the much larger four-seater forfour hatchback and the four wheel drive formore off-roader, the

brand has already become something of a social phenomenon, hitting that oh-so-

desirable classless trendiness that marked the Austin Mini in the 1960s but precious few other cars since: top international entertainer Robbie Williams, for one, has been

a high-profile early adopter of the smart lifestyle. Smart drivers positively revel in the

smallness of their cars and pride themselves in the alternative lifestyle choices they make: to some, stepping into a smart is a symbolic step out of the conformist ratrace. An obsessively enthusiastic fan club worldwide and the spontaneous running of 18

> smarti&start

smart rallies all over Europe — both rare for a non-classic car — are further symptoms of what must now be described as the smart phenomenon. Mercedes-Benz skilfully guided smart to the start of the runway where it was at last able to reach take-off speed and fly under its own power. But it was never an

easy ride: trials and tribulations in the run-up to the Barcelona launch were many and painful, but these would prove to be nothing in comparison with the crises — with their aftershocks felt as far away as Detroit — which were to convulse smart in the months and years before it came to be widely accepted. In the chapters that follow we go back to the earliest days of smart — before it had even been named smart — to trace those original sparks of inspiration from charismatic Swatch mogul Nicolas Hayek and visionary designer Johann Tomforde; we follow the story over the course of the decade, through its endless setbacks, its many changes of direction and its constant shifts of personnel. We document the rescue by Mercedes-Benz, recall the day that smart was within an inch of death under

DaimlerChrysler,

and track the long haul to integrity and universal

acceptance — the necessary preconditions for the commercial profitability that still narrowly eludes the brand. More than that, we pay tribute to the founding fathers of smart who had the vision to seize on the compact car idea and run with it, against opposition at every

turn. Many have argued, perhaps rightly, that the smart concept was something ahead of its time when first launched in 1998. In 2003, with 125,000 examples sold

in a single year, the smart’s time has clearly and convincingly arrived — and all those who did so much to protect and promote that always-controversial inspiration have

at last been proved right.

19

ae

bubble cars, bonds

beginnings

>> roots of the small car idea:

a bit of background The smart in its many startling shapes, forms and colours has become a familiar sight on the streets of Europe and, increasingly, in more remote countries such as Japan,.South Africa and Australia. Yet in each of these many markets it has taken some while for people to become accustomed to the tiny dimensions of the citycoupé : at just 2.5 metres in length it is without exception the shortest car anyone has ever seen and it’s invariably a magnet for pointing fingers and disbelieving stares in city traffic. That initial astonishment is something that’s shared by everyone when they are first confronted bya real-life smart, and for good reason,

too: you have to wind the clock back to the 1950s to find any truly compact cars, and even then they were not as short as today’s smart. a3

>> chapter 1

In fact, if you were under 40 by the

turn of the millennium

you might

have been under the impression that smart

invented

the concept

super-compact,

completely

that

of the

this

new _ territory

was

for

a

carmaker to explore. That’s not strictly true: as this brief history lesson will make

designs

‘ >

i /

—

la nuova

have

many

other

preceded

small

the

car

smart.

However, none was quite as compact,

5

fie iAT

clear,

|

only a handful were anywhere near as

successful, and only one triggered the 500

kind of social revolution that the smart

now promises to do.

Trawl through the history books

Fiat's nuova 500 was a marvel of compactness, and its low price helped

and you will find that each of the

mobilise the whole of Italy during the 1950s

decades leading up to the boom time

of the 1960s produced its own and frequently peculiar crop of motoring midgets, many of them daft designs conceived by crackpot inventors and destined to sell in single figure quantities rather than millions. Only a select few — the 1936 Fiat Topolino and the prewar Austin Seven are two early examples that spring to mind — bore what proved to be the correct combination of design inspiration, marketing acumen and financial muscle to make it into serious sales numbers and propel their parent brands into the major league. Most of the other hopefuls perished without trace, only a handful leaving

anything more than the most cursory footnote in automotive history — be it for abject commercial failure, hopeless engineering optimism, or for valiantly pioneering a technical innovation later taken up with more success by a mainstream product.

What makes the smart different from every other micro is that it has become a genuine commercial success: the only other compacts to have hit the big time were 24

>> bubble cars, bonds&beginnings

considerably less micro and definitely less revolutionary, generally seating four and coming across as smaller versions of standard cars rather than truly new concepts. Take the Austin Seven of the 1920s, for instance: locked in deadly competition with William Morris and intent on producing the lightest and cheapest car possible,

Herbert Austin stripped and simplified a standard car design until he could build and sell it for under £100. This predatory pricing guaranteed strong sales and helped mobilise a whole generation of families who could not otherwise have afforded to graduate from their customary motorcycle and sidecar. Ironically, licence-built versions of the Austin Seven helped kick off car production at both BMW and Nissan, now two of today’s most profitable car makers.

An even more

inspired move

in Italy saw Fiat’s legendary designer Dante Giacosa pen the compact 500 Topolino — Mickey Mouse — half a generation later; the same man was also responsible for the Nuova Cinquecento of 1957 which, with

its rear engine and rounded, egg-like silhouette, is hailed even today as a marvel of compactness and packaging. >>

Herbert Austin simplified a standard car design to produce the famous, low-

cost Seven. The model

became a huge success in inter-war Britain

>> chapter 1

However, though the Nuova Cinquecento was ingenious in its use of space, it broke

little new ground in terms of engineering. That task was accomplished in sensational style by BMC’s Mini, which burst dramatically onto the scene in 1959 and proceeded to revolutionise not just the way designers designed cars but also the way buyers

bought those cars. Nowadays, almost all but the very largest cars have emulated the Mini’s engineering example, with their engines mounted transversely, driving the front

wheels. Yet, though the Mini’s influence on automotive engineering was fundamental, the social revolution it triggered was if anything even more significant. Mini put a new

word into everyone’s lexicon and launched a whole new way of doing things, from mini-skirts to minidisks, minibuses to minicabs and minicomputers; the Mini did The radical Austin-Moms Mini smashed through social barriers to become the first small car to appeal to all classes of buyer

With this provocative press ad smart paid affectionate tribute to the Mini when it finally ceased production

rT

me

enyivey ys v

ee |

re eadiie

>> bubble cars, bonds&beginnings

more than merely follow the spirit of the age: it became the zeitgeist itself. For

the Mini’s

purely technical

secret

wasn’t

— people

didn’t

rush to buy it on the strictly rational grounds

that

it was

well

priced,

efficient and economical. These may have been

contributory

factors

in the

buying

decision, for sure, but for many the real motive lay a lot

deeper. At a whisker over three metres in length the Mini was one of the smallest and cheapest proper’ cars available: logic suggested that it should be cramped, primitive and boring, in keeping with its entry-level position in the market. Conventional thinking also suggested that you bought a Mini because you could not afford anything bigger or better. Yet, as we all know, things turned out very differently: the Mini proved stylish, practical and great fun to drive, and was soon taken up by enthusiasts whose budgets could easily have extended to something much bigger and more superficially prestigious. Ordinary buyers, more conservative in their outlook, stuck for some while with

their technically outdated Prefects, Anglias and Minors, but by the middle of the Sixties the Mini had become an intensely fashionable accessory among the newly wealthy as the Swinging London scene celebrated the arrival of mass emancipation and the casting off of stuffy suburban values. The pop stars, models, movie idols and boutique owners who made London swing had homed in on another way of challenging the established order; suddenly, in the Mini, they discovered that a

small car could carry just as much kudos as a millionaire’s motor costing ten times as much. Class boundaries were undermined in an instant and the age of inverted

snobbery was born. The Mini example is an important one as it represents a turning point in the

perception of the automobile. At a stroke, big was no longer automatically beautiful: small and subtle could convey equal — or even greater — social status, and

intelligent solutions could take precedence over designs that were merely complex, expensive or indulgent. As such, the Mini paved the way for the smart that was to a7

True bubble carswerea mainly German phenomenon, often deriving their engineering from motorcycle practice. By the end of the 1950s models such as this Messerschmidt had become unwanted symbols of austerity

appear 40 years later and set out its appeal to the car-buying, mobility-minded public in much the same way, citing compactness and classlessness, fun and a free

lifestyle as its selling points; incredibly, the Mini had yet to reach the end of its production run when the smart was already selling in substantial numbers. Smart

even paid a touching tribute to the British icon when the Mini finally ceased production, running a series of adverts showing a Mini being taken away on a

trailer, and captioned “goodbye Mini”. >> strange and short-lived: the bubble economy

Ironically, though the Mini could never have been called a true micro in the same sense as the smart, the phenomenon that motivated its creators was micro in the extreme — the bubble car. Nurtured in the chilly climate of post war austerity, the bubble-car was back-to-basics motoring in a novel format. Just as the deprivations

of the 1920s had prompted a rash of cut-price cyclecars opportunistically slung together from proprietary motorcycle components to take advantage of tax breaks or legislative loopholes, so the rationing, the rebuilding and the fuel shortages of the immediate post war period gave rise to another wave of car-motorcycle hybrids, though of a very different style.. What distinguished the late 1940s and 1950s bubble car was its extreme smallness — some were barely two metres (79 inches) long, others a mere metre (39 inches) in width — and the smooth, proto-aerodynamic bodywork that enclosed

two occupants and the rudimentary mechanical elements with precious little space 28

> bubble cars, bonds&beginnings

to spare. The rounded look was no accident: among the principally German bubble car designers were noted aircraft names such as Heinkel and Messerschmidt, while

BMW, with its expertise residing in aero engines rather than airframes, chose to combine the Italian Isetta design with its own motorcycle powerplants. In Britain the three-wheeler Bond was a big success, boxier rather than bubble-shaped in its configuration, and predating BMC’s 1959 blockbuster in using the ’Minicar’ badge.

With their puny engines, awkward access and only three wheels, bubble cars attracted the scorn of the more fortunate motorist able to afford a so-called proper

car. But there was no doubting the appeal of the format — bubble cars were cheap to buy, economical to run, easy to park — at right angles to the kerb in some cases — and could in most countries be driven on an easily-obtained motorcycle licence, giving them access to a vastly broader range of potential purchasers. The increasing numbers of German bubble cars — and their home-grown imitators — on British roads following the 1956 fuel crisis became a source of

intense irritation for Leonard Lord, chairman of BMC, at that time one of the world’s leading car manufacturers. Lord issued his now-legendary command to his chief designer Alec Issigonis to build a proper car that would banish the bubbles for

ever, and the Mini was the result. By now, however, the austere 1950s were at an end, fuel rationing had long since

been forgotten, and amid a booming economy the British Prime Minister Harold Macmillan famously told the nation ’You’ve never had it so good. The crisis that had inspired the Mini was now history, and with eager, forward-looking buyers having no wish to be reminded of the bad times they had been through, the stark,

stripped-out Mini — early versions even lacked a heater — was in danger of having arrived at precisely the wrong moment.

Its subsequent success, and its later appropriation by the rich and famous as well as the sporty fraternity, showed for the first time that a small car did not need a crisis to sustain it. The Mini succeeded in transforming the world’s view of smallness: no longer was a small car a reluctant second choice because you couldn't afford anything bigger or better, smallness became an attraction in itself, and the advantages that came along with it — such as economy, convenience and subtlety — were icing on the cake. In this way the Mini’s thinking paved the way for a whole re)

>> chapter 1

generation of consumer products where smaller is seen as better: mobile phones are

the prime example, along with cameras, handhelds and personal stereos.

>> the car that dared to cross the social divide The Mini’s lasting legacy was to prove to the world that small cars did not have to

be cheap or dull or low in status, and that they had a genuine role at all levels of society whether or not there was a crisis going on. Having said that, however, the pressure of successive crises, generally involving shortages of fuel or sudden rises in

the cost of those fuels, has proved a central influence in stimulating new engineering thinking in the small-car domain, though it was not until the mid-70s that legislation on vehicle emissions, fuel consumption and safety began to make that pressure on designers almost continuous.

The first fuel shock, in 1973, had probably the most profound effect, especially in Germany where the government took the unprecedented step of banning driving

one day a week in order to conserve fuel stocks. Blanket speed limits were imposed or further tightened in most western countries, and even prestigious companies like Daimler-Benz began — as we shall see in a later chapter — to seriously consider

having to downsize their model ranges and to develop small economy models to match the restricted supplies of fuels being allowed through the Arab oil embargo. Clever ideas appeared rapidly within Daimler-Benz but, much to the relief of top managers accustomed only to dealing with elite customers and expensive cars, the Arab oil embargo was lifted and the small-car ideas were swiftly put back in the drawer. Much the same must have happened in the headquarters of many leading car makers, yet the arrival of a second energy crisis in 1979 served to confirm that small and economical vehicles would have to feature prominently in the model programmes of any company that wished to survive long term. Further pressure had been coming from an unlikely source — the United States, where legislators were beginning to discuss rules which would impose a minimum corporate average fuel efficiency (CAFE) on each car maker. Daimler-Benz, for one,-quickly saw the

long term significance of the CAFE law and realised it had somehow eventually to move into the small car area to offset the greater fuel thirst of its predominantly large and luxurious passenger car range. 30

>> bubble cars, bonds&beginnings

Johann Tomforde, who was later to become the founding father for the whole

smart programme, was at this time a young and talented Mercedes designer with a

fervent belief that the motor industry should begin to address the issues of congestion and mobility in built-up areas. He had been researching possible small-

car designs since the early 1970s and had refined his ideas into two concepts — a three-metre long four-seater, and a range of two-seat city cars with a variety of power sources. The second fuel crisis saw work stepped up once more, but the panic was soon over and the sustained boom of the 1980s meant once again that

the momentum was lost in favour of profitable luxury cars. >> shock to the system Nevertheless, the fuel shock had been serious enough to shake the car industry into something of a general re-think. Direct experience of traffic gridlock and air

pollution were all too vivid in Europe and Japan, and the planners were able to clearly visualise the likely future chaos as the rising graph of car ownership intersected the level trace of road-system capacity. Suddenly, compact cars were back on the agenda, parking and congestion were hot topics and a wide variety of energy sources — everything from petrol and diesel to methanol, gas, batteries and even air — appeared on the engineers’ menu.

Volkswagen even declared that in future it would see itself as a provider of mobility systems, not just cars — clearly implying that it feared for the role of the private car in any future integrated transport strategy, and that public transport provision could one day form an important element of its business. In the event, however, it never came to that: Volkswagen and others developed several series of research prototypes with electric or hybrid power, stop-start and other forms of

fuel saving, but the private car remained resolutely private and the city-car studies remained just that — design studies for corporate congratulation at motor shows, rather than vehicles with any production intent. For the truly tiny tots, the twoseaters, battery power was still seen as the way to go, especially by French

companies encouraged by a state-owned electricity utility with a very high proportion of low-cost nuclear energy to sell. Of the electric adaptations of conventional small cars, only a handful made it 31

>> chapter 1

into limited series production — the Fiat Panda Elettra, an electric Renault Clio and several car and van permutations from Peugeot Citroen, which also undertook field trials in French cities such as La Rochelle. Mention should also be made of a an earlier valiant effort by the British inventor, Sir Clive Sinclair: his single-seater, three-wheeled C5 personal mobility device was powered by a washing machine motor hooked up to a battery of what turned out to be singularly inadequate capacity. Unsurprisingly, the C5 never caught on.

Shortcomings in battery technology may also have been partly to blame for the failure of an ambitious Peugeot-Citroen project to come to fruition. Tulip was the

name given to a scheme which planned to feature municipally-owned two-seater battery-powered city cars linked to parking bays across the city: the idea was that users would subscribe to the Tulip service, reserve a car in a parking bay, and be charged for each kilometre or minute of their journey before parking the car back

Later attempts at personal transportation were dismal failures. The single-seater Sinclair C5 was widely mocked for its poor performance and limited range

> bubble cars, bonds&beginnings

in another bay to be recharged for another customer. The car itself was of interesting, too, being built from two large plastic halves with the mechanical elements sandwiched in between in the style of a household electric drill. Soon,

the

only

remaining

incentive

keeping

battery

and

electric

car

development going disappeared when California relaxed its formerly rock-solid insistence that by 1998 two per cent of every car maker’s sales had to be zeroemission vehicles (ZEVs) — which at that time in practice meant battery-powered, or hybrid with electric-only capability. Only a scattering of cities in Europe still threatened to close their central zones to all but electrics (in the end still fewer ever

went through with their proposals), spelling the death sentence for the pure electric car, despite the billions of research dollars lavished on it.

The one thing the wave of electric car concepts did however do was to bring to the surface a large variety of new shapes and configurations for city-size cars, even

if none of them reached the high-street showroom. Much of the experience with compact electrics was later used in vehicles with different powertrains: BMW’s El project, for instance, first appeared as a battery-only concept at the Frankfurt auto

show in 1991; two years later it was back with three different engine types — pure electric, petrol-electric hybrid and petrol. Yet small-car thinking still had not escaped the confines of the city. The designs

being mulled over in the boardrooms still had certain echoes of the austerity era to them: they lacked decent style, they looked far too insubstantial for out-of-town and motorway driving and, critically, they still smacked of deprivation, cost-cutting and hardship, rather than fashion, excitement or quality. Most importantly, there

was not enough engineering substance, not enough deep-down credibility in these small-car propositions for a big-name manufacture to risk attaching its brand

name to a serious production venture. Until, of course — as we will see in the chapters that follow — a certain Mr Nicolas Hayek, of Swatch watch fame, decided the car business needed a shake up,

convinced the industry’s top brass of his revolutionary ideas for a tiny 2.5 metre two-seater, and teamed up with Daimler-Benz, possibly the most prestigious automotive maker in the world.

33

34

smartéspark >> the flash of genius: enter Swatch mogul Nicolas G Hayek and his revolutionary agenda Born in Beirut of a Lebanese mother and an American professor father, Nicolas G

Hayek was an unlikely candidate for near-sainthood in Switzerland.

Yet it was within the precious confines of those 23 Cantons that Hayek came to be hailed as the saviour of the traditionally glorious Swiss watch industry — a platform which, with equal implausibility, provided the jumping-off point for his ‘next venture as a courageous pioneer in the very different arena of the automobile business. But the business world is full of strange tales, and the story of how Hayek progressed from French-speaking Lebanon to a Parisian university and eventually to the multi-million dollar negotiating table with the world’s top car makers is no

more implausible than, say, the accidental invention of the internet or Sony’s intuitive hunch which led to the Walkman.

35

>> chapter e

Indeed, Hayek’s apparently single-handed

turnaround

of a world-famous

industry in complete collapse has become the stuff of MBA textbooks in top business schools around the globe; like Jack Welch’s reorganisation

of General

Electric in the 1980s or the equally miraculous renaissance of a near-bankrupt Nissan more than a decade later under Carlos Ghosn, the invention of the Swatch

and the subsequent revitalisation of Swiss watchmaking under Hayek’s direction will be seen as an object lesson in how it should be done. Hardly surprising, then, that having just put the Swiss watchmakers profitably

back onto the global map — and having increased their share of the market from a rapidly-shrinking ten per cent in 1980 to a once-again dominant position by the end of the decade — Hayek should feel his expertise could also put the European automotive

industry to rights. In fact, claimed Hayek, the opportunities for

improvement presented by the automotive industry were if anything even greater than those he had achieved in watchmaking. As we will see, there were many

apparent parallels between the two industries, especially when viewed from the perspective of the late1970s, and it is easy to see why the internationally-minded engineer, who had surprised everyone with his management talent when he took

over the running of his ailing father in law’s foundry business in the 1950s, was so confident about his prospects in the car sector. A highly effective self-publicist, Hayek had worked in management engineering consultancy in Switzerland, and had advised firms such as AEG and the steel processor Maxhiitte before becoming involved in the watch business. Here, his entrée was as financier and advisor to the Swiss

banks who, through a succession of rescue operations, had come to

be majority shareholders in the two main Swiss watch making groups in apparently terminal decline. To Hayek, the reasons for the decline were abundantly clear: cheap but accurate and reliable

quartz-movement watches from the far east had flooded the world markets, but the Swiss producers were reluctant to move away. from their traditional highly skilled and thus labour-intensive assembly methods for classical mechanical watches. Hayek’s prescription was simple but drastic: to reduce costs and 36

and

Nicolas Hayek learmedthe value of brand management as he built up his Swatch group. His portfolio ranged from the low-cost ‘fun’ Swatch to the luxury Breguet and avant garde Rado. More than 20 brands are now in the Swatch Group stable

37

> chapter 2

simplify assembly procedures

across

the board by developing a common quartz

movement

module

for

everyone to share. This would ensure high volumes and good economies of

scale, but would not affect the external branding of the many famous watch

names that had come under his control. However,

his

masterstroke

came

with

the

Swatch, launched independently of the two watch groups he was reviving. Swiss makers had been completely priced out of the lowcost watch market, yet Hayek was convinced that by packaging a quartz movement in a one-piece moulded plastic case and making it in very high volumes it could sell at a very keen price and Switzerland could once again reclaim world leadership in the watch market. Some argument still surrounds exactly who pioneered the design — some contend that the engineer Dr Ernst Thomke deserves more credit for coming up with a design using just 51 components rather than the 100-plus of the typical watch — but it was unquestionably the brilliant marketing skills of Hayek which ensured the Swatch was such an enormous success. A watch needs to do more than just tell the time, argued Hayek — so he came up with the then-revolutionary idea of turning the Swatch into a colourful fashion item, a piece of jewellery that could be worn and,

pretty soon, be replaced by a brand new model when a fresh style was released.

The formula was an instant hit, selling over a million units in 1983, the year of its launch. By the end of 1984 ithad sold 10 million, and nudged 100 million in less than a decade. Shortly before its 20th birthday the 300 million Swatch mark had been passed and the Swatch Group had grown to include 20 different watch brands — including famous names such as Omega, Tissot, Longines and Calvin Klein — in each of the key market

sectors. Hayek, growing in confidence all the while, would wear up to eight watches at the same time and had taken to grandiose gestures to gain publicity for his ventures: at one trade fair in Basle he gave away thousands of imitation dollar bills with his portrait in place of that of Abraham Lincoln, and bearing the motto ’time is money”.

38

>> smart&spark

>> Hayek's brand management sets an auto industry template In building up this powerful group Hayek had explored many of the strategic techniques that would a decade later become key talking points for the automotive industry — automation, component sharing, common platforms and, perhaps most important of all, brand management. No wonder, then, that he felt convinced his

ideas could be applied to other sectors of business with equal success. None was more ripe for change than the automotive business, he figured: here, he saw a clumsy and outdated

smokestack

industry, clinging to dirty and inefficient

manufacturing methods, hampered by a ponderous model development process,

an unresponsive supply chain and a stock-heavy distribution network. Like the watch industry, the car business was under attack from the Japanese, though not so

much on a technological level as in terms of price, efficiency and reliability; like the watch industry, especially that in Switzerland, the carmakers had failed to keep pace

with the progress made in other sectors over the past several decades. But more than anything else, he was certain that the motor industry had missed

a trick by completely ignoring a whole sector of buyers at the bottom end of the market: people who wanted a small and stylish city car, perhaps with only two seats. In linking this essentially marketing-driven idea to technical developments on hybrid petrol-electric powertrains he had been working on in his engineering consultancy business, Hayek began to see a way of realising his dream

of

establishing a Swiss automotive industry. If the car could combine the strong environmental credentials provided by fuel-saving hybrid power — the automotive equivalent of the standardised quartz watch movement consumer

— with the powerful

appeal of Swatch-like interchangeable plastic body panels in bright

colours, he could guarantee it would be well priced, youthful and fashionable — and that it would turn in a handsome profit, too.

“Buying a car is an emotional thing,” Hayek later said in an interview with Car magazine in early 1992. “It’s even more emotional than buying a watch. The secret of success behind the Swatch can to a certain extent be transferred to the motor car. In both cases, it is our aim to offer high quality at a reasonable price.” Thus, in the late 1980s, had emerged the idea of what soon became known as

the Swatchmobile. Questioned for this book, Hayek explained that his motivation 39

>> chapter 2

was to “try to do and create things useful for the human community and to seriously improve major problems”, while in contemporary interviews he stressed

how he liked developing new things: “I am an artist,” he said. “I am a man who gets enormous pleasure making a product, seeing people around me having work, sitting around and getting work done,” he told Automotive News Europe. But while engineering work on the Swatchmobile products proceeded apace at

Hayek Engineering AG in Biel, Switzerland (first was to be a two-seater, then a fourseater, both with hybrid power), Hayek did not find everything plain sailing, despite his experience in dealing with big-name auto industry clients such as Mercedes-Benz and Volkswagen

on consultancy assignments. Manufacturing promised definite

savings through the adoption of elements of the Swatch watch supply chain model, but Hayek came to realise that the flow of finished products from the factory gates to

the consumer would bea rather less straightforward process to establish. “To sell a car you needa large distribution system,’ he explained. “And to sell a

large quantity you need the confidence of the consumer that major automakers have.” Clearly worried by the enormous cost of setting up a dealer network from scratch, and also concerned that a nascent Swatchmobile brand might be frozen out

by competitors who saw it as a threat to their business and margins, Hayek opted

for co-operation rather than direct confrontation: he began doing the rounds of top industry boardrooms in search of a willing partner. >> auto industry reluctant to change its ways

Most CEOs were by all accounts keen listeners, impressed by Hayek’s growing fame, by his quasi-guru status in the business community, and by the freshness of his ideas. The notion of building a car as fashionable and as successful in its field as the Swatch had been in the watch world must have been a highly seductive one for a carmaker struggling to make an impact in the market. Yet, pulling firmly in the

opposite direction, were instincts so deeply ingrained in the psyche of every auto industry business leader and board member that they were impossible to ignore: that small cars meant small profits, that anything other than a standard petrol

powertrain meant a lot of expense, a lot of inconvenience and a lot of future warranty-cost risk, and that it was impossible to sell environmental friendliness, in 40

>> smart&spark

the market place, especially to small-car customers with little cash. For many, this innate product conservatism must have been further fuelled by a suspicion of high-profile creative inventor types such as Hayek: today he would be

characterized as left-field in his eagerness to bank heavily on radical and untried solutions, but back in the late 1980s when the auto industry was still strongly fragmented and cross-brand leverages scarcely existed, his ideas would have come across as too high risk — too many steps, too far and too soon. Hayek claims to have spoken to most of the leading car makers in the period around the turn of the decade, but it was as late as 1991 before he at last found a

senior executive who thought the way he did and, more importantly, who was able to convince his fellow board members to embark on an exploratory joint venture research programme. That executive was Daniel Goeudevert, already known as

something of a free-thinker in the automotive business, and the company he presided over was Volkswagen. Given that Volkswagen, with its super-successful Golf and big-selling Polo and Passat was European market leader at the time, the omens for Hayek’s pet project

could hardly have been better. Little did he realise the difficulties that would lie in store for him in chasing these aims.

41

42

Swatchistruggles >> Volkswagen's idealistic engineers take up the micro compact challenge On the face of it, Nicolas Hayek could not have imagined a better nursemaid for his pet Swatchmobile project than Volkswagen. For sure, it was somewhat inconveniently located on the eastern fringe of the pre-reunification West

Germany, but it was the biggest car producer in Europe and ranked fifth largest in the world; its volume products were strong sellers around the globe, its quality was seen as a cut above the rest, and it had a vast dealer network that would relish the task of selling a well priced and fashionable baby car. But perhaps more crucially, Volkswagen was being run by top management which was very enlightened by the standards of the late 1980s. In charge of the whole group — which at that juncture had only just absorbed SEAT and Skoda —

was the cultivated and idealistic Carl Hahn, who believed in fairness and equality and that everyone — even developing markets and entry-level customers — should 43

Idealistic Volkswagen management believed strongly in the Swatchmobile idea. Top to bottom: VW Group CEO Carl Hahn, VW brand chief Daniel Goeudevert and research head Ulrich Seiffert

have access to the very latest environmental and safety technology. As well as being affable, articulate and unusually media-friendly, engineering director Ulrich Seiffert also ran one of Europe’s most effective research and development operations. Under Seiffert, Volkswagen had pushed hard into the still unexplored territories of alternative powertrains and fuels, notably pure electrics and diesel-electric hybrids. Examples of these were to be found under the bonnets of Golfs of various colours, buzzing around Wolfsburg or being demonstrated at

trade fairs or environmental conferences; such was the breadth of future drive technology activities in Seiffert’s department that there was the clear impression 44

> swatchistruggles

that Volkswagen had all the bases comprehensively covered. Frenchman Daniel Goeudevert had arrived from Ford in September 1989 and was soon promoted to run the Volkswagen division: he was already known as something of a free thinker, and was open to influences from a broad spectrum of

sources both inside and outside the car industry. He was even on good terms with union leaders, and enjoyed an excellent relationship with Hahn, the general wisdom being that he was being groomed as the chairman’s heir apparent.

Typical of Goeudevert’s willingness to embrace non-automotive influences was his admiration for the work of Nicolas Hayek in pioneering the Swatch phenomenon. The automotive press reported that Goeudevert was already good friends with Hayek

while he was still at Ford and had even then discussed small, low-emissions vehicles with him; certainly, Ford was among the companies Hayek had spoken to when he first began seeking an auto industry partner. Interestingly, Hayek now says he first met Goeudevert when he began negotiating with Volkswagen: one way or another, however, the close working bond that developed between the two men proved to central to the smooth running of the VW-Swatch programme. All three Volkswagen men were clearly open to new ideas and new concepts, all shared a broadly idealistic view of the way the auto industry’s evolution should be directed, and the company itself was already ahead of the game in terms of its engineering knowledge base. Some of this thinking had already been channelled into influential motor

show concept cars such as the Student and the Scooter,

which had appeared in the mid 1980s; in short, VW appeared well equipped — and well disposed — to take on the challenge of working with Hayek and his Swatchmobile team.

>> the deal: both parties hedge their bets The deal signed in Biel between SMH and Volkswagen on July 3rd 1991 was a surprisingly cautious one. Perhaps reflecting uncertainties on both sides, it called for the setting up of a joint venture - SMH Volkswagen AG — between the two partners: each would meet its own costs, contributing a maximum

of DM10

million ($5.4m/£3.4m); the company was to have its headquarters in Biel, and staff were to be drawn equally from both sides. 45

>> chapter 3

The initial formal contract was for a limited-duration feasibility study designed to establish the technical and business case for such a vehicle. Hayek brought his SMH engineers and the series of prototypes which they had been working on in collaboration with the Biel Polytechnic, well respected in the field of battery and solar technology; Volkswagen assigned ten engineers to the programme, a relatively small investment in relation to the millions of DM

it was spending on other

company projects. Though as chief engineer it was down to Ulrich Seiffert to run the joint venture programme

on a day to day basis, the initial impetus had clearly come from

Goeudevert. “The whole project with Hayek was the idea of Daniel Gouedevert,”

said a Volkswagen engineer closely involved with the programme: “he was a friend of Hayek’s, admired him very much and liked what he had done with Swatch and

the other brands.” “Hayek himself had always dreamt of an electric car, something with high efficiency at low cost — the same principles as the Swatch watches,” added the source. “At that time there was a lot of discussion about the growing success of the Japanese manufacturers,” remembers a VW executive also involved in the project. “We all felt that something needed to be done, that we would have to become much more competitive in production efficiency, like the Japanese. So, we reasoned, why

not spendalittle bit of money — like a test case, really — using the ideas of someone from a different industry. After all, the Swatch had saved the Swiss watch industry.”

The Swiss entrepreneur had already been busy on the programme well before he sought VW’s involvement. As early as 1990 he had engaged Urs Wenger, co-founder of engineering services provider Swissauto-Wenko,

to begin development

of

powertrains for the Swatchmobile. Four different drivetrain types were planned: pure battery electric, so-called direct drive, with a petrol engine, and two forms of hybrid, with either a petrol or diesel engine driving a generator. Development of the diesel was subcontracted to a German firm, but the single-cylinder bio-diesel fuelled unit was beset by vibration problems and gave a hopelessly inadequate 10 horsepower, so it was soon abandoned.

Swissauto handled the remaining three, along with the associated transmissions and other components. “Ninety per cent of our development work went into the 46

>> swatchéstruggles

hybrid version,” says Urs Wenger. “We had developed a 250cc twin-cylinder engine with two valves and twin plugs per cylinder, and with a turbocharger and intercooler it gave 30 kW (41 horsepower).” Later, this engine would form the basis for the three-cylinder concept engine that Mercedes-Benz used in early smart studies, though the eventual production

unit was Mercedes’ own design. “Hayek was always insistent that the engine should be small and turbocharged,” remembers Wenger. “That’s why Mercedes never used the 1050cc three-cylinder engine they had been working on.”

>>

Scooter concept car wasa good example of the original design thinking at Volkswagen in the late 1980s and early 1990s

>> chapter 3

>> the prototypes prove a let-down After all the hype surrounding the venture, the eventual appearance

of the

prototypes at Volkswagen was by all accounts something of a let-down. The cars were driveable and runnable, according to one engineer present, but they were at a sufficiently early stage of development that most of the attention still had to go into the drivetrain rather than other systems. It quickly became clear that Hayek had seriously underestimated the volume and the intensity of the development work required to produce a car fit for road use and conforming to the mass of legislation governing road vehicles. “Developing a car is totally different to developing a watch,” remarked one of the VW team. “If you create a watch and it doesn’t work, you just throw it away and ask someone else the time. It’s not like that with cars — there are regulations that affect almost everything on the car, especially its safety.”

Under Volkswagen the hybrid version continued to receive the lion’s share of the attention; its technical layout was certainly the most interesting, with the petrol engine directly coupled to a generator under the bonnet and sending current to the battery and to the hub motors mounted in all four wheels. “This was the only prototype that we really tested, said an engineer present during most of the work. “The electric four-wheel-drive layout was one of Hayek’s design ideas: he most definitely had his own car in mind.

“The prototype ran reasonably well,’ continued the engineer, “but the big

problem was that if you got even the tiniest difference in revs between any of the four motors, the car would too easily give a rapid yaw response.”

In layman’s terms this meant that the Swatchmobile was liable to swerveeee to one side under acceleration if any single motor pushed harder than its counterparts: such behaviour would clearly be unacceptable to the consumer. Some cars did even spin spontaneously, according to one eyewitness. It is perhaps ironic that had those same engineers had access to today’s much-improved vehicle electronics systems the vehicle could have been made perfectly stable by the automatic synchronisation of the motors: in fact, the ability to control all the wheel motors independently would now be regarded as something of a bonus, helping improve stability in adverse conditions when coupled to a proper chassis management system. 48

>>

UK's Carmagazine ee. scooped the Swatchmoibile : prototype on test in late

1991: most attention went

1994. Y11 is still a

lear, but the fa based on the Fiat +cates tum also moves a di neraton Panda,

—"fnociween the

into engineering rather than bady style

-wunercials

vv time on talk—

moe

chapter 3

“the moves were

to have

consequences

fatal

changing

for the

smooth

up

so

as

to

ensure

a

shift. For downshifts we

hitherto happy

were able to blip the throttle, again

relationship between

thanks to the electronic operation

: Volkswagen and SMH” | Sre

i

of it.. The changes were much faster than on the eventual smart car built by Mercedes-Benz.” Swissauto had earlier worked on the Judd

engine for the Brabham formula one team and later =

went on to develop motorcycle race engines and an ultraeconomical version of the Renault Twingo for Greenpeace. This,

too, was a twin-cylinder petrol unit, though it was supercharged rather than

turbocharged and had to adopt a boxer layout as the firm’s contract with the Swatch organisation forbade it to build in-line twin cylinder engines of under 500cc for any other customer.

At this stage the Swatchmobile prototypes were of an all-steel construction: Hayek’s idea of a steel frame clad with easily-replaceable coloured plastic exterior body panels was yet to come, and it was too early for the engineers to have given serious consideration to factors such as safety. Fuzzy scoop photographs began doing the rounds of the magazines in late 1991 and early 1992 and showed an oddly shaped, tall and narrow vehicle with a surprisingly long nose, a steeply-raked windscreen, and a stubby tail incorporating

a substantial slatted grille. Its most noticeable feature was the pair of frog-eye headlights placed midway up the bonnet, apparently as an afterthought; reports at the time speculated that it was powered by a two-stroke diesel engine. Yet often on the very same pages of those publications would be an artist’s impression of what the eventual production Swatchmobile would look like: depicting a smoothlystyled hatchback rather like a Renault Twingo, these proved seriously wide of the

mark and certainly bore no resemblance to the model that would eventually emerge under Daimler-Benz’s stewardship as the smart. “The co-operation with Volkswagen went very well at the beginning,” recalls Nicolas Hayek. “The company was very open-minded, especially at CEO level and 50

>> swatchéstruggles

at the level of the research and development responsibilities as well as with many top engineers.” “Within VW, practically the whole management

supported the idea,” adds

Hayek. “They all went to north Sweden to see the performance of our hybrid car on a steep, icy test road, for example.” Throughout the co-operation with Volkswagen the original design of the car

changed very little, says Hayek. Though there was clear frustration with Hayek’s underestimation of task of developing a complete car, those involved on the VW side agree that Hayek was a likeable, creative and open-minded person who was friendly and stimulating to work with. Urs Wegner

recalls the development

programme as one of the most interesting he had ever been involved in, with Hayek “one of the best contacts we have had”. However, what these enthusiastic team members did not know at the time was

that back at VW’s Wolfsburg headquarters the company’s marketing people had been

doing a bit of background

research

on

customer

demand,

and _ that

manoeuvrings at the very highest level within VW’s group board meant that the chairman would step down from his post a year earlier than anticipated. Together, the moves were to have fatal consequences for the hitherto happy relationship between Volkswagen and SMH.

51

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>>

Ferdinand Piéch took over

CEO's seat at Volkswagen at a time of crisis. Almost immediately, he cancelled the Swatchmobile programme with Hayek

sSwatchishocks >> shock number one: new-broom VW boss

cancels ‘elephant’s roller skate’ The 13th floor of Volkswagen’s cast-concrete headquarters is hardly a model of architectural inspiration, but it does provide a spectacular panorama over the city-

like scale of the company’s Wolfsburg plant. From beneath the vast roof-mounted neon-blue VW roundel the buildings seem to stretch endlessly into the distance,

the plant with its four tall chimneys — naturally emitting nothing but scrupulouslyclean exhaust gases — sandwiched between the canal and the railway marshalling yards that whisk away the million-odd cars which issue from the factory gates each

year. Even well away from the epicentre of the huge site you can feel the ground tremble each time the massive presses in the famously mile-long Hall 54 crash down to stamp out yet another set of body parts for the latest Golf. From the outside, the windows of floor 13 look just like those of the other

storeys, but the tale they have to tell is a somewhat different one. For it is behind 55

>> chapter 4

these windows that reside the topmost executives of the VW group — and it was here that, ultimately,

the fate of the VW Swatchmobile was sealed. Subtle shifts of power and influence tend to grip any large organisation as the contract of its chief AN] if 6)

executive approaches it final year or two. And so it

DeROrowennee

was at Volkswagen in the spring of 1992, when the much-respected group CEO Carl Hahn was due to

step down at the end of the year. Frenchman Daniel Goeudevert, strong advocate of the Swatchmobile

programme and boss of the Volkswagen brand — which just happened to be losing a lot of money at >>

Incoming VW boss Piéch

the time — had long been seen as Hahn’s most likely

disliked the Swatchmobile

successor. In the opposite corner was the aristocratic

amme, dismissing ee haben etnaac summarily in his

Ferdinand Piéch, grandson of Ferdinand Porsche,

it

autobiography

:

om

:

Le Mans-winning engineer, architect of the rallydominating, image-boosting quattro and boss of

the group’s Audi brand — which just happened to be making even more money than the core VW division was losing. Piéch says in his autobiography that it was as early as 1987 that he received the ‘first signals’ that he could be in the running for the top job, but he had reservations

about Wolfsburg’s

dismal northern

location: he was

used to warm-blooded

Austrians, Swiss and Bavarians and was wary of the move. Talk of the succession

stepped up during 1991 when Hahn’s tenure had been extended in order to provide continuity through the looming crisis, in which the media had judged VW ‘a case for treatment’; matters came to a head when a group of prominent shareholders summoned both Piéch and Goeudevert to explain their positions, well in advance

of the meeting of the supervisory board. Earlier, according to Piéch, Goeudevert had declined to accept a tandem’ deal where the one who failed to get the top job would serve under the other as head of sales and

engineering; when the Frenchman declined the offer Piéch immediately realised that he — could not possibly stay on at Audi with Goeudevert in overall command. 56

>> swatché&shocks

The issue never arose as the all-powerful shareholders unexpectedly sided with Piéch and — apart from alast-minute attempt to snatch Louis Hughes from General Motors — the appointment of the energetic Austrian was passed swiftly by the board. The remaining eight months of 1992 saw a further worsening of VW’s position, and as soon as Piéch moved in to the chairman’s 13th floor office on January Ist 1993 he set

to to examine the effectiveness of all the group’s activities in detail. Inevitably, the Swatch joint venture came pretty near the top of Piéch’s list — indeed, in his autobiography the Austrian makes his dislike of the project absolutely

clear. The book devotes less than two and ahalf of its 287 pages to what Piéch describes dismissively as the ‘Swatch affair’. “I wanted to clear my desk of this Swatch business as soon as I took up my post” he states at the very beginning of the chapter, explaining that the project had been a decision proposed by Daniel Goeudevert and ‘carried’ by Carl Hahn and Ulrich Seiffert. Insisting that he did not have anything against the concept of a radical, low-cost ecological car that challenged established patterns, nor against the cooperation with Swatch, which he saw as a sign of the times, Piéch nevertheless felt that with corporate morale at such a low ebb it was a “sad signal” to VW’s in-house development team that work on an future ecological car should be placed with an outside company. “This would have given our R&D people the message that they were incapable of doing it on their own, that we preferred to bring in a Swiss

engineer who had had a big hit with watches,” reasoned Piéch. The new CEO was also critical of the Swatchmobile’s engineering layout, or at least that of the predevelopment prototypes. “The idea of our own small car with

three-litre (94 mpg) consumption was already around,” explains Piéch. “It seemed a much better proposition than a two-seater with an absurd wheelbase that couldn't possibly give enough space for the things that make up a proper car. For me, it was an elephant’s roller skate — not even a practical bubble car.” >> Piéch wants out, fast

Resolving to wind up the joint venture with Hayek as swiftly as possible, Piéch convinced Seiffert that VW

could develop a better car in-house, and the two of

them flew to Biel to meet with the Swatch chief. “Our minds were made up,” recalls 57

>> chapter 4

Piéch, “and we wanted to get finished. But Hayek kept explaining to me how little

we knew about cars and how we should be doing it all differently.” Piéch, who prided himself as an automobile engineer, was understandably not amused, and told Hayek that VW had no interest in making watches, nor did it need

a car from Swatch. Others present at the meeting recall it as quick and as good natured as any rupture of that type can possibly be: “We explained that we didn't want to continue,” said one. “There was no hostility, no aggression — it was simply that a business contract had finished, run its course, and we didn’t want to extend it.”

The decision could hardly have come as a surprise to Hayek, who had detected a change in tone as soon as Ferdinand Piéch had become the favourite for the

succession. “When Dr Hahn and Mr Goeudevert left and Dr Piéch took over, he was not convinced an ecological car was required,” recalls Hayek. “With a partner without any emotional connection to the product I did not want to continue the project. So I took the initiative and proposed to them that they should sell me their share of the joint-venture company.”

Piéch’s recollection of the meeting was of an atmosphere heavy with Hayek’s implied threat that if VW pulled out he would go to Ford or Mercedes, who were

both “only too greedy for the idea” — something the VW boss found “miraculous”. Piéch even said that Hayek could keep hold of everything VW had contributed. As the driving force behind the formation of the venture, Daniel Goeudevert

was said to be especially hurt by the dissolution of the partnership. In his memoirs, tellingly entitled Like a bird in an aquarium, he tells of his disillusionment, not just

with Hayek but with the auto industry in general: “From the day I called him to tell him that our side was going to pull out of the programme, from that day on I never heard a single word more from him. This reaction affected me deeply”. Others, however, stayed on good terms with the Swiss entrepreneur. “Hayek was the first person who called me when I left Volkswagen a few years later,” said one senior figure from the programme.

>> Piéch: Swatchmobile will never make money Nevertheless, it would be unfair to lay the responsibility for cancelling the Volkswagen-Swatch programme solely at the door of the car giant’s incoming CEO. 58

>>

Some of the knowledge gained on the cancelled Swatchmohbile project proved useful when Volkswagen engineers later had to develop the compact, four-seater Lupo

Long before Piéch’s ascent to the 13th floor in January 1993, Volkswagen’s marketing experts had been coming up with research findings which did not augur well for the future of the Swatch-inspired two-seater, as one who was close to the

matter recalls: “The Volkswagen marketing people had commissioned a study of buyers in the sector, and the study found very clearly that the clientele was looking for a four seater. They needed to take their partner, their kids and so on — no-one just wanted transport for a single person. The report concluded

that there was no big

opportunity for the Volkswagen brand in the two-seater sector.” That report was drawn up from a marketing perspective, independent of technical or manufacturing considerations — for there was always the nagging suspicion that even if the formidable engineering hurdles could be overcome, the final product would still be uneconomically expensive to build in quantity. Piéch

held strongly to that view and indeed continues to do, as the summary verdict in his short chapter on the Swatchmobile makes plain:

“Even the eventual sales success of the smart doesn’t make me in the least bit jealous as I know that it’s resulting in a deep red financial bottom line. It was always “my ambition to finish my term in office not leaving behind any product lines that were making aloss. If we'd had smart that wouldn’t have been possible.” Perceptive words indeed. As the mighty Mercedes-Benz was about to discover for itself, even with the advantage of Volkswagen having done some of the exploratory work beforehand, the cast-loose Swatch project would prove to be a major financial headache — with or without Hayek on board. 59

ie:

60

te

>>

Mercedes-Benz head Helmut Wemer and Swatch founder Nicolas Hayek celebrate the launch of the small-car joint venture. The car displayed had no Swatch input

stari;shocks >>

shock number two:

Mercedes takes on the challenge To understand why the redoubtable Mercedes-Benz would wish to surprise the world and take on the seemingly lost cause of the cast-aside Swatchmobile project, it is necessary to understand not just how different a company Mercedes was at that time, but also to get a measure of just how profoundly the company had been

rocked by the developments of the late 1980s and early 1990s. In the 1980s Daimler-Benz, which reverted to the Mercedes-Benz name in 1989, was a very different organisation to the one we know today. It was stiff,

upright and formal, and intensely traditional in the way it presented itself, both in the form of its products, its advertising and its personnel. Almost all its operations were then centred on the Stuttgart area of Germany, and apart from significant business in trucks and ensuring Europe’s taxi ranks were stuffed with Mercedes diesels, all its products were aimed unashamedly at the rich. Cars were developed 61

Mercedes-Benz passenger car head Juirgen Hubbert (left) was an enthusiastic but rational backer of the small-car venture; CEO Helmut Werner (below}) was less open to radical change but liked Hayek

with legendary thoroughness, with the quality of the final product being sacrosanct

and

the question

of costs

almost

never

arising. Whatever

the

engineers

recommended was accepted, regardless of the expense — certainly until the late 1970s when the W201 190 series was first proposed. There had been atortured internal debate over the wisdom of launching the 190 series, predecessor to the modern C-Class: many inside the company felt the model

would drag the image of Mercedes down off its lofty pedestal. Yet the 190 proved a big hit and in no way dented the reputation of the company as an elite organisation, a

pillar of the establishment and the living embodiment of all that was finest about German engineering. It was a formula that had worked, brilliantly, for more than three post-war decades, and it was perhaps not surprising that this sustained success

led to a certain complacency among the Mercedes management of the day. “We had grown used to having it easy,” remembers an aide to the CEO at the 62

> star&shocks

time. “We would develop the car, launch it, and people would simply queue up to buy it. I had an uncle who was happy to wait for several years to get his W123.” The first cracks began to show — though not yet publicly — around the time of

the launch of the new W140 series S-Class at the Geneva motor show in March 1991. The large and luxurious S-Class, the favoured transport of politicians, heads of state and top business tycoons all round the world, had long been a lucrative cash cow for the company, and no expense had been spared in adding every conceivable sophistication — even including double glazing and parking aids — into this latest version. It promised to be by far the most technically advanced luxury car ever built, but the principal problem became apparent as soon as the covers were pulled off at the car’s Geneva show stand reveal: the new S-Class was huge, slabsided and, in a word, ostentatious. It did not matter that subsequent press reports were flattering about the car’s

performance, handling and comfort: its insensitively brash looks were the thing people remembered, all the more so as the German economy was faltering at the time, having just reunited with the stagnant east of the country. The damage was done: no amount of technical explanation could make up for that initial bad impression and, in sharp contrast to the position with S-Class models of earlier generations, customers voted with their feet and stayed away, especially in Europe.

One insider recalls the sense of outrage within the Mercedes-Benz organisation

at the time: “It was a genuine shock when we launched the W140 S-Class: people simply didn’t want it — we weren't used to things like that. Our previously loyal buyers went off and bought the BMW 7-Series: it was the best thing that could have

happened to the big BMW.” “We realised something very important,’ continued the insider. “We realised we

had built the car that Mercedes-Benz wanted, not the one our customers wanted.” It was a lesson the company would never allow itself to forget. To add insult to injury, the money-no-object development programme for the W140 had been the most protracted and the most expensive in the history of the

company, and pretty soon the effects of this, as well as of the poor sales, began to show through in the company’s financial results. The whole German nation went into shock when Mercedes-Benz plunged into loss for the very first time in 1993. It 63

>> chapter 5

was a huge loss of over abillion Marks, too: the

national symbol of financial stability and good practice appeared to have been undermined. “Tt was a difficult year in 1993 because earnings were going down,’ remembers Jiirgen Hubbert,

then

head

and

now

operations

of

passenger

in charge

car

of both

Mercedes-Benz and smart. “First of all, Werner Niefer handed over to Helmut Werner in May and he died in September, of cancer. And for

the first time Mercedes passenger cars had a negative result. Discussions with the board were tough.” Behind

the scenes

within

the group’s

Stuttgart headquarters there was much soul-

searching and — unthinkable for such an august :

establishment

-—

management

consultants

The MIT's study of car

Heth

oe oe

profoundly influential and shook

Mercedes-Benz to the core

McKinsey were called in to make recommen-

dations. One aide to a top manager recalls the horror with which his boss received the news that even the inner sanctum of the head office was to get the McKinsey treatment,

too; still greater was

the horror

at one

of McKinsey’s

eventual

recommendations, that the directors’ restaurant (generally known as the Kasino in German companies, but nicknamed the Golden Spoon at Mercedes-Benz) and the management canteen — the Silver Spoon — should be abolished.

|

It was in any case a time of major transition in the auto industry. The influential

study by the Massachusetts Institute of Technology into motor manufacturing, The Machine that Changed the World, had been published the year before and had

roundly condemned

the inefficiency of almost all car producers except the

Japanese; Daimler-Benz’s Mercedes operations had come in for clear criticism, even

though direct mention of either name was tactfully avoided. Every carmaker, even Mercedes, was forced to reassess how it built its products. In addition, California

had passed legislation which would require, as from 1998, that two Per cent of 64

> star&shocks

every carmaker’s sales in the state be zero emission vehicles, and the rest of the US

threatened to impose corporate average fuel efficiency limits which would force automakers

fielding mainly large cars to introduce smaller, more

economical

models to raise their corporate mpg enough to avoid paying heavy gas-guzzler fines. Thirdly, the rise of pick-up trucks and sport-utility vehicles in the US had

shown that customers were getting impatient with standard sedans and station wagons, and even in Europe there was growing interest in niche vehicles such as

people carriers, sports cars and coupés. One way or another, it was abundantly plain that something had to change if Daimler-Benz was to survive, let alone prosper, into the next century.

>> the early ‘90s: Mercedes’ time of crisis Inevitably, there were those within the company who felt that everything should be shaken up, while others — such as president and CEO Werner Niefer, who had been in charge since 1989 — were less open to radical change. At every level there was the

pressure to diversify — to consider building cars abroad, to move into different market sectors such as SUVs, and even to develop smaller models to fit the increasingly fuel-conscious future. At an engineering level work on the ambitious small car concept which was later to become the A-Class was well advanced and, with an eye to the upcoming California Zero Emission Vehicle regulations, a visionary engineer named Johann Tomforde had moved out to Mercedes’ newly established Advanced Design Centre in Irvine, near Los Angeles, to put the finishing touches to a series of two-seater city car concepts that he had been developing “in between other jobs” over the past two decades.

“Tt was a time of crisis in the early 1990s,” remembers one insider. “Tt was the perfect time for new ideas to come through: many people felt we needed to do something in order to displace 100 years of tradition.”

Among the key advocates of the plan to give Mercedes-Benz major shake-up were Helmut Werner, who would take over the CEO’s seat from Werner Niefer in May 1993, and Jiirgen Hubbert, the highly respected head of passenger car operations.

“I was surprised that Niefer wanted to go that route,” said Hubbert in an interview for this book. “I was surprised because at the same time we had just 65

>> chapter 5

introduced the [Niefer-generation]

S-Class, with some discussion about the size

and weight and all those issues. We had debated the issues around cars in society in the early 90s and it became an idea to create positive momentum in transportation

systems too, and to go into a direction which at the end created some difficulties. “The difficulties arose because this idea — which later became ‘reduce to the max’ — took us into something where you had to reduce the fun of driving and had to work together with trains and planes in combined traffic systems. From today’s ‘ perspective it was too early to go into things like that — it was against the interest of customers. But at that point in time it was an idea that helped us in the discussion

with the board.” Nevertheless the outgoing CEO, Werner Niefer, was realistic enough to realise that a third, even more severe fuel crisis could easily strike, and that the company

should be prepared for all eventualities. It was he who, perhaps against his deeper instincts, was to make the crucial first move in opening the door to Nicolas Hayek and thus setting Mercedes on the smart road. Aware in mid-1992 that Ferdinand Piéch had become CEO designate of the Volkswagen group and correctly sensing that his arrival in the chairman’s seat

might lead to a rupture with Hayek and the abandonment of the Swatchmobile project, Niefer and his advisers were keen to tap into the Swiss entrepreneur’s ideas and exploit the youthful charisma of his Swatch brand. History does not record when the Mercedes and Swatch CEOs first met, but Hayek has always been famous

for having good contacts at all levels and had begun sounding out the top European boardrooms as soon as he sensed the relationship with VW under Piéch was unlikely to work. He certainly called the Mercedes-Benz board “ust before Christmas” 1992 to discuss possible co-operation, though this may not have been the first such call. The first official meeting — which insiders still refer to in hushed tones as a “very very secret meeting” — took place just weeks after Piéch’s arrival in Wolfsburg in January 1993, just as VW was beginning to dismantle its links with Hayek. The venue was a restaurant in a castle near Geneva, the city where top motor industry executives gather every March for the season-opening show. It was here, at this undercover

66

rendezvous,

that Nicolas

Hayek, Mercedes-Benz

chairman

Werner

>> star&shocks

Niefer and passenger car division boss Jiirgen Hubbert put together the essential elements of the deal that would one year later become public as the MercedesBenz-Swatch joint venture.

“Before we went to see Hayek I quite naturally did some research into his history,’ remembers Jiirgen Hubbert. “Before we met for the first time I needed to understand his reasons for wanting to go into this venture. He was still working with VW but had the impression it wouldn't be successful, mainly because the characters of Hayek and Piéch were extremely different — and difficult. So Hayek was of the opinion that he had to stop — and on the other side Werner Niefer was pushing to go in just that direction. For me it was surprising to be talking about such a project: we had done some work in that area a few years ago in our research department, but I was still surprised that Niefer wanted to go that route.” There was evident chemistry between the two CEOs, recalls a Niefer insider. “Niefer and Hayek always got on very well: they were the same kind of personality — definite in their ideas, but open to other viewpoints too.”

Six months later, at the Frankfurt auto show, Hayek and Helmut Werner — who by this time had become CEO of Mercedes-Benz — met again for what has become known as their six-hour dinner, during which further details of the deal were explored. Remarkably, little word of these meetings reached the outside world, yet all the time the finishing touches were being applied to the co-operation agreement to be announced the following spring. Mercedes was confident in the knowledge

that it already had Johann Tomforde’s two city concept cars which it could wheel out as evidence that the co-operation would get off to a flying start, and Hayek could be secure in the knowledge that he had teamed up with perhaps the most respected of all names in the car business — even if the eventual product would display many more of the genes of its Mercedes step-parent than the Swatch family from which it stemmed.

>> a surprise announcement There was a fevered atmosphere at Mercedes-Benz HQ on Friday March 4th 1994

as the world’s business and automotive media gathered for the press conference. It was the final Friday before the Geneva show, in a week invariably crammed with 67

>> chapter 5

competing press presentations and car launches, and journalists had

been summoned at short notice for what was billed as an important announcement. .

Few of the 400 attendees had any inkling of what was to be announced; still fewer would have linked the names of Mercedes-Benz

and SMH,

the umbrella

company

for

Nicolas Hayek’s Swatch venture. But the principal elements of the partnership were duly outlined and two concept cars rolled onto the stage. Labelled MCC eco-sprinter and MCC eco-speedster, they were two variants on the same ultra-short, underfloor rear-engined two-seater theme,

the speedster having a sportier stance with wider wheels and a removable targastyle roof. They had the notable innovation of a passenger seat positioned slightly behind that of the driver to improve shoulder room and safety. The cars were billed

as having been developed in Mercedes’ Californian advanced design studio: the fact that they contained no input whatsoever

from Hayek’s SMH

company

was

conveniently glossed over. Four powertrains were being developed, the audience was told, though once again hard technical details were sparse. The presentation appeared to the reporters to go with the customary MercedesBenz smoothness — yet according to one of the senior staff members organising it the entire proceedings could have come to a sudden and embarrassing halt. It

appears that moments before the presentation was due to start Nicolas Hayek reached into his inside jacket pocket and pulled out a package which he proceeded to unroll; the contents of the package proved to be a huge silk Swatch banner several metres tall, which Hayek insisted Mercedes personnel hang up in full

camera shot— otherwise he would walk out. A few moments of frenzied discussion among the Mercedes organisers produced a hurried “okay, let him do it” and, in blatant breach of normal corporate branding etiquette, the banner was hoisted and the conference carried on as if nothing had happened.. An earlier incident, also reported by an inside source, gives another insight into 68

>> star&shocks

the unconventional way that Hayek would often conduct his business. Asked by Mercedes

some

weeks before the press announcement

whether Swatch could

produce some limited edition commemorative watches as gifts for the journalists

attending the event, Hayek refused, saying that the notice period was too short and that production was in any case running flat out. However Hayek surprised his hosts by arriving with 400 watches that he had brought on the plane himself, along with an invoice which, in the recollection of one official present, showed no

appreciable discount.. On a more important level the lawyers had been busy and before the end of April that same year Micro Compact Car AG had been officially founded in Biel,

Switzerland, as a joint venture between Mercedes-Benz AG and SMH, Hayek’s Swiss watch company. Ownership of MCC AG, whose initial capital was 50 million Swiss

>>

Eco-sprinter design came out of Mercedes-Benz's Californian design centre 1n 1992 but had mechanical elements from Germany

Cee)

eco-sprinter i

>> chapter 5

Francs ($34m/£23m), was 51 per cent Mercedes-Benz AG and 49 per cent SMH,

while the presidency of the firm was to rotate annually, with Hayek installed for the first term. Named as the three co-directors of the new organisation were Johann Tomforde, a Mercedes-Benz engineer and designer, Christoph Baubin, again a Mercedes employee, this time on the financial and administrative side, and Hans Jiirg Schar, the marketing manager who had done much to mastermind the highly successful Swatch phenomenon for Hayek.

>> the dream team is assembled The trio, who set out to run the new venture on an open and egalitarian basis, with all decisions taken unanimously, promised to bring exceptional talent and potential to the project. Hans Jiirg Schar had been instrumental in turning the whole world on to the radical new concept of the Swatch watch: unafraid of breaking rules, he was the perfect person to extend the idea of a youthful, funky and fun-oriented product into the staid and cautious car sector. Christoph Baubin, though a Mercedes and Daimler-Benz veteran, was not only an accomplished accountant but also had extensive experience of corporate partnerships and joint ventures with

other organisations: he also possessed just the right entrepreneurial streak to come up with inventive ways of attracting finance and generating co-operation with distributors, suppliers, banks, governments and other potential stakeholders in the small-car project.

Johann Tomforde was the natural first choice to lead the development of the MCC-SMH product. Son of a successful rally driver, he had joined the DaimlerBenz design department upon graduation in the early 1970s; yet despite this background of fast, powerful and prestigious cars, Tomforde had always been intensely concerned with what he termed issues of mobility in built-up areas, and these ideas had found expression in the 1970s — at least internally within DaimlerBenz — in two series of advanced city car proposals. The first were categorised within Mercedes as Nahverkehrsfahrzeugkonzept (NAFA) which, strictly translated,

means ‘local journey vehicle concepts’ — a description which does not do justice to the fact that these were hardly city-only vehicles but proper four-seaters which were simply compact enough for dense traffic. The NAFA concepts, which later evolved 70

>>

The three co-dirsctors

who set the smart template: Johann

Tomforde and Christoph Baubin from MercedesBenz and Hans Jurg Schar, the marketing

genius behind the Swatch phenomenon

into the Vision A concept and the production A-Class, measured

about three

metres in length, while the dedicated two-seater City Cars were 2.5 metres and had underfloor location for their electric or hybrid powertrain components.

>> Tomforde: serious about small cars since the 1970s These concepts were taken seriously within the engineering and design areas, recalls Tomforde, but work on mainstream

models

for series production

always took

precedence and, perhaps inevitably, it was hard to convince top management that

small-car programmes should be supported: “Our representative in the boardroom, passenger car development director Karl Wilfert, was getting more

and more

enthusiastic about the idea of a Mercedes city car — yet he wasn’t able to get it through the Daimler-Benz board at the time.” But almost as soon as it had arisen, the 1973/74 fuel crisis — which had given the

city car its big opportunity — vanished. Quickly, the sketches were stuffed back into the drawer, only to emerge a couple of years later when traffic chaos once again began escalating and parking problems were felt to be reaching crisis point. The second energy crisis of 1979 was enough to convince the company to step up its

activities in this area, remembers Tomforde. “By this time Daimler-Benz research had become involved: we needed to develop improved battery technologies for

better energy storage.” Support from research director Professor Férster, development chief Werner Breitschwerdt and design director Bruno Sacco helped speed the development of 71

>> chapter 5

more specific technical concepts for a 2.5 metre local-journey’ vehicle. “This work culminated in a concept car that was driveable,” says Tomforde, “even though it did

have a *borrowed’ three-cylinder petrol engine and front wheel drive.” The car was shown at the 1986 “WeltMobil” exhibition in Stuttgart to celebrate the centenary of Daimler-Benz, and it was displayed at other exhibitions too. Nevertheless, he points out, what no-one had taken into account was the market

— or, to be more exact, the high level of customer demand the company was

experiencing in the mid 1980s.

“Mercedes was on a roll on a scale we'd never seen before. The S-Class of the time was selling around the world in record numbers, the 190 series was doing

better and better, and the upper medium sector W124 had got off to a very successful start. Who at a time like this wanted to think about penny-pinching cars like the compact four-seater and the Mercedes City Car?” It was a problem which was to dog smart throughout its rocky ride to eventual market launch — and indeed for some while afterwards, too. Yet, as we have already seen, the boom times at Mercedes were not destined to last for ever. By late 1989 the

passenger car division had taken the decision to embark on a strategic reorientation and enter fresh market sectors, a new approach which was to take in, among other initiatives, entry into the sports utility market with what was to become the US-

built M-Class, a people carrier based on the Vito van, a compact luxury sports car, later the SLK, and an advanced development of the internal four-seater compact

family car concept, which later became the A-Class. It was a massive programme by anyone's standards, more especially so when measured against the exalted demands of Daimler-Benz’s famously thorough design and development process. Inevitably,

something had to give. As divisional director for strategic design, corporate design and design concepts, Johann Tomforde was responsible for both interior packaging and exterior design. He takes up the story: “The strategic reorientation of the passenger car portfolio meant that in the design department we began working on many different models in 1989: as part of this we also restarted concept development in the small-car area — the so-called local journey (NAFA) cars as well as two-seater cars for urban areas.

“Together with pre-development, especially for the chassis and powertrain, my — Te

>> star&shocks

department

worked

on

two

different

vehicle

concepts,

both

with

low fuel

consumption and the expected Mercedes standards of safety. The first was a compact

five door front wheel drive car with a transverse four cylinder engine mounted almost horizontally: behind the engine there was space for electric drive components and batteries. It was about 3.3 metres (130 inches) long, and still went under the internal designation NAFA; this was the car that became the Vision A, later the A-Class.

“The second

concept was

a super-compact

two-seater town

car with an

underfloor rear engine (either electric or hybrid) and had the maximum possible

interior space for its 2.5 metre length. This vehicle formed the basis for the Mercedes City Car (MCC)

design studies started at the end of 1990 in the

Advanced Design Studio in Irvine, California.

“However, because of capacity limitations, but also for its own strategic reasons, Mercedes-Benz decided to concentrate development work on the Vision A and the

MCC concept study was put on the back burner for the time being.” >> the project moves to California All was not lost on the two-seater front, however. concentrating solely on the “A” model did not go down too well with some design and market strategists, and Tomforde jumped at the chance to present his Mercedes City Car philosophy at the newly-founded Advanced

Design Studio in California and provide its young

designers with vehicle packages for concept work. “The initial scepticism of the advanced designers soon changed when California put out its legislation for zero emission vehicles by 1998,” recalls Tomforde. “There was also growing concern within companies like Mercedes about the impact of the fleet average fuel consumption laws: without micro cars in our range we didn't see much

chance of reaching

the future

corporate

average

fuel consumption

requirements.”

Tomforde also cites as influences the heavy congestion in Japanese cities and in city-states such as Singapore: so-called Kei cars, less than 3.3 metres in length and 1.4 metres (55 inches) in width, were exempt from certain Japanese taxes and were

allowed access to key shopping areas in towns. “All this meant that from a technical point of view we were pretty clear which direction we wanted to move in,” says 73

>> chapter 5

Tomforde. “It would be 2.5 metres long and 1.4 metres wide; the powertrain, hybrid

if possible, would be housed under the floor or between the double floors, and a

safety cell concept would give crash protection values similar to those of a C-Class.” By 1992 the work had resulted in a Californian design concept labelled ecosprinter, complete with German-sourced chassis, electric drive and batteries, as well

as a four-element sliding glass roof. However, throughout this period Tomforde and

Advanced Design Studio head Gerhard Steinle had been coming to a growing and disturbing realisation — that cars of this type would never become a success through the conventional channels of rational and environmental appeal. “That’s why the teams from Irvine in California and Sindelfingen in Germany began the first studies for variants of the MCC concept that were much more dynamic, more emotional and with much more of a sense of fun. Among these studies were a micro-roadster and an eco-speedster with a removable hardtop. “Thanks to these two models we were able to achieve the breakthrough into the top management of Mercedes-Benz and Daimler-Benz,” remembers Tomforde with evident satisfaction. It was becoming clear that inside the mighty company the forces pushing for change were beginning to gain ground.

oe =.

concept car seen here —

Mercedes’ collaboration with Hayek's Swatch group

attracted strong media interest. The launch

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> star&shocks

By now installed as compact car project leader, Tomforde was charged with building a driveable prototype of each model and carrying out a feasibility study; the Mercedes-Benz product strategy now called for the MCC to serve as a logical

extension of the Vision A’s thinking, rounding off the product range with models which would appeal to young people and draw in types of buyers different to the traditional wealthy and often elderly Mercedes customer. Nonetheless, the shift in thinking was not always an easy one for the MercedesBenz marque strategists to accept: “Tt was the total differentness of the MCC technical concept and design that caused a few headaches,” recalls the project

leader. “The controversial yet also attractive shape of the MCC

made quite a

contrast with the classical Mercedes core values and the conservative-serious sales organisation that supported them.” One way or another, the die was cast. Tomforde led an interdisciplinary team which between February 1992 and the same month the following year established the technical and business case for the MCC vehicle, culminating ina clear decision to go into series production. By this stage Tomforde’s team already had available to them the results of test drives, simulations and, above all, car clinics and focus

groups conducted with the eco-sprinter and eco-speedster they had completed

during the course of 1993. The findings were very clear: the first customer preference was for an economical conventional combustion engine, while second choice was electric drive with high efficiency batteries. Relegated to third place was hybrid drive, which those questioned believed would be too expensive. Nicolas Hayek, as we have already seen, had heard reports that Mercedes-Benz

was working on an advanced city-car project. To him, the fact that the most prestigious German company had a programme up and running and was willing to talk appeared too good to be true. What at this stage no-one knew — or perhaps what no-one wanted to know — was that the two sides would have often sharply different ideas as to how the project should be delivered, and that what was originally a top priority for Hayek was to become an awkward afterthought eventually to be dismissed entirely before smart could finally call itself successful.

75

t

,

“i Spee e s!

neeNip

76

>>

The three founding fathers of smart, from left to right: Christoph Baubin, financial director; Hans

Jurg Schar, marketing director, and Johann Tomforde, in charge of

design, development and, later, manufacturing

Smarti:dreams building on ideals — and creating the ideal enterprise When

Nicolas

Hayek realised his co-operation

with Volkswagen

was

going

nowhere he began approaching other companies in the hope that they would take up the project from where VW left off. Among the firms on his itinerary were Renault, Fiat, BMW

and General Motors, where the US giant’s then European

president Bob Stempel gave the Swiss entrepreneur a polite but nonetheless cool reception. Undeterred, Hayek continued leafing through his Rolodex, and it was just before Christmas 1992 that he put in the all-important telephone call that would link the fate of the Swatchmobile inexorably with that of Mercedes-Benz and, later, DaimlerChrysler.

For Hayek, it must have seemed that Christmas had come early and that Santa Claus had been in a doubly generous mood. For opening the door to Mercedes-

Benz revealed a company that was not only hungry for change and thus keen to co77

>> chapter 6

operate, but which also had already done a huge amount of research on very much the kind of car Hayek wanted to build. “When the Mercedes top management visited us to discuss the joint-venture contract, they showed us a car-body design for a two-seater where the seat of the passenger was positioned slightly backwards,” remembers Hayek. “They said they had a young designer who was proposing this seating possibility.” The young designer in question was of course Johann Tomforde, who was soon to become celebrated as Mr Smart’, while the ’slightly backwards’ passenger seat positioning of the concept car was hardly its most noticeable feature, though still a significant one. Yet the prototype, for all its sophistication, must have posed

something of a dilemma for Hayek. He could see all too clearly that Mercedes had done a tremendous amount of groundwork to a very high standard, and that its programme had progressed rather faster and further than his own work with VW; it was also crystal clear that the concept was aimed at very much the same clientele as his existing effort with the VW Swatchmobile, yet on an engineering level it was very different indeed. Hayek and VW had mounted the engine in front: Mercedes

placed it underfloor and between the rear wheels; Hayek’s team favoured hybrid drive, which Mercedes had rejected on cost grounds in favour of pure battery operation. Overall, Mercedes preferred a small petrol or diesel engine, Hayek’s

least-favoured choice. Hayek’s three options placed him in the classic dilemma of having to choose between commercial expediency and higher long-term ideals. He could have tried to persuade Mercedes to adopt or adapt the model he developed with VW, an

option he is likely to have quickly ruled out, simply because Mercedes was so much

further advanced; taking the low-risk route he could sacrifice the engineering principles, if not the small size, chunky looks and compact fun feel of his own design and lend his name and support to the well established Mercedes-Benz project. The higher-risk route would have been to stay true to his firmly-held engineering belief that hybrid was the way to go, and continue the search for another partner company. In technical terms this might have allowed for a purer,

more ecological product, but the big drawback was that, rather than having the market to itself as had been the plan, any such vehicle would immediately face 78

>> smart&dreams

formidable

competition

from the Mercedes

entry being pushed hard by its

immensely professional sales organisation. Even the most optimistic of Hayek’s

market projections could not be finessed to come up with a microcar cake large enough to be shared profitably between two sales-hungry companies.

Mercedes-Benz, for its part, saw Hayek and his ideas as valuable assets in generating original designs and novel marketing approaches, and in drawing a

younger generation of buyers into the company’s showrooms. Mercedes managers believed strongly that all other companies were likely to be working on microcar designs and worried that if they let Hayek go he could find backing for his ideas

elsewhere and thus thwart Mercedes’ ambition to be the first - and hence the most profitable — in the two-seater market. The eventual choice of the joint venture format between Mercedes-Benz and SMH, the Swatch holding company, came as a surprise to no-one, but the structure of the deal — which had been prepared in some secrecy in the second half of 1993 —

caused a few raised eyebrows. What surprised many was the degree of autonomy Mercedes was apparently willing to give its new offshoot, especially considering that

Nicolas Hayek and Mercedes-Benz passenger car chief Jiirgen Hubbert, the man in charge of overseeing the operation from the German side, were such opposite personalities. Nevertheless, Hubbert believed sufficiently strongly in the concept that he was willing to entrust Hayek with developing the brief which would provide the foundation for the joint venture agreement. The original letter of intent had named Tomforde, Baubin and Schiar as the co-directors of the project; now, the

agreement finalised in February 1994 provided much more specific detail and some telling analyses of the future prospects for the car the joint venture was to produce. The initial capital of 50 million Swiss Francs (equivalent to $34m/£23m in

1994) was to be contributed 51 per cent by Mercedes-Benz and 49 per cent by Hayek’s company, SMH; the joint-venture company, MC Micro Compact Car SA, was to be registered in Biel for tax reasons, and would comprise two fully-owned subsidiaries - MCC

GmbH,

of Renningen, near Mercedes-Benz headquarters in

Stuttgart, charged with developing the car, and an as-yet unnamed subsidiary to

manufacture the vehicle. Marketing and distribution would be handled from Biel and, in addition, SMH Auto SA, majority owned by Nicolas Hayek, would develop 79

—

The first prototype smart drew heavily on the layout of the Mercedes ecosprinter but launched a much more exciting and

sporty style

hybrid drive systems, and Hayek Engineering would oversee and audit both the development and the manufacturing processes. But most interesting of all in the original agreement were the estimates in crucial areas such as price and sales volumes. Starting from a novel manufacturing concept,

where all the major assemblies such as the engine, transmission, body and interior

would be bought in from outside suppliers, the three co-directors had targeted a build time of just half the 24 hours per car that was the industry average at the time. In the event, smart would later improve massively on that target, but even at 12 hours the

figure appeared strong enough to allow Hayek to excitedly declare aselling price target of just over €6,000 ($6,750/£4,500) — a level which prompted him in turn to asales

forecast of 8 per cent of the market for compact cars, or some 200,000 units a year by the time full volume had been reached in the year 2000. With total development, manufacturing and marketing costs estimated at DM 1.4 billion ($800m/£540m), this

gave a calculated payback period of five and a: half years, taking break-even well beyond the then still-distant millennium. 80

> smart&dreams

Unfortunately, the euphoric and, as it turned out, over-optimistic tone of these estimates was something that would come back and haunt the smart programme with monotonous regularity throughout its history. It could even be argued that if these forecasts had been more firmly grounded, fewer targets would have been missed, the business and financial sectors would have been more favourably disposed towards the project and many of its later difficulties could have been avoided.

>> a challenge on every levél It was late spring 1994, the outline targets to guide the set-up phase had already

been established and the dream team of three co-directors covering engineering, finance and marketing had been hired. Now, that same

dream

team

had the

unenviable task of assembling the much larger forces necessary to turn the project into commercial reality. The job was made all the more pressing by Mercedes’ sense of urgency in getting the car to market before its competitors could respond or forestall its move: Job One — the first production car destined for sale — had been

set for early 1998, with a market launch in the spring of that year.

This would give the team a challenge no industry executive had ever before faced. Other companies had launched all-new models, built shiny factories on greenfield sites, set up in operations in different countries, and even — like General Motors

with Saturn or Toyota with Lexus — created new brands or set up

distribution networks from scratch. Some had even done two or maybe three of these tasks in one go, and survived — but until the arrival of Messrs Tomforde,

Baubin and Schar no-one had had the courage to take on the whole suite. Especially without any existing staff, any organisation to kick off from, or any established structures or designs to act as templates. And to make matters worse,

the arm’s-length relationship with Mercedes-Benz meant there wasn’t likely to be a vast amount of cash, and the acutely compressed timescale left no margin for error in what was already looking like a technically risky venture. Most cars of that era spent between four and five years in technical development alone, benefiting from a mature and established engineering team, familiar procedures and facilities, and

ready-made structures for ensuring the resultant vehicles were up to standard in every important respect. The fact that the three Micro Compact Car pioneers 81

>> chapter 6

started with nothing but their own inspiration and the encouragement — though heavily qualified — of Mercedes-Benz gives a measure of the uphill task they faced. But between them, Tomforde, Schér and Baubin managed it. They conceived,

developed and implemented this completely new car, opened up an untested market

sector

and built a fresh brand:

they rewrote

manufacturer-supplier

relationships in the shape of the system-partner initiative, created highly innovative systems for manufacturing and distribution and, possibly most remarkably of all,

they succeeded in convincing a sceptical industry establishment as well as the

chronically conservative financial sector to subscribe to their revolutionary ideas. Indeed, it must be counted one of the minor miracles of the car business that within six months a decision on the factory location had been taken; by the fifteenmonth mark, with the name smart now adopted for the tiny two-seater, a design

study for the city-coupé had been presented to the public at the 1995 Frankfurt auto

show, while just two

years later the production-ready

city-coupé

was

displayed, the factory had been completed and, amid tight security, German Chancellor Helmut Kohl and French President Jacques Chirac had officially opened the manufacturing operation.

However, none of this was achieved easily, and by the time the first production cars rolled out of the factory in Hambach, eastern France, in the middle of 1998

much executive blood had been spilled, two of the three founder-directors had

gone, Nicolas Hayek was out of the picture and the smart board, now firmly in the grip of Mercedes-Benz, was into its third generation of top managers. Mistakes were made, of course, but with benefit of hindsight it can be seen that these were largely down to the hectic pace encouraged by the shareholders and the astonishing

pressures the three founders imposed on themselves — and thus a direct consequence of the very idealistic vision they were so deeply committed to realising. Certainly, without their brilliant and original thinking, especially in the early stages and especially on an organisational level, there would have been no smart; yet, equally, it could be argued that without the wilder excesses of this enthusiasm smart’s planning might have been more realistic and the brand would have had less of a rocky ride to its eventual success.

82

>>

Johann Tomforde believed that a revolutionary

manufacturing system offered the only way of achieving the ambitious cost targets set for the smart

>> where to start? The central challenge facing the three founder-directors in the summer of 1994 was strikingly obvious. Everything needed to be decided with the utmost urgency, but it was hard to know where to start. From the design of the car to the location of the factory, and from the structure of the organisation to the method of manufacture, the system of finance, the shape of the retail network and even the targets of the marketing — all were blank sheets of paper waiting to be written on. What was to be decided first? After all, technical concept and design of the car would dictate the layout of the factory, which would in turn affect the financial structure of the manufacturing operation, which would feed back into marketing in the shape of likely selling prices; yet the car itself would be influenced by those same marketing considerations. Indeed, costly changes to the eventual factory buildings did in fact become necessary because ofa late design change on the vehicle, underlining how precise everything needed to be from the very beginning. In the event the three founding co-directors established their operational base in Renningen; close to the Mercedes headquarters on the southern side of Stuttgart. ‘Here, Tomforde, Baubin and Schar — who split his weeks between this venue and

his sales and marketing HQ in Biel — began to add firm detail to the broad brushstrokes of the proposals they had been working on for the last nine months. The people they recruited were deliberately young and open minded: the average age was just 27. At an early stage Tomforde’s team of 60 development engineers was

suddenly complemented by some 40 more from Hayek’s R&D operation in Biel, the 83

>> chapter 6

Swiss entrepreneur still wanting to prove that the hybrid drive option would come to be seen as best if only his researchers could work together with the rest of the team rather than remaining isolated in Biel.

Taking their inspiration from Hayek’s enthusiasm and his revolutionary slant on what the mould-breaking small car should be, the three co-directors determined to be free-thinking, original and independent especially

those

of

the

step-parent

of established

company,

industry practices,

Mercedes-Benz.

This

anti-

establishment thinking pervaded all aspects of the planning, even when it came to

manufacturing and marketing. The left-field mind-set even extended to the fabric of the buildings themselves: much of the decision-making took place in the socalled ’Biohaus’ or hothouse, an open-plan wood-and-glass structure with free

access to a garden and woodland, a layout deliberately designed to promote equality, environmental awareness and the free exchange of ideas across all teams. Procedures

were

determinedly

different, too: important

meetings

were

held

standing up, remembers one former team member, so that they would never last

longer than an hour. “It was only by working in an interdisciplinary and almost hierarchy-free way with everybody in the Renningen ’Biohaus’ that we were able to do the conceiving, planning, design, building, testing, sourcing and manufacture of the four system

The so-called Biohaus which housed smart’s headquarters in the early phase was an environmentally friendly open-plan construction run on egalitarian lines

> smart&dreams

modules — the body, the cockpit, the chassis

and

the

driveline,”

said

Tomforde in an interview for this

book. “The method of working I had devised allowed us to develop

systems solutions which came

very

close to our firm cost targets.” _ Extending his line ofthinking from design

into manufacture, it became clear to Tomforde that the clean sheet of paper promised by a greenfield factory site

would allow him to escape the constraints of classical car industry practices: his brief soon became broadened to include manufacturing as well as vehicle development. This led him and his small planning team to visit the most efficient car plants in the US, Japan, France, Italy and Germany: they also looked at the most up to date facilities outside the auto industry, including Hayek’s highly efficient Swatch factory at Grenchen in Switzerland. Mercedes management was strict in insisting that even though this was to be a vehicle of micro-car dimensions, it was to make use of the most advanced available engines, it had to reach the toughest safety standards, it had to be equipped to a very high level and it had to employ lightweight materials. To Tomforde, this

daunting assignment was just the challenge he had been waiting for: “For an automobile engineer and designer like me it was a dream job to take on the 100 per cent new development of a complete vehicle — but there was one big catch: the MCC, later smart, was only allowed to be half as expensive in the

manufacturing costs of its main modules and systems as other, similarly equipped cars. As several of my Mercedes management colleagues warned me at the time, it

looked a bit like a suicide mission!” One of the early debates was over the name the vehicle should eventually carry, and it was here that, in the recollection of some of those present, Nicolas Hayek first showed a difficult side; already, he had acquired a certain reputation for fieriness and, as one put it, shouting loudly in meetings. “The smart name had a difficult birth” remembers Tomforde. “Nicolas Hayek 85

>> chapter 6

wanted Swatch or Swatch Car, but Mercedes-Benz

wanted a new, more

neutral

name that would fit well with this new category of car and had hired branding consultants Manfred Gotta for input. As co-directors we had been using “MCC

Swatch-Mercedes-Art’ for some time, which we tended to abbreviate to S. M. Art — until we noticed that it could also be made into SMART” In the end a potentially explosive situation was defused surprisingly easily when everyone suddenly realised to their delight that smart, complete with its brilliantly on-target double meaning in English, was the perfect name. Hayek was always the one with the high profile, recalls Tomforde: “As far as anyone on the outside was concerned, it was Hayek who played the leading role. He was always giving interviews where he would talk about his Swatch Car, his marketing vision and the huge numbers he was going to sell.” By contrast, the top Mercedes managers would maintain a distinguished presence

in the background: “They did a very professional job with us, especially Jiirgen Hubbert when it came to the vehicle and Helmut Werner on questions of finance,

locations and globalisation — everything connected with the factory situation.” On issues of concepts and design Hayek tended to promote the most innovative

process and the most emotional designs, remembers Tomforde, but this was more on an intuitive basis than on rational grounds. “I received strong support from Hayek and Helmut Werner when it came to pushing through methods

and

solutions that weren’t standard practice at Mercedes. However, if difficulties later

cropped up the impact would fall on me alone.”

Mercedes-Benz

passenger

car

chief

Jiirgen

Hubbert,

an

articulate

and

distinguished figure witha reputation for affability, is more diplomatic: “I don’t remember any shouting in meetings, but it was difficult with Hayek because he was not familiar with the auto industry and did not understand the problems and the needs we have. We had to show him that you have to increase costs because of safety standards. We had to explain that going into this programme it would bea situation where you spend money before you get your money back, and that at the end it would cost something around a billion.”

86

>> smart&dreams

>> Carrying capacity “ two people and two crates of beer” Central to Hayek’s mini-vehicle concept had been the idea of a shock price — a price so low that it would suddenly open up the possibility of buying a new car to a whole class of people who had never before thought of buying one; more importantly, the low price, allied to the stylish design, would enable a fundamental shift in the reasons why people bought cars. Just as the Swatch watch had instantly become a fashion item rather than a practical object (people don’t buy a Swatch just to tell the time, Hayek was fond of saying), so the smart/Swatchmobile

could mark a similar

transformation for the car: by being funky, fun and affordable it would become socially as well as environmentally friendly, fashionable as well as economical, practical — it had to carry ’two people and two crates of beer’ — and safe. What all this

added up to was a need for top quality and features, but at a very low price.

This in turn forced Tomforde into a radical rethink of the elements that made up the car, how those elements would be produced, and how the whole car would be put together. It was not simply a question of optimising the more conventional

>>

Tomforde's breakthrough was to subdivide smart into

modules, which included the steel tridion safety frame and interchangeable plastic body panels

>> chapter 6

factors such as labour costs, logistics or overheads: Tomforde and his cohorts were determined to apply new thinking to every link in the intricate supply chain which is responsible for turning a set of humble commodity ingredients into a finished car for the grateful customer. By re-examining each process, rethinking all the relationships between the different operators and devising new ways of working at each stage, Tomforde believed he could more than halve the direct labour content

traditionally put into car assembly, leaving less work for MCC smart employees to carry out and requiring less in the way of investment for the Mercedes-Benz and SMH parent companies to sustain.

>> the big breakthrough

Tomforde’s great breakthrough was to subdivide the whole car intoa series of socalled modules — an example would be the dashboard assembly, complete with instruments, wiring and controls. Each module would not just be manufactured by an outside supplier, but it would also be developed by that supplier. Where Tomforde broke even further from conventional thinking was to suggest that, where possible, that same supplier should install the module on the final car, at the smart plant, but using his own operatives.

The

attractions

for the fledgling MCC

organisation

were

obvious:

the

development costs for the vehicle — typically up to a billion dollars for an all-new design — could be dissipated across several outside suppliers, leaving MCC with a much smaller share of the bill; further, costs at the assembly stage would be lower,

too, with the supplier being responsible for setting up his own mini-plant within the MCC facility and providing his own labour and materials. And with traditional carmakers having to deal with at least 200 different parts suppliers for each model, the prospect of only having to cultivate strong relationships with just ten or twelve module producers was an attractive third benefit of the new proposal. Tomforde was able to make out a convincing case for the component suppliers, too. By becoming what MCC termed a system partner, a supplier would benefit from greater security, longer contracts at agreed prices and volumes, the prospect of repeat business on later models, and the ability to influence the design of the systems so as to improve quality, ease of manufacture and keep down costs; by | 88

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>

October 1997; French President Jacques Chirac and German Chancellor Helmut Kohl cut the

ceremonial ribbon to open the smart factory in Hambach, Lorraine

Smarticeremony >>

grand beginnings for a tiny car as national leaders roll in It was akin to a state visit but with twice the pomp and circumstance, for two top European premiers were attending rather than just one. When German Federal Chancellor Helmut Kohl and French State President Jacques Chirac, complete with their respective retinues, outriders and secret agents, rolled into the tiny democratic and fiercely independent industrial republic of Hambach on October 27th 1997, each had a different agenda in mind — as did each of the business

‘consortium leaders also present. For Chancellor Kohl, close to the end of his decade and ahalf in office and still

deeply embroiled in the struggle to integrate the industrially bankrupt former DDR states back into the reunified Germany, it provided a welcome respite from his domestic difficulties. It was also a convenient opportunity to demonstrate

Germany’s pro-European spirit and the international vision of its most famous 95

>> chapter 7

company — never mind the fact that France’s wage rates were a usefully substantial

percentage lower than Germany’s, that fat regional incentives had been extracted from the authorities, and that France’s fiscal rules handily allowed financing schemes that might not have got past the auditors in Germany.

For President

Chirac,

a relative

newcomer

among

international

leaders

compared with Kohl’s long innings in charge of Bonn’s affairs, the occasion was the

source of great pride for France and especially’for the Lorraine region, which he lauded as a worthy home for such a prestigious foreign investor. In fact, boasted Chirac, Lorraine had become number one among French départements for inward

investment. A member of the regional parliament in Metz went one step further, proclaiming the investment “almost like a gift from heaven.” Daimler-Benz

CEO

Jiirgen Schrempp held up the smartville venture as a

shining example of a genuinely European project, a new field of European cooperation alongside aerospace, and one which would not just provide employment

for 2000 at Hambach but also secure 10,000 direct jobs in the auto sector and 6000 indirectly, too. Even Nicolas Hayek, the Swatch watch magnate

and original

inspiration behind the smart initiative but who was now in the process of being

sidelined by the financial might of Mercedes, found it in his heart to declare that the vehicle could “perhaps mark a milestone in the history of the automobile.” Never mind the stark truth that the vehicle in question bore little relation to the eco-hybrid urban mobility device he had originally dreamt of. The cheers were surprisingly muted, however, for the simple reason that the leaders were not addressing massed ranks of contented workers or even a packed gathering of news-hungry reporters: instead, their words were delivered to closedcircuit cameras and relayed to the 2,500 invited guests on a giant television screen in a secure building a safe distance from the actual action.

The normally sober Handelsblatt described the Kohl-Chirac tour of the plant as an almost ’entre nous’ affair, with only a handful of selected topmost managers allowed to accompany them. For the guests, it was no more than a ’virtual state visit’ to be followed on TV, complained the respected German financial daily, blaming the very strict French security requirements that had ’hermetically sealed off’ smartville and placed 100 patrol personnel in the building and a further 350 96

>> smart&éceremony

spread across the surrounding industrial park. Forcibly removed

from the carefully staged sweep round the facility, the

assembled media were treated to a running commentary from an increasingly frantic “live” TV reporter who, instead of being one step ahead of the factory march, was swept along by the entourage. His farcical attempts at on-the-ground reporting met with increasing derision from journalists within the large conference

room. Chancellor Kohl’s struggle to get his heavily built personal frame into and out of the compact two-seater at the end of the production line added still more to the surreal nature of the visit. “Even with my meagre proportions I’ve got enough space,” the Chancellor joked to the cameras.

However, no amount of heavy-duty security and agenda-control could prevent certain

awkward

cracks

from

beginning

to appear,

most

noticeably

in the

increasingly tense relationship between the original smart partners, Daimler-Benz

and Nicolas Hayek’s SMH Swatch organisation. After the two state premiers had completed their tour of inspection, delivered their speeches and departed, it was the turn of Lars Brorsen, who had been brought in as president above smart founders Tomforde, Baubin and Schar, to address the assembled press directly. This he did in

the shiny new conference hall, but he found his audience was restless and less numerous than expected. A discreet whisper in his ear from an attentive PR minder told him why: Hayek, now fully into the role of maverick partner, was at that very same moment holding his own ’alternative’ press conference immediately outside the conference hall, surrounded by an excited throng of reporters thirsting for headlines

about

internal

strife, boardroom

bust-ups

and

German

_heavy-

handedness in the joint venture programme.

Back in the warmth of the conference room, meanwhile, a clearly embarrassed Brorsen put a brave face on the fact that Hayek, complete with Swatch watches draped like bangles up his arms, was upstaging the official event. Brorsen joked half-heartedly that it was unique in his experience to have two simultaneous press conferences taking place. In his rival address Hayek added insult to embarrassment by deviating from the official line and flagging up alternative power source versions of the smart — which he would be responsible for building, but which he knew

Mercedes wanted to downplay. The Swiss entrepreneur specifically mentioned 37

>>

The system of production for the smart was even more innovative than the

car itself, with suppher companies carrying out four-fifths of the tasks

>> chapter 7

plans for hybrid and full electrically powered variants, plus a four-seater — which would second-guess Mercedes-Benz’s own A-Class. After about 15 minutes the Hayek session came to an end when PR staff whispered in his ear that the interviews and photocalls could perhaps wait until after the official presentation was complete. Yet the all-too public posturings of Nicolas Hayek were in many ways the least of MCC’s problems: already, Hayek’s influence had been significantly diluted when, in September that year, the growing demands of the building and development programmes had forced Mercedes to recapitalise the project, upping its stake

substantially. Hayek’s SMH, being a far smaller company than Daimler-Benz, was unable to match the capital increase and so saw its share fall from 49 per cent to just 18, a figure chosen in order to protect SMH from having to absorb any of the continuing losses from the car operation. Within a year, with Daimler-Benz having fused with Detroit’s Chrysler to form DaimlerChrysler, the German-led giant had bought out Hayek completely and the maverick partner was out of the picture — much to the relief of those who had had to deal with him on an everyday basis. Jiirgen Hubbert knew, too, that it was soon time for the relationship to end: “I was always a strong believer in the concept andI still am a strong believer. But from 1993 to 1997 it was a tough time because it became clear very soon that Swatch and we had different ideas, different motivations and different opinions. Nicolas Hayek wanted to

fight the Japanese: he did it with the Swatch watch and he wanted to do the same on the car side. His interest was in making sure that the European industry was capable

of doing something at the same cost level as the Japanese. What he didn’t realise was the difference between a watch and a car — that when you put acar into traffic, when you put people in it, you have to make sure that the situation does not create any safety problems. His first idea, the idea of building a Swatchmobile, was very different to the idea that finally came out. That is the reason why later on we had to make a decision to stop the co-operation and go our different ways.” >> rebellious Hayek is not the biggest problem

Awkward

though

Hayek

had

been,

especially

to Mercedes’

Stuttgart

staff

accustomed to orderly procedures and conventional decision-making processes, he | 100

>> smart&ceremony

was not the biggest priority faced by the Daimler-Benz board struggling to get to grips with the smart project. Costs were beginning to overrun, delays were building up and important technical issues remained unresolved: to those on the Mercedes side in contact with the project it had become clear well before the factory opening in October 1997 that the programme was not being run as effectively as it should

have been. Before long the finger of blame began to point in the direction of

Tomforde, Baubin and Schar, the three founder-directors, and their innovative ’all three must agree’ decision-making procedure: the new management structure was overloaded and not as responsive or as decisive as it needed to be, reasoned the Mercedes representatives, and the programme was slipping asa result. The outcome was the appointment in January 1997 of Dane Lars Brorsen as

chairman of the board of management of both Micro Compact Car AG and the manufacturing operation, MCC France. Brorsen appeared to have strong industry

credentials, having spent his whole career at the respected component supplier TRW; nevertheless, there was some scepticism in the press, with one commentator

prompted to ask why a Dane had been drafted in to run a Swiss-German joint venture building cars in France.

Brorsen was to last less than three years at smart, but even though those months were perhaps the most turbulent of the firm’s history he has, in the view of JeanPierre Guth and Gérard Naulleau in their study La voiture qui a changé lentreprise, left little trace in the company’s annals. An interview with him in Automotive News Europe revealed little except his fascination for small cars and, oddly, his children’s excitement for the new smart car. Nevertheless, Brorsen’s low-key management style did allow him to preside over some important milestones in the programme, such as the first showing of the finalised smart design to the press in April 1997, followed by the inauguration on June 13th of

the engine factory in Berlin which was to build the three-cylinder petrol and diesel engines that had been finally decided upon as the staple powerplants for the smart. Some DM 100m ($57m/£39m) had been spent adapting the existing Daimler-Benz plant to produce the tiny Suprex 600cc turbocharged smart engines, and at the time the facility had the distinction of being the only one in the world able to produce both petrol and diesel engines at the same time on the same line. 101

Lars Brorsenwas

appointed in January 1997 as overall head of smart: his mission was to speed up decision making,

control costs and improve feedback to Mercedes-Benz management

The engine was one of the last of the smart’s modules to be finalised. Design and development work had proceeded apace on the seven other main modules — see below — and smartville was gearing up for a production start in late autumn and

a planned market launch less than a year away. However, at the main Daimler-Benz board the ambitious high flier Jiirgen Schrempp had by now taken overall charge in a reorganisation which rolled Mercedes-Benz into Daimler-Benz and eliminated the role of the charismatic, smart-supporting Mercedes boss Helmut Werner. As with the arrival of any new broom, it was not long before all areas of the business — especially smart, where progress was looking decidedly slower than the

parallel programme to produce the new M-Class sport utility in Alabama — began to come under scrutiny. All the while, Brorsen had been looking hard at the sales

forecasts prepared by the three founder-directors and was coming to the disturbing — not to say alarming — conclusion that their projections were way too optimistic.

By the time the smart had its first big moment of glory, its public debut at the

Frankfurt auto show in September of that year, Brorsen was predicting first-year sales of just 100,000 units — in stark contrast to marketing and sales director Hans

Jiirg Schar’s expectation, used in planning the whole venture, of 160,000 in 1998, rising to 200,000 a year from 2000 on. The higher figures, it later emerged, were

best-case projections which assumed the inclusion of a Hayek/SMH-developed hybrid version in the range, a development that never happened.

Worse, with unfortunate timing the forecasting consultancy DRI McGraw-Hill published a study suggesting that between 70,000 and 80,000 smart sales was a 102

> smartGceremony

realistic estimate for 1998, rising to no more than 130,000 a year as a longer term ceiling. The implications of these and other forecasts were profound, and Brorsen, Hubbert and the senior Daimler-Benz chiefs knew it: so, too, must Tomforde et al

have known it, if only in their hearts. If the predicted lower sales rates proved to be

correct, Hambach would be running at only one third to one half of its full capacity, completely undermining its calculated economies of scale and thus its overall efficiency and profitability. Not only that, but a whole raft of extra penalties would kick in as the factory’s output failed to hit its anticipated levels. The reason was simple: the three original SMH principals had seriously over-promised in their agreements with the system

suppliers responsible for more than four fifths of the added value in each smart. In their eagerness to attract system partners into the Hambach operation, smart managers made what with hindsight could be seen as extravagant promises to suppliers about minimum annual volumes as well as guaranteed volumes for the

lifetime of the vehicle. Again, the numbers were geared around the inclusion of the hybrid

derivative

which

never

happened:

many

of the supplier

contracts

guaranteed a total of 200,000 smarts a year, with compensation promised if output fell short of that figure; some suppliers were also promised compensation for tooling development and depreciation costs. These contracts, which Johann Tomforde says were the responsibility of Christoph Baubin and Lars Brorsen, were clearly confidential at the time and differed from one system partner to another as the different individuals negotiating within each module team each came to different agreements; however, the whole arrangement was to become much clearer

in March 2001 when DaimlerChrysler paid off the bulk of the smart system partners in a single settlement designed to free it from further penalties. This was done in the form of a charge in the DaimlerChrysler accounts for €536 million ($502m/£354m), and at the time Automotive News Europe reported that for most of

the system partners the company had to pay €1200 ($1120/£763) compensation for each unit short of Hayek’s projection of an annual 200,000. For 1999, when about 80,000 smarts were sold, supplier compensation totalled €144 million

($149m/£93m), reported the trade paper. Later, however, in an interview for this book in November 2003, the current 103

>> chapter 7

manager of the Hambach plant, Klaus Fischinger, sought to correct what he insisted had become a widespread misapprehension about these penalty payments: “Two hundred thousand a year was never the real capacity, even though the business case for the production system was made on the basis of this. We realised in 1997 that the

market wasn't that big, so we reduced the investment we were putting in. The 200,000 figure was only theoretically possible if all the cars were exactly the same specification — the same colour and so on. We couldn't possibly do that many now that we have the cabrio and so many different versions for all the different markets.” “The only supplier who had a guaranteed volume contract was Siemens-VDO,” explained Fischinger, “and that was for 180,000 cars a year. The others were lower volumes,

such as 110,000.

It was

another

important

lesson learned for our

purchasing department.”

The prospect of a serious sales shortfall was clearly very worrying from both a business and a morale point of view, and from the perspective of mid 1998 there appeared

a strong

likelihood

that

those

worst

fears

would

be

realised.

Commentators continued to cast doubts on the viability of the smart vehicle as well

as the complete smart programme, with almost every news report prefacing its coverage with phrases such as ’the still controversial’ smart or the “hotly debated’ two seater smart. Even the early advertising campaigns, designed to get the buying public accustomed to the notion of the smart as a serious car, were so off-beat and

abstract that they met with either bafflement or downright indifference from the car’s potential clientele. Many of the more original and imaginative attempts to place the smart in ground-breaking urban mobility roles, where the vehicles were rented, leased or

shared rather than owned outright, had been stopped dead in their tracks by official red tape, by competitor pressure or by vested interest groups. One such example was the plan by the German state railways and Lufthansa to launch special ticket deals

which would offer the business traveller the use of a smart at his or her station or airport of arrival. The only problem was that the German taxi drivers union objected volubly and vociferously to the scheme, fearing that if successful the smart-drive idea would pose a threat to a lucrative portion of its members’ business. The taxi men closed ranks and threatened to boycott Mercedes-Benz if the smart-inclusive ticket 104

>> smarticeremony

plan went ahead: “We can serve our customers without having a star on the front of our car,” said the union leader pointedly. But with Mercedes the first choice of 77 per cent of Germany’s 55,000 taxi drivers, who at that time spent an estimated €185-205 million ($205-226m/£125-139m) with the firm each year, the pressure was such that Daimler-Benz soon backed down and the schemes were quietly set to one side. Nor were the more conventional sales channels looking any more encouraging.

With the plant just weeks away from producing an unstoppable flow of a thousand or more smarts every week, only 90-odd dealers had been contracted for the whole of

mainland Europe and it was far from clear how many of these would be ready in time for the spring market launch; up to afifth of the dealer contracts had been given to firms or individuals with no experience of the automobile business whatsoever — even a Burger King restaurant owner applied successfully for a franchise. Not

only did the retail network

seem

insufficiently prepared:

potential

customers were not up to speed either, and the contrast with the Mercedes A-Class,

the first small car carrying the three-pointed star and due for release that same autumn,

was

beginning

to worry

the Daimler-Benz

planners.

Thanks

to a

systematic advertising campaign, particularly in Germany, potential buyers already knew a lot about the radically-engineered new model and the compact Mercedes had already attracted 100,000 fully paid up orders several months before its on-sale date. Smart’s pre-launch position was anything but encouraging, even though some

pre-publicity moves had been made. One novel tactic was the sending out of a million copies of a plush, 192-page large-format magazine — almost a book in its own right — that appeared more like a fashion publication than a prospectus for a

revolutionary, mould-breaking new car. Jiirgen Hubbert is said to have seen an early copy of this publication, failed to understand what it was all about, but trusted in the smart contingent’s instincts and given the go-ahead for printing. These clearly costly brochures were sent to anyone who enquired about the smart on-line, something of a novelty at the time, but appeared to have been singularly ineffective: with six months to go before the scheduled release date smart had

received 18,000 expressions of interest, of which just 6,000 were accompanied by a firm financial commitment.

105

>> chapter 7

>> Tomforde’s manufacturing system is wdely admired But while there was clearly a lot that had already gone wrong with the Smart programme, the senior executives who kept the faith knew, despite many of these outward symptoms of ill health, that the basic equations which governed the operation still gave it the potential to be one of the most efficient car-producing machines in the world. And though Daimler-Benz had had to top up its stake in the joint venture to re-establish its momentum, the overall investment was still low in

relation to the output it was capable of yielding. Thirdly, though there was still a question mark over early demand levels for the compact two-seater, there was the

promise of a rising curve of medium-term demand thanks to the scheduled arrival

Smartville introduced new manufacturing techniques which have since been adopted by many other carmakers

> smarticeremony

of a diesel version in 1999, a convertible a few months later and a hybrid when

Hayek’s engineers had completed their development; there was also the feeling that once a critical mass of smarts had found buyers, familiarity with the concept and its then-unusual looks would encourage a broader spectrum of buyers to come forward. Thus, reasoned the faithful, the factory would still stand every chance of operating at close to full capacity. Certainly the manufacturing operation in its finalised form was the envy of every

other

carmaker.

Johann

refining and implementing

Tomforde

had

excelled

himself

its layout, seeking out the most

in conceiving,

suitable systems

partners and fine-tuning the overall logistics. Initially, Tomforde had hoped to

halve the then-best industry standard car-build time of around 15 hours: the 7.5 labour-hours mark was soon demolished, and by the time Hambach was due to open for business the direct labour content had dropped below five hours to 4 hours 30. This meant that only 20 per cent of the input on the smart was in-house MCC work: the rest was all done by external suppliers, especially those selected to become system partners and take on the major roles.

In fact, the whole smart production process begins with perhaps the most pivotal system partner of all: Magna Europe, which presses the steel parts for the smart’s

structure, welds them to form the chassis platform and distinctive ’tridion’ safety cell surrounding the cabin, and passes the completed structure to the next partner, Eisenmann Surtema, also housed in the ’island’ building off the far end of the top

arm of the distinctive cross-shaped final assembly building. Eisenmann Surtema was unique in 1997, and indeed still is, in using an environmentally-friendly powder paint

process to give the tridion cell its distinguishing silver or black finish.From Surtema the painted cell — the equivalent of a conventional factory’s body-in-white — travels by overhead conveyer to the top arm of the main cross for Siemens-VDO to fit the ‘cockpit module, consisting of the dashboard, instruments, controls, heating, and air conditioning where specified. VDO is alone among the system partners in having its

own personnel fit the assemblies into the vehicle.

The cockpit assembly completed, the line turns left into the right-hand arm of the cross, keeping to the outside edge of the building to allow direct component deliveries to the line without the need for fork-lift trucks. It is in this section that

107

Glass in the long

grass: smart towers in kaleidoscope colours became a familiar roadside feature.

MCC operatives fit the electrical wiring systems, the brake and cable lines and prepare chassis systems such as the front suspension and brakes, fuel tank and the rear-end module, supplied by Hoesch, now Thyssen Krupp Automotive, from a buffer store immediately next door. The rear-end module comprises the engine, whether

petrol or, later, diesel, the transmission,

rear suspension, brakes

and

wheels. After a U-turn the line travels back along the near side of the right arm to the all-important ‘marriage’ station where the body, complete with cockpit, is lowered onto the chassis components and bolted together. Next, in the lower arm,

come the front-end module, taking in the headlights, radiator and air conditioning condenser,

as well as the windscreen

and roof panel (whether solid, glass or

sliding). Seats from Faurecia and wheels in sets of four and complete with preinflated tyres come from Continental just before the line swings left into the final arm of the cross.It is here that the smart takes on its final look as the nine bright composite external panels, completed elsewhere in the complex, are attached. The plastic front and rear sections, door panels and tailgate have their own story to tell. Precision-moulded in one of four different substrate polymer colours on-

site by Dynamit Nobel, the body panel sets are either finished with clearcoat lacquer or, in the case of black, silver or metallic grey cars, colour-coated and then

lacquered; a third option, that of printed-on patterned designs, means a detour to Cubic’s facilities at the near end of the shop. While the door panels go next door to Magna Uniport for assembling into the door modules, the remaining external panels go direct to the line to be attached to the car; all that now remains is for final 108

> smart&ceremony

checks to be carried out. Every single car is started and run up on the rolling road, testing the selection of all six gears in the process; curiously, one of the last tasks is the fitting of the rear triangle windows, carried out while the cars are waiting for

their end of line sign-off. It’s a process of remarkable smoothness, speed and efficiency, and one which has hardly had to change since it was devised in 1997. Each smart then took eight hours of labour time, four of them from smart and the rest from system partners; system partners were — and still are — responsible for their own quality control and timekeeping,

and any delays in the chain

or quality defects requiring later

rectification work continue to trigger automatic penalties for the supplier concerned. It is an ingenious financial model, too, helping smart dramatically reduce its

parts inventories: smart only owns the system partners’ parts for a few minutes, from the instant they are fitted to the car to the moment the finished car is signed off to the distribution company. The rest of the time those components are

someone else’s responsibility. Tomforde was confident that the system he had set up was well protected against stoppages and unnecessary costs and that it was world-class in its efficiency — so it

must have come as something of a shock to be informed by the new managers under Jiirgen Schrempp that the project had been poorly managed, that costs had spiralled out of control and that they had to be urgently reined in. The result was a further round of intense technical and financial negotiations with smart’s system suppliers and further pressure to re-examine every part of the process in the hope of boosting

efficiency still more and reducing the costs of the operation as a whole. More and more, Tomforde, Baubin and Schar were being drawn into the orbit

of Mercedes thinking, Mercedes process and Mercedes pressures, despite their continuing determination to launch smart as a confident, independent venture, free from the taint of establishment practices. Resisting the relentless advance of what

they saw as the Mercedesation of smart had become a time-consuming task for the three founder-directors but, as they were soon to find out to their cost, vastly bigger upheavals were just around the corner.

109

> news ker strike S plants — Two Renault auto were closed last week strike by French truck

; Road blocks setup by s closed Douai (Scenic)

Sandouville’ (Laguna, e), Deliveries of finished 1d components were af“ Peugeot continued) to cars to dealers by rail. ent of parts and cars bethe UK and France were d= by blockades at

October car sales better than expecir Epmunp Cngw AuTOMOTIVE News EuroPe LONDON — New-car sales in Europe grew by an estimated 7.9 percent in October. Sales in Italy and Germany were better than expected, according to industry sources. perapoing incentives continue to boost the Italian market. The rise in Germany reflects new A-class deliv-

eries, said Richard Hover, economist at VDIK, the German importers association. The A-class went on sale 18 October. Hover said orders for new cars in Germany rose 12 percent in the first nine months compared with the same period last year. Sales in Germany are expected to finish at 3.55 million units in 1997, about the same as last year. But auto executives estimate that the market

could reach 3.7 million next year

when the A-class and new VolksapesGolfare in full production. The French market was down again. French sales in October 1996 were inflated by late registrations of cars bought under the scrapping incentives that ended in September 1996.

October sales in the UK are estimated at 157,000, slightly above year-ago levels.

‘Europe

Italy W. Europe*

1,149 149)

ports.

— Stephane Farhi

0 freezes stments in ice and

many STEPHANE FARHI

OMOTIVE News Europe - Valeo has halted a numinned capital investments any and

France, where la-

pensive. Investments will arging markets. or Valeo executive coniat “some planned extene been frozen.” s “investing heavily in deand emerging countries er an economic, social and

onment favorable to busiid the company ina stateit accompanied its thirdnancial report. as 27 plants in France and

srmany, out of a total 61 | Europe and 101 world-

2 company aims to merge s European Dperetlous

leans more plants will

ie rationalization has alrted, ar radiator for engine coolpreviously manufactured es; Saragosa, Spain, and

, Italy. All production is ragosa. mps are produced at two “ans and Mazamet. “was

110

Mercedes-Be Denmark/Sw

newspaper at

_ could have fu

>>

Elk-test debacle was a

major PR headache for Mercedes: smart officials knew their car would also need chassis alterations to perform the manoeuvre without tipping over

Smarti;the elk slalom spin-off prompts rethink of company as well as car It’s said by some that business organisations are much like people, in that they have their births, deaths, marriages and, often, divorces; their biographies are shaped as much by outside events as by actions of their own choosing. And sometimes an outside event can have such impact on the organisation that it comes to be seen as a turning point in the corporate story — an event which, whether dramatic or surprisingly mundane, triggers such profound change that everyone shares the same instinctively understood sense of before and after that event. For smart that external event was the now-notorious elk test: it was a very

different company which rebuilt itself after autumn 1997 when the test hit. The irony is, of course, that the test didn’t really happen to the smart car: rather, it was the smart’s bigger half sister, the Mercedes A-Class, which succumbed directly, after which the smart became guilty, first by association and then by actually mimicking 111

>> chapter 8

the failure. This failure soon became seen as symbolic of many other less publicly

visible failures within the still-young smart organisation, sparking a chain reaction and triggering an upheaval that some would argue was out of all proportion to the scale of the original problem. When the blue A-Class flipped onto. its right hand side when being tested on a disused airfield by Swedish car magazine Teknikens Varld that October 1997 day, it instantly became headlines the world over. Papers, magazines, TV news bulletins

and websites were full of images of the wrecked car, its A-pillar flattened, its screen shattered and its roof crumpled: centre-frame in every picture was the threepointed star. This was the nightmare moment for Mercedes: an ambitious new

design from the world’s most respected car maker, anxious to make a high profile entry into a new segment of the market where it hoped to use its top-quality reputation to great advantage; no-one could have imagined a worse public relations disaster for the proud German company. But while Mercedes top managers and

senior engineers might have had their private doubts about the relevance of the test to normal driving conditions, the company faced the issue head on, admitted the failure and agreed to recall all 3,000 customer cars sold so far, to re-engineer the appropriate chassis systems and to standardise the elk-test proof chassis on all future A-Class production units. The cost of the exercise was estimated at close on €200 million ($216m/£131m), but the crisis was handled so professionally and so

openly that the net damage to the Mercedes brand and its organisation proved minimal. For smart, however, the issue had huge ramifications which would be more serious to its corporate structure than was the case with the mother brand. The

smart did not suffer the humiliation of a public elk-test rollover in front of press and cameras. But because the auto-industry air was thick with talk of which models could and which could not pass the test, and smart’s directors did not reassure

doubters by going public with test results on their two-seater, suspicions were aroused — not least among Daimler-Benz leaders who were already growing impatient with what in their judgement seemed to be the excessively isolationist

management in charge at smart. The episode was without doubt the most divisive in the whole of smart’s short 112

>> smart&the elk

history and, as with any potentially explosive situation, positions become polarised, subsequent accounts of the event inevitably begin to be seen from opposing points

of view, and hindsight distorts recollectionss of judgements made at the time.. According to French academics Jean-Pierre Guth and Gérard Naulleau, in their

study La machine qui a changé lentreprise, Tomforde had known all along that the smart was incapable of performing the elk test manoeuvre; indeed, insist the French authors, the designers had hoped that Mercedes-Benz would provide additional funding to allow the'car’s track to be widened to improve its stability As chief development

engineer for the city-coupé Johann Tomforde

had

certainly always been aware that, because of its narrow track, short wheelbase and

relatively high centre of gravity, the car would never be able to offer in his words ’agile, kart-like’

handling

characteristics.

A further

handicap,

according

to

Tomforde, was that the engine had had to be located further rearwards in order to make provision for the batteries, control devices and hybrid drive of the SMHSwatch version — which, ironically, was never built.

“We decided as early as 1996 to go for big differences in front and rear track, as

well as very different tyres front and rear,’ he said. “With this considerably improved chassis set-up, which included ABS and electronic intervention in the engine-gearbox management in emergency situations, we had covered millions of

test kilometres on several continents by October 1997.” Recalling the events, Tomforde notes that the elk test was something new in the

industry’s test routine, that it had not existed before October 1977. “As soon as the incident with the A-class was known at MCC, I initiated similar tests and also the

elk test for the smart. With the so-called free style slalom methods the Mercedes

test engineers managed to flip almost every car. “In order to be able to cope with such extreme emergency situations and freestyle’ exercises we also worked with Mercedes engineers to try and reproduce all kinds

of emergencies,”

added

Tomforde.

“The

results

led to some

necessary

improvements in the smart, too — these came shortly after the very successful debut at the 1997 Frankfurt motor show, but in good time for the market entry to customers.” “After the incident with the A-class, all the other car manufacturers became

scared and incorporated the elk test into their test programmes. I had developed 113

Mercedes-Benz

passenger car chief

Jurgen Hubbert (left) took decisive action over both

A-Class and smart elk-test failures, calling in the

experienced Gerhard Fritz

(below) to trouble-shoot the smart project

the TRUST system at smart and it had been ready long before the elk test in 1997.” Nevertheless, even the Trust system was not sufficient to prevent the smart

tipping over on what for such a small vehicle was a pretty extreme test; Tomforde

knew that extra work was required on the chassis and did indeed begin a programme of engineering upgrades. However, with a massive launch programme on its hands the whole Daimler-Benz engineering establishment was fully stretched

and, recalls Tomforde, was unable to help: “The Mercedes people were busy enough resolving the problems of the A-class and the other models. For capacity reasons they could not offer any help to the MCC team.” While it is entirely understandable that the parent Mercedes organisation would want to concentrate its resources on the A-Class, a car of huge commercial significance and one carrying the sacred three-pointed star, difficulties in resolving engineering problems were not the most contentious issue between smart and its Daimler-Benz shareholder. The real arguments revolved around openness and disclosure. 114

> smart&the elk

Few, it seemed, doubted Tomforde’s talents as an engineer or designer, nor was anyone questioning his integrity or motivation. What the Daimler-Benz management

found unacceptable was that though Tomforde had indeed tested the smart and found it wanting in terms of dynamic stability, he had failed to inform the parent company and instead kept the results to himself; there was even the suggestion of an earlier, pre-elk test report that had concluded that the smart’s behaviour was not as it should be’ —a report that was again not circulated to outsiders.

The fallout over the elk test‘was an important milestone in a chain of events that was to prove tumultuous for the tender young smart organisation. The elk test

fiasco prompted not only the redesigning of the car — as might be expected — but also the postponement of its launch, the departure of its founding father and guiding light, the restructuring of the whole operation, its management and its

reporting lines, the abandonment of several of its principles and, indirectly, even the reshaping of its dealer network and its system of spare parts distribution. At issue was more than just the dynamic stability of the city-coupé when

undertaking a seven-metre swerve at a speed of 60km/h. If such an obvious manoeuvre was wrong, how many other things could also be wrong? Daimler-Benz officials feared the worst, for costs on the programme were already overrunning and the determinedly independent smart directors had been notoriously reluctant to open up their processes to scrutiny. Schrempp’s response was to postpone the market introduction of the smart

from March 1998 to October of the same year: this would give everyone concerned a breathing space in which to come up with asuitable solution. The rethinking of the smart’s chassis was set to be every bit as thorough as that being undergone almost in parallel by the A-Class. The disturbing difference was that whereas Daimler-Benz chairman Jiirgen Schrempp was quick to express confidence in the A-Class, praising the efforts of everyone involved and promising that “no heads will

be cut off”, no such assurances were given in respect of the smart. >> the launch is delayed

Jiirgen Schrempp’s announcement that the board of Micro Compact Car AG had decided to put back the launch of the smart car by six months was issued on 115

>> chapter 8

December 18th, 1997. The cause of the delay was given as the results of a strict quality and technical audit that MCC had carried out in all areas of the project. The

audit had revealed that the smart product ’had not reached a sufficient level of maturity’ for such an innovative product, and that it was essential to exclude every

risk to the customer. The manufacturing arrangements were also questioned, and only at the end was mention made of ’additional vehicle testing needing to be carried out in order to further develop driving dynamics and directional stability under more demanding testing conditions.’

On the same day a press release announced that Johann Tomforde had been reassigned to other duties within Daimler-Benz, and within the space of a month

finance director Christoph Baubin had gone too, “It seemed that at the end of 1997 at the very highest levels in Daimler-Benz there were many very serious questions raised about the commercial and industrial

viability of the smart project, and whether it should still be pursued, conclude Guth and Naulleau in their study. “Times were changing, and it was no longer sufficient to innovate technically, industrially and commercially: what was needed was to develop an organisation that was efficient and profitable. New people were required. The project had to fall back into line.” News of the postponement did not go down well in the Hambach area, where recruitment was proceeding apace and expectations were running high: the last thing that was needed was anything that undermined the security of the new staff. Suppliers and system partners were anxious, too, as in its desire to cut costs and

boost efficiency the new regime had vowed to renegotiate contracts and ensure they were all drawn up on aconsistent basis. Soon it was decided to make a virtue out of necessity and establish a temporary refit line to allow 150 Hambach staff to carry out the post elk test updates to the 3,000 Mercedes A-Class models that had been sold to customers and then recalled for reworking; remaining staff were bussed to surrounding Daimler-Benz group plants and supplier facilities. Some even went to the A-Class’s home facility of Rastatt.

At the same time Daimler-Benz teams began their close-up examination of the MCC smart operation: their initial results revealed problems in the production system at Hambach and poor quality in certain areas, in addition to the known 116

>>

Smarts had been tested

all over the world in order to iron out potential faults; here, two city-coupés anda

cabrio are ona ride and drive exercise in Texas

issue of the dynamic instability of the vehicle itself. Mercedes passenger car chief Jiirgen Hubbert asked his product development head Helmut Petri and his team to help MCC, explaining to Automotive News Europe that “perhaps the young team at MCC was too proud to ask us for help in the past: maybe they wanted to prove that

they could do it themselves. It was like a competition with the parent company.” Hubbert’s words were perceptive indeed, for they reflect precisely the ethos that

Nicolas Hayek was always drumming into the programme team around him — that they should challenge the establishment, break the rules, find radical new ways of doing everything and, above all, resist any ideas which involved closer relationships

with Mercedes. Hubbert now recalls this crisis as the darkest time in the history of smart: “The worst point was late 1997 when we had the problems with the A-Class. Journalists tried to do the same elk test with the smart, and clearly the car was not

designed for such an extreme manoeuvre. We had to make a decision, should we go on or should we stop? Do we have technical solutions for the problem? Clearly, there were some people in the discussions who thought we should stop. We had to reassure the board at that point that we had apositive technical solution: this was the TRUST system — in effect the forerunner of full ESP. “Another difficult step was the restart in 1998, when we only built 20,000 units.

It was hard because we had aclear target to achieve the 80,000 in 1999. This was when Jiirgen Schrempp put us under pressure, saying that if we arrive at that figure we will go on, but if not we will have to stop.” 117

Onesmartmanagement

ride and drive exercise took in the dense city

traffic of Paris. Jurgen Hubbert, Lars Brorsen and

Johann Tomforde appear pleased with the results

While Christmas 1997 provided a welcome breathing space for the workforce at Hambach, there must have still been much uncertainty in the air when the operatives

reported back to work in the new year. Over the break, Daimler-Benz chiefs had appointed a troubleshooter to sort out the engineering issues surrounding the vehicle. Dr Gerhard Fritz came with the perfect qualifications: a career engineer at Daimler-

Benz, he had led the development of the Mercedes M-Class sport utility and supervised the start of production at the greenfield site in the United States. The programme had started slightly before that of the smart and had already been judged a great success: it involved many of the same factors as smart — a completely new product, a new market sector, a factory in a foreign country, new relationships with suppliers and, perhaps most importantly of all, it had the distinction of being the firstever Mercedes deliberately built down to a target price, $33,900 (£20,575), to pitch it just above the Jeep Grand Cherokee. During the development phase Gerhard Fritz and 118

> smart&the elk

his boss, Andreas Renschler, had been in regular communication with Stuttgart HQ whenever there had been a problem, and the outgoing Mercedes-Benz chairman

Helmut Werner was a keen supporter of this new, profitable luxury product. All in all, the strong general approval felt for the successful M-Class project made the agonies of MCC

smart seem

even more

obvious, reinforcing the

impression that while Renschler and Fritz had done everything right, their idealistic counterparts at Renningen and Hambach had got it all wrong. The arrival of Fritz

at smart would, Daimler-Benz

hoped, allow some

of the M-Class

ethic of

discipline, efficiency and good planning to rub off on the struggling and by now increasingly dispirited joint venture Replacing Tomforde as head of vehicle development, Fritz faced a daunting intray of urgent tasks. He had to decide the most effective way of giving the smart acceptable dynamics; he had to present these ideas in time for the Geneva motor show in early March, when the revised vehicle needed to appear; the changes then had to be ready for production by early summer, in time for an autumn on-sale date. The summer production start meant all quality problems and supplier issues had to be resolved with some urgency and, although it was outside of Fritz’s remit,

there was serious concern about the dealer network — it should originally have been ready for the planned March 1998 launch but was now looking unprepared for even the postponed October 2nd commercial launch. Before his departure in December 1997 Johann Tomforde had put together a reengineering and design package to address the car’s dynamic issues. Fritz and his

team decided right away that the smart’s main problem was its most obvious one: its wheels were set too close in for proper stability, especially as its centre of gravity was already too high. In addition, with the mass of the engine concentrated over the rear wheels, the back of the car could swing out if it was clumsily handled on a - skiddy surface. Fritz’s solution was to widen the front axle by 16mm and the rear by

86, as well as fitting much wider tyres at the back than at the front. He also changed the camber (vertical alignment) of the rear wheels and stiffened the springs to reduce body roll, and thus the risk of a rollover.

To lower the centre of gravity, Fritz lowered front and rear suspension systems by 20mm and mounted the driver and passenger seats 20mm closer to the floor. 119

May 7th 1998; DaimlerBenz CEO Jurgen Schrempp and his Chrysler counterpart Bob Eaton sign the agreement creating DaimlerChrysler

The result, said Fritz, was a lowering of the centre of gravity by 45mm. The steering was changed, too, to incorporate more damping, and Fritz specified the TRUST dynamic handling control to regulate the speed of the driven wheels through the engine’s electronic control system; this was in effect traction control with some

extra stability functions added. Less well publicised was the extra 35kg weight which, according to one insider, had to be added to the front end, again to improve stability: the move was ironic, said the insider, as the original engineering team had

gone to a lot of effort and expense to perfect a sophisticated transverse leaf spring in carbon fibre — just to save weight over the front wheels. Outwardly, the smart was virtually unchanged save for slightly widened rear wheelarches and beefier rear tyres, giving a curiously sporty allure when viewed from the side. Presenting the revised line-up at the Geneva motor show in March, the prevailing mood was one of quiet confidence rather than the euphoria of Frankfurt just six months previously; in place of extravagant sales forecasts came a more measured view of the prospects following the October launch. Avoiding precise overall numbers, head of marketing and sales Hans Jiirg Schar explained 120

> smartéthe elk

instead the volumes expected to be sold by the various types of smart center, while chairman Lars Brorsen declared that the decision to postpone the launch was the right one. “It will allow us to improve quality before production start-up in the French town of Hambach

and will permit us to make modifications to the

suspension,’ he said. Senior executives on the Mercedes/smart stand at the show

even allowed themselves a quiet chuckle at a good-natured joke prepared by their Volvo opposite numbers on the adjoining booth. The Swedish engineers — or perhaps their mischievous colleagues from public relations — had found a splendid set of elk antlers and had mounted them high up on the stand on the side overlooking the Mercedes A-Class display. Away from the glamour of the showtime spotlights in Geneva, headquarters staff had been busy examining how the smart organisation operated and why it was

falling behind in its performance. One of the more immediate conclusions was that the whole Daimler-Benz organisation had been very heavily stretched with the new

model offensive. More or less simultaneously, the group had been designing, developing, manufacturing and launching five different new model programmes, the V-Class, M-Class, SLK, A-Class and smart; four of them were in sectors entirely

away from the company’s traditional heartland of luxury saloons and sports cars, and it was more than a co-incidence that the two programmes which had become most seriously tripped up were on the low-cost territory that was least familiar to the group’s engineers. And, being a semi-detached joint-venture, MCC smart had not been monitored as closely as it would have been as an integral part of the group, allowing matters to get even further out of hand. The one thing the organisation — especially smart — now needed was stability, and the tightening of control and scrutiny from Daimler-Benz began to provide that. The A-Class was now back in full and successful production in Rastatt,

Hambach was getting moving again under the new regime, and it seemed that after weeks of uncertainty the smart programme

was about to get the period of

continuity and consolidation it so badly needed if it were to re-establish itself and grow. However, what no-one had counted on was a new distraction for senior

Daimler-Benz executives from an unlikely quarter — Detroit.

dct

>> chapter 8

>> Daimler-Benz goes global Business journalists received no more than a few hours’ notice to hear what proved to be one of the most momentous announcements ever made in the auto industry. Speaking at a hastily-convened press conference in central London on May 7th 1998, Daimler-Benz chairman Jiirgen Schrempp announced that his organisation was to merge with Chrysler, the US number three, in a deal estimated at $92 billion

(£55.6bn), at that point the biggest transaction ever seen in the world of big business. The fusion would create the world’s fifth-largest automaker, employing over 420,000 and selling some 3.6 million vehicles annually.

Chrysler had just had the second-best year in its history, with an operating

profit of $4.72 billion (£2.85bn), while Daimler-Benz too was on aroll, selling a record

715,000

light

vehicles

in

1997.

The

product,

manufacturing

and

geographical fits were near perfect, and the merged businesses expected to achieve

cost savings of $1.4 billion

(£845m)

in 1999 through component

sharing,

combined purchasing and joint distribution. It seemed the ideal match — especially

from the point of view of Hambach and Renningen, where the US market and Chrysler-Jeep’s catalogue of predominantly large vehicles seemed a million miles away and posed no apparent threat to the successful start-up of smart operations. Little did anyone realise that within the space of six years Dodge — Chrysler’s sporty brand — would build a concept car based on the tiny three-cylinder smart roadster. Busy preparing

for the all-important

press launch

of the city-coupé

in

Barcelona in July, smart personnel had in any case been keeping their heads down; there was also the even more

important matter of Job One, the first series

production car destined for a paying customer. The date for Job One had been set

for July Ist, and plant director Harald Bélstler was determined that all quality problems and supplier issues should have been resolved long before then. At long last came the official press launch of the smart car, in Barcelona. For the

many waves of journalists flown in from all corners of Europe — and indeed some

from other continents too — this was the first direct contact with the vehicle everyone had been hearing and reading so much about for such a long time, and expectations were running high. In a somewhat subdued welcome to the world’s press, Micro Compact Car 122

>> smartéthe elk

president Lars Brorsen

acknowledged

that the programme

had been behind

schedule and that patience might be wearing thin: “Smart is here and you'll soon see that it has certainly been well worth waiting for,” he told journalists. “The city-coupé we are presenting to you today is an attractive product in every respect. I cannot put it into words how much fun it is to drive and

own. The smart is an emotional product as you will see for yourselves tomorrow.” Warming to his theme, Brorsen expressed his confidence in the smart’s classy appeal: “This is a car which has been developed to meet the demands of traffic conditions in urban areas..... it goes without saying that this product will provide us with a high level of social acceptance. Smart is a car for open-minded, unconventional

and progressive people,” he insisted, “for anyone who is prepared to replace old behaviour patterns with new ideas: for people who put quality before quantity.” Brorsen also acknowledged that things had gone wrong in the project and that smart had “had to do some more homework before launching the car on to the market’, paying tribute to “all the employees who have put ina lot of overtime over the past few months.” Significantly, too, he predicted that the factory would reach its full 200,000-unit capacity by the year 2001, when all the variants were available. However, by way of a spanner

in the works it emerged later that at a

stockholders meeting Daimler-Benz chairman Jiirgen Schrempp had told analysts that the smart would not make any money in its first product cycle, likely to last until 2004. “We will have to include the following cycle of the smart in our calculation,” he was reported by Automotive News Europe as saying. “In the first two to three years we will put pressure on the costs of smart production.”

The next morning, correspondents were faced with a bewildering variety of names, colours, accessories and options as they chose between the different smart versions; every car, however, shared exactly the same overall design, with the sturdy steel tridion safety cell and contrasting not-so-sturdy plastic external body panels, the big, comfy seats and the stylish interior design with a surprisingly generous complement of luxury extras such as electric windows and remote central door locking fitted as standard.

The visual impression was one of something small, stylish and calculatedly fashionable, and with good scope for individual expression; less emphasis was 123

>> chapter 8

placed on the engineering aspects of the car, though in fact the miniature 600cc three cylinder engine, complete with twin plugs per cylinder, a turbocharger and an intercooler, rated as pretty advanced for such a small car. So, too, did the six-speed

sequential ‘softip’ transmission, operated without the need for a clutch pedal by the push-pull central lever: for a few euros more, the car could be specified with

‘softouch’ fully automatic operation of these same six gears — again a feature unique on any car, let alone one in micro class. Safety was an obvious concern in such a small vehicle, and here the smart engineers spoke eloquently of features not generally found in small cars at that time,

such as ABS brakes and dual full size airbags — plus of course the steel safety cell. The overriding impression, as we saw in the earlier chapters of this book, was of

something that was very small but also very sophisticated, a car ultra compact on the outside but opening up to reveal the luxuries and indulgencies you would only expect to find on something much larger. The Barcelona launch also provided selected journalists with the opportunity to see a smart dealership first hand and admire the seven-car high glass tower of

smarts outside. Inside the showroom smart sales and marketing director Hans Jiirg Schar — the only one of the three founders still on board — spoke excitedly about the smart retail concept and how it was the crucial interface with customers, the place

where “we can show our customers how we are different to other brands.” Schar explained how the company’s lean delivery system meant that cars arrived direct

Renault Twingo (left] and Ford Ka were frequently cited as full four-seater cars which cost little more

than the €8200 ($8850/£5330) being asked

for the basic smart

> smart&the elk

from the factory rather than via time-wasting wholesalers or distributors. Even a car built to a specific customer order — with an unusual paint or trim combination, for instance — could be delivered within two weeks, he boasted.

By the standards of the day that counted as an impressive claim and tied in well with his notion of the smart as an impulse purchase. But it was the ’on the road in

fifteen minutes’ claim that really surprised reporters. Schaér promised that a customer could walk in off the street and pick his favourite smart from the 28 stocked in the tower: the chosen car would be automatically lowered to ground level in two minutes, the smart center would arrange registration, insurance and tax

there and then, and the buyer could be out on the road in his new car — all within the space of a quarter of an hour. “We're aiming at trendsetters,” said Schar. “Our objective is to create a cult

which lasts, not a fashion which is short lived. These cars are likely to be third or

even fourth cars in relatively affluent households.” Nevertheless, despite the smartness of the Barcelona smart center and the evident

efficiency of the operation, most of the journalists left the city somewhat disappointed with the actual driving experience of the smart. The most common complaints, as we saw in Chapter 1, were of the hard ride, the slow steering, and the even slower

automatic gearchange. More seriously, many of the subsequent write-ups, while acknowledging the smart’s charm and the likelihood that it would appeal to the

fashion-conscious

and

the affluent

impulse-buyer,

homed

in on

the €8200

($8850/£5330) launch price as the big problem. Each time, the names Renault Twingo, Ford Ka and Fiat Seicento kept coming up as stylish small cars with similar pricing to the smart but which could seat four people and offer decent comfort and practicality. Ominously, it would be years rather than months before this particular block was overcome and the smart finally came to be recognised as a car in its own very individual right rather than something which one could be judged on rational grounds alone. After all, reasoned one commentator at the time, it would be hard

for you to justify the choice of a sports car — other than the fact that you wanted one. In other words, the car you want is a much more attractive proposition than

the car you merely need.

125

ee mt

amare

ee

eonbaleea Oreaeseat Bithe Sent ierreedie oisnipaideaenlite

thehran

i f

i

: ie

eM yh

128

:

>>

Bad news appeared to greet smart at every tum in its early years. Here, a

smart which spun ona snowy motorway slip road made sensational headlines; later, it emerged the car was on summer tyres

a7 1o @ | A

Y &

os

7
> chapter 9

a

ie »Making contact.

»A wide selection. our individual needs specially for st. o turn your smart into

RDS radio with 2 x 21 watts of power & cassette deck with sotoreverse and Dolby ® & bass reflex apoakere & flexible antenna, And if you woh,

Are you ready for the smart? This autumn more than 100 exclusive saart Centers will open in nine Zuropsen countries, You can get the exact addresses and such more by calling our Infocenter hotline, vieiting ovr website, or sending ue this reply card.

Econcaical, but nippy enough to get you there on time: RPM counter and cockpit clock,

@ CD changer.

‘The omart is uch in demand. Would you like an alarm systen?

Yor youths only: smart child seate with tray bucket for the tiny ones,

The alternative to down jackets and av: trenks; CFC-free air conditioner with pollen and ozone filter. a

:

Nous to the amart Center,

Public interest in the smart was high right from the very start, fuelled by innovative marketing and the strong brand identity fostered by distinctive smart towers at dealerships

There were many who, with some justification, felt proud of that achievement: yes, there was a certain amount of executive blood on the carpet and the car had received something of a pasting at the hands of the enthusiast auto press, but those critics who gave the car a mauling conveniently ignored the significance of the whole new edifice that had been created to produce, promote and deliver it. It was like condemning a brand-new theatre complex because you didn’t like the first play to be staged there. 130

>> smartésmiles

To the car buyer strolling the city-centre showrooms

the adverse media

comment following the summer 1998 press presentation did not seem to matter.

Public interest in the car was intense and dealerships in Europe’s major cities were busy throughout the summer answering questions, handing out brochures and taking addresses; however, the number of actual firm orders taken was judged disappointing in relation to the 300,000 customer profiles on file — but it was early days and radical new ideas can take time to gain acceptance. Smartville threw a big party at its Hambach home at the end of September, the day before the real big day — the market launch, when customers could actually drive away in their cars and call themselves pioneers of a new generation of motorists. The party was a tremendous success, attracting a reported 100,000 visitors instead of the expected 20,000; it set a suitably festive tone for both the launch and the official show debut of the car, fresh from its €170m ($194m/£116m) fettling, at the 100th Mondiale de ?Automobile in Paris. Smart’s show stand was

packed with fascinated visitors, young and old, rich and poor, male and female. Also displayed as a pointer to the future was a city-coupé prototype with a turbodiesel engine — the world’s smallest, at 800cc and 41 hp, and promising excellent fuel economy. It is not recorded how many of those Paris showgoers decided there and then to buy their smart, but sales certainly proved brisk in the first few weeks: the car had

been launched in nine European countries simultaneously, with the expectation of 20,000 sales by the end of the year. Some 90 dealers had opened for business by

launch day, and interest was reported to be greatest in densely populated areas: dealers were also able to offer the first of a variety of services specially tailored for smart owners and their cars — Avis came up with large discounts for smart owners who wished to rent a larger vehicle for holidays or family trips, certain carparks in major cities promised reduced rates for the smart’s compact footprint, and Zurich Financial Services provided dedicated smartstart insurance, with the then-unique option of online booking.

A matter of weeks later smart became the first car anywhere in the world that could be ordered over the internet — but this was not before some fundamental changes had taken place to the company’s financial structure. It all began on 131

>> chapter 9

November 1st when Daimler-Benz chairman Jiirgen Schrempp tipped off analysts about ‘structural changes’ planned for the company: the business press immediately

speculated that the move could prove to be the ousting of Nicolas Hayek and his 19 per cent stake from the joint venture. The announcement proper came just three

days later, a press release from Hayek’s Swatch Group stating that it had ‘sold its participation’ in smart to Daimler-Benz, effective from October 31st. The reason

given for the sale was that Mercedes-Benz had abandoned work on the hybrid version of the smart, whose technology was under development by Hayek’s R&D organisation in Biel; the conventional car had been launched successfully on to the market, Swatch said, but “technical examination of the integration of the hybrid

SwatchMobil system unveiled almost insurmountable space problems, resulting in the withdrawal of this project and consequently in the payment of an appropriate compensation to the Swatch Group.”

Swatch offered to licence back its know-how to Daimler-Benz in a separate agreement: there has been much speculation as to the size of Hayek’s pay-off, but he was judged to have netted some DM150 million ($90m/£54m) for the sale of his

stake. Relations between the Swatch mogul and Daimler-Benz had been growing increasingly tense, but the two sides nevertheless felt able to pay carefully-worded compliments to each other. Jiirgen Hubbert described how Mr Hayek had “pushed this project onward with much personal engagement and influenced it in an important way; the collaboration with him was an enrichment for all of us.” Hayek was less effusive in his response, saying that “the Swatch Group has fulfilled its role as a loyal, competent

and efficient partner

for the concept,

development and production as well as for the marketing, distribution and launch of the smart car. After the successful smart introduction, the Swatch Group considers its task concluded

and thanks Messrs

Schrempp,

Hubbert

and their

collaborators for an exciting and positive co-operation.”

>> end of an era Hayek was right: his role had ended. It was a poignant moment for him. Yes, the baby car he had always dreamed of and had pushed so hard for for so many years had at last become a reality and was, as far as anyone could see at that early stage, 132

>> smartésmiles

proving a hit with consumers; he had been able to put into practice several of his radical ideas on corporate organisation, even if the more extreme of these had already been dismantled under Daimler-Benz’s tightening grip on the joint venture; thirdly, he had gained valuable exposure for himself and his Swatch brand. But these positives were scant compensation for the undeniable fact that, despite their fashion-icon status, the smart cars now whizzing around the capital cities of Europe

were nothing whatsoever to do with Hayek’s original inspiration — in fact, they represented a complete betrayal of the most sacred of his principles. Successive encounters with the tough men of the auto industry and the even tougher regulations governing the products in that industry had knocked the corners

off Hayek’s

idealism:

at every turn

he had

faced

disappointment,

climbdown and sacrifice, his ideas — always original, at times visionary — made to seem naive by the harsh realities of consumer behaviour and big-scale industrial manufacture. Towards the end, all that was left of his dream were his name, the

concept of interchangeable plastic body panels, and the tenuous hope that a genuinely ecological derivative could one day follow; when first his name and then the dream that sustained him all along — the hybrid option — were removed, there

was nothing left. He had wanted to turn the auto industry inside out, but it had ended up ejecting him and the awkward, insurrectionary values he stood for. His parting shot was to tell Handelsblatt that smart would continue to lose money for the next two to three years — though these losses, he pointed out, would now no longer be shared with Swatch Group: “No-one enjoys having to tell his shareholders that 20 per cent of this year’s profits have been written off because a very attractive car is running a deficit in its early years.”

Yet, as always with Hayek, the entrepreneurial spirit was alive and well: he was already in negotiation with at least three other major carmaking groups, he boasted, two from Europe and one from the United States. A decision would be made by the end of the year, he told the German financial daily Handelsblatt, and a productionready petrol-electric hybrid car would appear on the market within the space of two years. The formula was familiar: a two-seater, along the lines of a smart, and priced at DM 18,000, ($11,000/£6,500) or ‘a smart plus ten per cent. Those who knew him of

old smiled. Something told them they had heard it all before. 133

>> chapter 9

For

Daimler-Benz,

shortly

to

become DaimlerChrysler, it was the

end of an era: not only was an increasingly embarrassing distraction

now

off the scene,

but the

corporation could now get on with running

smart

in

a

focused

and

systematic manner without having to have regard for anyone else’s interest but that of the parent group. Mika Hakkinen had just won the Formula One world

championship for McLaren Mercedes, great things were expected of the merged Daimler-Benz and Chrysler organisations, and smart was at last a wholly-owned in-house subsidiary with benevolent — rather than dysfunctional — parents. Things were looking up.

>> winter wobbles Winter was by now setting in across Europe, and smarts continued streaming out of

the dealerships at the rate of several hundred a day. Unfortunately for some drivers, however,

the three-way

combination

of the newness

of the car, the owners’

unfamiliarity with its handling and the seasonal slipperiness of the road network began to cause unease. Soon, reports were beginning to circulate of tricky cornering under adverse conditions: on the level of pub gossip at first, the rumours

began to build and it became clear that there might indeed be something of a problem. The anecdotes all had a common thread to them: a smart making a turn or accelerating round a bend, the tail snapping around suddenly and the car

pirouetting or spiralling off the road backwards. A parallel set of reports revolved around smarts being caught and even spun round by gusts of wind from the side. But it was only when the German papers and television splashed a truly dramatic picture that the real impact of the problem was felt. Now notorious, this photo (see page 128) was the smart’s equivalent of the post elk-test Mercedes AClass crunched on its side — only the one big difference this time was that this had not been a special magazine on-the-limit test or a laboratory engineer’s dynamics 134

>> smart&smiles

exercise but took place with ordinary people on an ordinary Autobahn, the kind of environment used by millions of German drivers each day. That made it painfully real, and anyone seeing the forlorn spectacle of the smart sitting on its tail in a bank of snow next to the crash barrier — like an elephant performing a stand-up trick in a circus ring, as Der Spiegel magazine

observed — would

immediately have

identified with the unfortunate owner and concluded that smarts were still unsafe. Never mind the fact that that particular smart had been driving, inadvisedly, on summer tyres at the time — the damage had been done. It didn’t even matter that the woman who had rented the car and so spectacularly spun it onto its tail later said it had been fun to drive and she wanted to buy one: from now on, smarts would be indelibly branded in the popular imagination with that disastrous image of treacherous handling in the snow.

The respected Swiss magazine Automobil Revue agreed. Testing the smart on a snowy surface, it said that the tail would snap out violently and the car would performaseries of pirouettes, during which, despite hefty applications of steering

lock, the driver was no more than an onlooker to the action. The Nissan Micra and Mercedes A-Class tested at the same time managed the test with no difficulties. The smart is a safety risk on snow and ice, concluded the magazine. A different type of accident provided further bad news

for smart. Stern

magazine reported how a Munich garage proprietor had rolled over three times when his smart was caught by a gust of wind on a packed-snow road surface on the southern side of the city. He was travelling at 40 km/h (25mph) and was thrown out of his smart when the glass roof shattered, after which the car rolled onto him,

causing serious injuries.

Smart chairman Lars Brorsen was quoted in the story — headlined “New doubts about smart’s safety” — as agreeing that rear-engined cars had different dynamic ‘characteristics. Questioned about the sluggish sales of smart cars, Brorsen was candid

in admitting that the price did not tally with what the car offered: “There were too many extras which had to be paid for individually,” he told the weekly magazine. Sales plummeted, and smart finished 1998 having built 21,161 cars and sold

only 17,080 of them. Before long, DM500 ($297/£180) was lopped off the price of the models, and their standard equipment levels were boosted with many of the 135

>> chapter 9

items previously charged separately as extras. It was to no avail: with so much bad press

around,

smart

sales

froze

solid

and

it looked

increasingly

as

if

DaimlerChrysler would once again have to implement its crisis management procedure, tactics that had proved so effective just one year back at turning the elktest disaster of the A-Class into a PR triumph for Mercedes. Only this time there was one key difference: whereas with the A-Class it was a question of finding a fix for the car, in the case of smart it was a fix for the operation itself: what was at stake was the survival of the entire smart venture, no less.

>> troubleshooters are called in The fightback had got off to a poor start. the slowdown in sales meant that as A short-term measure smartville had to reduce production so as to prevent a large

build-up of stock in the network; at the same time the annual target was slashed by a quarter, from 130,000 units to 100,000, though several executives were soon

stating publicly that they would be happy if the year-end total went past 80,000 — barely 40 per cent of Hambach’s planned capacity. Next came a further unhelpful blow to the smart’s reputation: Avis — the exclusive rental partner since the whole venture began — suspended its rentals of smart cars. The cars were not safe in winter conditions without proper winter tyres,

said Avis, adding that it was working with the carmaker to re-equip the cars and return them to the rental fleets. Smart accepted the need for the Avis rental cars to have winter tyres and agreed to bear the bulk of the cost, though local shortages of winter tyres meant that it was three weeks before the fleets returned into service..

Meanwhile, smart engineers in conjunction with 80 colleagues drafted in from Mercedes had been busy developing a fix to improve the city-coupé’s winter driving. They were by now under the leadership of Helmut Wawra, the highly respected engineer who had led the well-received programmes for the advanced Mercedes SLK compact sports car and the still to be released second-generation CClass saloons, estates and coupés. The existing TRUST system, developed by Gerhard Fritz’s team as part of the previous package of post elk-test updates, already gave a high level of protection against wheelspin in adverse conditions: in particular it intervened in the engine — 136

>> smart&smiles

management system and servo clutch and was effective in controlling torque to the

wheels under acceleration. For this reason, the engineers were at first puzzled at the accident reports, believing the smart much more comprehensively engineered than comparable family-sized cars. Some of the incidents, smart investigators believed, were down to driver error, simply because these drivers had done the only thing the TRUST system did not protect against: the driver keeping his foot absolutely flat down on the accelerator, despite the icy conditions. In these conditions, reduced

power was still fed to the rear wheels and the transmission was still permitted to shift ratios, and it seemed as if gearchanges occurring during cornering, even at low speed, were upsetting the car’s balance. The improved solution developed by the engineers, labelled TRUST-PLUS, catered for clumsy driver behaviour by completely cutting power under such

conditions. In addition, gearchanges were prevented during wheelspin episodes,

>>

Winter testing programme

by smart engineers had failed to anticipate drivers keeping accelerator flat to floor on icy surfaces. A simple software change

cured the problem

Chief engineer DrHelmut

Wawra [left] and designer Michael Mauer (below) came from Mercedes SLK programme to inject new

professionalism into smart

and by linking in the ABS sensors on all four wheels an element of yaw control was

added, too, making the system considerably closer to an ESP (dynamic stability control) setup in the way it operated. Another clever aspect of the fix was that it could be achieved by a simple update to the software alone, allowing smart owners

to have their vehicles upgraded free of charge at their local smart center. The cost to smart was said to be less than €20 ($20/£14) per car.

Meanwhile,

the rumour

mill was

beginning to

hum

with

stories

that

DaimlerChrysler was once again about to cut its losses and pull the plug on smart.

Time magazine described it as an expensive flop, a much-hyped

concept car

designed for the city but which was having trouble getting out of the parking lot. “If the market refuses to materialise, the smart may wind up as the most expensive revolution that never was,” concluded the US weekly. By now smart was becoming a cause for concern at senior management level in 138

> smart&smiles

both Stuttgart and Chrysler’s headquarters in Auburn Hills, near Detroit. Some of the American members of the DaimlerChrysler board (at that stage it was made up of nine Germans and nine Americans) found it hard to get to grips with the concept of smart but, according to Jiirgen Hubbert, co-chairman Bob Eaton was an enthusiast for the project all along. “At that point there was no pressure from Detroit on smart,’ remembers the

Mercedes passenger car chief, “We had discussions about it and Bob Eaton was a promoter of the concept and apromoter of the system because with his experience in Europe he was aware of the situation of fuel consumption

and emission

standards. He was clearly somebody who supported us.” Closer to home, the other co-chairman, Jiirgen Schrempp, was fast coming to

the conclusion that decisive action was needed. He had already gone on record as predicting that the smart would have to wait until its second model cycle to make money; at the DaimlerChrysler financial press conference in March he made no

secret of his growing disappointment with the smallest brand in the group,

deflecting questions on the continuing losses at smart with the comment “T wouldn’t want to spoil this lovely morning for you.” Even former chairman Helmut Werner, always one of the strongest supporters of the project, said that the problem

with the car was that it had arrived half a generation too early. DaimlerChrysler in its various guises had by now invested over a billion euros ($1.05bn/£649m) in

smart, and was faced with the prospect of putting even more in — for the immediate technical fixes, for a more thorough update, for an intensive advertising campaign,

and for the much-needed enlargement of the dealer network. From these high-level discussions a change of attitude began to emerge, and with it a strategy for a relaunch. It had already become pretty plain that the public had little interest in abstract concepts of eco-friendliness or urban mobility and were more ‘interested in fun, style and status: the car itself was selling better as a well-equipped up-market version than cut-price basic transport. The thin spread of dealerships was one of the biggest headaches — just 110 now covered all nine markets where smart had launched — and many of the initiatives for special reduced-price smart spaces in car parks and on motor-rail services had failed to materialise. So, during the spring of 1999, with smart sales bumping along the bottom at 139

>> chapter 9

barely 3,000 a month, several important decisions were made. The relaunch, known

internally as ‘smart take off’, would switch the focus away from worthy causes like mobility and even economy, which smacked of deprivation. In any case the smart had never performed well in economy comparisons with competitor vehicles, despite its small size. Instead, the technology of the car would be highlighted in advertising communication and television spots, and the car itself would be centre

stage. Money would be invested in developing a ‘major ‘second generation’ update

of the city-coupé and, perhaps most importantly of all, planning discussions began to look ahead

to further

models

beyond

the already-promised

diesel and

convertible in order to shift smart from being a single model and transform it into a complete full-line small car brand. The dealer network would be rethought, too, to take it away from the concept of

independent smart centers devised by the original founders — and here the experience in Italy provided a valuable lesson. Smart had always expected Italy to be one of its best markets, but the first four months had been bitterly disappointing with 3,000 sales, or less than one car a day from each of its 22 smart centers.

DaimlerChrysler Italy stepped in, gave a smart franchise to each of its 90 Mercedes dealers and persuaded Banca di Roma to act as agent for the car through its branches, in effect adding 1,200 outlets to the network. Thanks, too to another deal

with the direct marketing channel Millionaire, smart sales shot through the roof,

eventually exceeding the annual target of 16,000 which had seemed so impossible at the start of the year. Revealingly, 90 per cent of the sales were of the topspecification versions and the buyers were predominantly managers adding a second or third car to the family garage, often to replace a scooter.

>> Italian success heartens the talented team

~

The Italian experience had provided welcome proof that the smart did indeed have what it took be a hit, provided the conditions were right. All that was now needed was to transfer that inspiration to the other eight markets in which smart was present, and thus get sales — and cashflow — moving again. But that, of course, would only be the beginning. At a more fundamental level the business model needed serious attention, too, for both the manufacturing and distribution systems — 140

>> smart&smiles

relied on impossibly high volumes in order to cover their costs, let alone yield a

surplus. A lot of expense would have to be taken out of all of these processes before Hambach

could make

money

— a daunting prospect as the manufacturing

operation was still being hailed as one of the most efficient in the entire industry. And with the growing realisation that smart would have to become a multi-car family rather than a single model there was the spectre of the huge outlays needed

to develop the vehicles that would guarantee smart’s future as a broader brand. Unquestionably, the team assembled by Jiirgen Hubbert — who continued to be the driving force behind smart take-off — and Helmut Wawra was a talented one. Many

of Wawra’s

persuaded

colleagues from

to join, most

the SLK

notably Michael

and C-Class

programmes

Mauer, the much-praised

were

exterior

designer of the SLK. The smart development department now numbered almost 400, a far cry from its extremely lean configuration under Tomforde, as Wawra explained to Automotive News:

“This is a small team with enormous flexibility, fast decision-making processes and a broad responsibility. Hubbert has given me his full back-up: he told me that I can change whatever I want to turn this project into a real car company, so I enjoy

almost complete freedom in the decisions | take... and with my new management structure we are able to simultaneously develop new models and improve the existing one.” At the same time Klaus Fricke joined smart as sales and marketing director to replace Hans Jiirg Schar, the last of the three founder directors to leave. Schar had

been unwilling to make the move to Renningen following the buyout of Hayek’s stake and the closure of the marketing division in Biel. Michael Mauer, meanwhile, had quickly got down to work and soon came up with a stunning design for an open-topped sports car based on the hardware of the

city-coupé. Later to be christened roadster and shown to great acclaim at the 1999 Frankfurt show in September, the new design proved to all within DaimlerChrysler

that smart had the talent and the determination to build attractive cars that would secure its long-term future. All that was now needed was the confidence — and the cash — to keep faith with the smart idea, get through the difficult times that everyone knew lay ahead, and reach that assured, multi-model future. 141

142

Smarti;serlious >> long-awaited sales breakthrough but smart’s fate still hangs in the balance It did not take long before the strategy began to work — or at least the salesboosting elements of it. The €35 ($37m/£23m) million pan-European advertising campaign that had kicked off the late spring of 1999 seemed to be having some effect: it paired speedy action shots of a smart with clever double-entendre catchlines alluding to its performance or its features. “Die erste Formel-1 Schaltung ohne grossen Preis” plays on the dual meanings of grossen Preis as both Grand Prix and high price, the line translating as either ‘the first formula one gearshift without

a grand prix’ or ’the first formula one gearshift without a high price. The tagline of a French language ad from the same campaign reads “Le premier coffre-fort avec turbo” — the first strong box with a turbo.

There had been increasing concern about the pricing of the car, with a survey revealing that those who had bought a smart were happy with the vehicle but 143

>> chapter 10

criticised the price; those who did not buy the car blamed the price. In the effort to cut production costs it had emerged that one of the most costly things was complexity of equipment and options in final assembly: the more similar the cars’ specifications were, the more economically those cars could be built. Smart solved

the problem in a typically win-win way when it made some of previously optional items standard across all models and discovered that the cost of production had

actually fallen as a result of the greater standardisation. The buyers got more for their money — and so did smart. The increased value for money

combined

with the realigned advertising

message to improve the perception of the model and the organisation, though smart’s travails continued to haunt the business pages — if not so frequently as the lead story. Sales across Europe, below the 3,000-unit mark in February 1999, broke 5,000 in May and hit almost 8,000 in July, while in September there was an

The 800cc diesel engine

(the world’s smallest] gave a much-needed boost to smart sales

> smart&serious

important milestone when the smart overtook the VW Lupo, Renault Twingo and Ford Ka to lead the German small-car market for the very first time. There was even a champagne-popping day in October when smart sold a thousand cars across Europe ina single day. DaimlerChrysler managers knew full well, however, that jubilation over a few months’ sales results meant very little when there were so many structural problems to put right. At the first-ever DaimlerChrysler shareholders’ meeting, in Stuttgart in May 1999, Jiirgen Schrempp déclared that he was prepared to make all the “cost, marketing and management” changes to ensure that smart succeeded, at the same time doing nothing to deny persistent media reports that the project would be killed off if it had not improved in three or six months. Smart president Lars Brorsen, conceding that the acceptance of smart was taking longer than expected, drew

a “minimum

defence

line’ of 80,000

units for the year; by September,

Schrempp was to turn this into an ultimatum, threatening to shut down the whole

venture if sales did not reach that target. “We’ve done all we can to solve the problem,” Schrempp told Der Spiegel. “We’ve changed the management, we've improved the car, we’ve lowered the price and kicked off a massive advertising campaign. If this doesn’t do any good and our order intakes don’t point towards us being able to sell at least 80,000 smarts this year, the project will have to be shut down.” >> Cheaper to fix smart than close it In the event, however, neither Schrempp, his co-chairman

Bob Eaton nor the

DaimlerChrysler board had any choice: it was always going to be cheaper to fix smart than to close it.

Company accountants had already calculated what it would cost to abandon smart: between two and three billion Marks ($1-1.5bn/£600-900m). That was more

than had been spent on the whole venture so far, and represented the cost not only of redundancy for the 1,700 workers at Hambach in line with France’s strict social

laws, but also the cost of compensating dealers who had invested in their own smart centers. System suppliers would have to be compensated, too: many had made substantial investments at Hambach

and in satellite locations in order to

145

>> chapter 10

secure their leading role in building the smart. By comparison, unspecified company sources quoted in Car magazine estimated that some DM 700 million

($370m/£235m) would be needed to implement the revival programme. It was an understandably tense time in the weeks after the shareholders’ meeting, and incoming sales data was seized upon and examined minutely for signs of the anticipated upturn. The first word of an impending decision came in Die Welt, which reported at the end of June 1999 that the news was expected to be good and that smarts would continue to be built. The DaimlerChrysler board, meeting this time in Auburn Hills, Michigan, was said to have been impressed by the rise in smart sales and had given the green light for the programme to continue. The “to

be or not to be” question isn’t being asked any more, company sources told the newspaper. Intriguingly, the paper also reported parallel rumours that continued production of the smart would only be possible if the brand and the factory were transferred to another carmaker. In the event the second possibility was no more than wild speculation and the first outcome proved correct, though smart managers insist to this day that there was never a yes/no vote on the brand’s continuation and that the decision was certainly not taken in Detroit, but in Stuttgart. Whatever the truth of the

matter — and it will be many years before the board meeting minutes are released for historians to scrutinise — it was evident that the tide was beginning to turn. A later strategy committee meeting in July formally

committed itself to a future for smart, sanctioned new investment and approved the development of a second car line — the four

seater — as well as right hand drive versions of the city-coupé. Momentum was picking up and, most importantly, morale was at a higher level — though smart employees have’in any case always been more highly motivated than their peers at other volume car makers. The advertising strategy was working, and the investment in dealer training and recruitment was paying off in

the shape of better order takes and improved

sales; all this

culminated symbolically in September’s triumphant top-seller slot for smart in Germany’s small car market. 146

O pel


chapter 10

The Frankfurt auto show in September 1999 saw smart full of confidence and especially proud of its roadster concept car. Low, lithe and sporty, but still featuring a

characteristic bright-metal tridion safety cell structure, the roadster pulled in the crowds and on press day was photographed by the world’s magazines with a series of different dignitaries — including a positively beaming Jiirgen Hubbert — at the controls.

For Hubbert this was the moment when he realised smart had turned the corner: “It was September 799 and I had been able to convince the Board we should carry on with smart. Jiirgen Schrempp went on stage at our Frankfurt motor show press conference and announced the new car, announced that we had decided to

continue with smart, and announced our new team. He told the media that we will develop more than just one product.

“This was the point when the public for the first time believed that we wanted to carry on with smart,’ remembers Hubbert. “There had always been some question mark hovering over it as to what would happen to it. Schrempp’s announcement helped change the external debate, too: for the first time we got positive comments, people saying this is an interesting concept. Until that point the motoring journalists

were always talking about the situation, but now it changed dramatically and people started to see it as something that has cult status. It was a change in the mindset.” >> Smart boss quits immediately before the big moment

Just one cloud hung over Smart that exceptionally hot September. The division’s president Lars Brorsen had quit his job unexpectedly the day before the show. It was clearly a precipitate move: his name was still on the speakers’ list for the various DaimlerChrysler press conferences, journalists had interviews booked with him, and he had been expected to be the person who would unveil the dramatic roadster concept. One journalist even reported seeing his nameé-badge on the reception desk

outside the conference hall. Did he jump or was he pushed? And if it was the latter, why? The PR minders were saying nothing, Brorsen was nowhere to be found, and the swirl of press speculation suggested that he must have been briefing journalists off the record about commercially sensitive subjects. Jiirgen Hubbert stepped in and took all Brorsen’s show engagements, presenting the smart brand and especially the roadster with his 148

>> smart&serious

usual immaculate

professionalism;

of the reasons

for Brorsen’s disappearance,

however, there was no official line, no explanation, nothing to be said.

At the

question

and

answer

session

following

DaimlerChrysler’s

press

conference, Jiirgen Schrempp said he would pick his “best manager” to replace Brorsen and run smart in the future, correcting himself quickly to say “one of my best managers — I have to run this business [Mercedes-Benz] successfully too.”

The consensus which emerged over the following days and weeks was that Brorsen had jumped the gun in several ways in trying to promote an agreement

with another major automaker — believed to be PSA Peugeot Citroén — for cooperation on the platform and possibly also powertrains for the planned fourseater smart. Brorsen, some later said, did not have the internal backing for this

particular approach. Nevertheless, the choice of PSA — if the rumours were to be believed — would have been a canny one: the French producer was an acknowledged leader in small-car ride and handling at the time, and its diesel engine technologies were widely respected. Three years later, Mercedes’ chief competitor, BMW, would announce a joint venture agreement with PSA on engines, but by the following

March DaimlerChrysler had signalled its intent to take a controlling stake in Japan’s Mitsubishi, offering a handy source of small-medium car experience to help speed

development of smart’s four-seater. Though it overnight found itself without a president, smart suddenly had everything to play for. Its main model was on something of a roll, at least by the modest standards smart had grown accustomed to; the diesel version had attracted much interest on the show stand and stood to boost sales substantially, the cabrio

was waiting in the wings, again with potential pent-up demand, and the roadster concept had advertised to the whole world in the most glamorous possible manner that smart was no longer a one-car company by a brand in its own right. And

besides, the vacancy at the top would soon be filled — by a candidate whose qualifications could not have been better. >> new boss Renschler: a fresh style of management Tall, solid and gritty, Andreas Renschler does not present the conventional picture of a leading auto industry chief executive. His is the allure of a strong outdoor blue 149

“i

a

!

Andreas Renschler (left) ' took over the reins of smart in late 1999 and led the company through to prosperity in 2004; Group CEO Jurgen Schrempp

(below) threatened to close smart if sales failed to meet minimum defence line

collar type, at home with heavy machinery and real-world engineering, rather than an Italian-suited boardroom strategist communicating via emails and spreadsheets. Instinctively, one would place him in the cab of an eight-cylinder Dodge pickup or

some other hunky four-wheel-drive; certainly not sharing equal billing with just one other occupant in a smart. But smart is where he chose to go, tempted as much

by the contrast to his previous product — the Mercedes M-Class luxury sport utility — as by the challenges of turning DaimlerChrysler’s youngest, smallest and most precariously-balanced subsidiary into a global brand delivering a healthy profit back into the group’s coffers.

Renschler had been on the staff of Mercedes-Benz chairman Werner Niefer in the 1980s and was a key part Niefer’s ‘Querdenker’ teams — managers whose job it was to think laterally and suggest original and inventive solutions to problems. One

of the questions put to the Querdenkers was to investigate the feasibility of building 150

> smart&serious

a profitable successor to the loss-making Mercedes

G-Wagen,

a solidly-built

military style 4x4 which Mercedes tried repeatedly, and never with much success, to turn into a luxury SUV to rival the Range Rover. Andreas Renschler was charged with coming up with ideas for a replacement which would make money. Renschler’s findings were positive, provided the vehicle could be built in the US, likely to be its largest market, and he was given responsibility for the DM 1.5 billion ($1.09bn/£685m) budget to build the factory and develop and build the vehicle. The money-making G-series did of course emerge in 1997 as the M-Class, and the Alabama operation that was built to manufacture it was the smooth-running industrial and organisational model that made such an unfortunate contrast with faltering and the false-starting of the smart operation. The success of the American

venture had marked

Renschler out as a talented manager. Already, his chief

engineer from the M-Class programme, Dr Gerhard Fritz, had successfully reengineered the smart in a remarkably short space of time: now it was the turn of

the overall boss of the M-Class enterprise to inject some of that same Alabama ethos into the way the whole operation was managed, how it handled its costs and its processes internally, and how it would develop its structure from a single-vehicle specialist into that of a full-line producer of multiple models. Yet, as appeared to be the habit at smart, the first few steps were scary. The first commitment in the new president’s diary was to host the press launch of the brand-new city-coupé turbodiesel on the island of Sicily in late October. Dealing with successive waves of questioning journalists, Renschler put out the clear and consistent message that smart should make much more use of the competence of other branches of the DaimlerChrysler network. “It is time that we became a professional enterprise,” he urged. On riskier the ground of sales volumes, he said that Hambach could produce 400 to 430 cars daily, and predicted a 20 per cent

increase in sales for the following year. But barely had he dealt with the enquiries and got his feet under the Sicilian table than the phone rang. It was the Hambach plant, and it had been brought to a standstill by the last thing anyone was expecting — a strike. By all accounts the strike came as quite a shock to the close-knit community of smartville; industrial conflicts were things that occurred in grimy, old-fashioned 151

>> chapter 10

primary industries where union agitators were rife, not in shiny and highly efficient new plants where everything was planned down to the tiniest detail and much thought had been put into workplace conditions and leisure facilities. Coming out of the blue, it was a shock to the predominantly Mercedes managers of the plant, too: accustomed to the co-operative style of industrial relations debate in Germany, where days or weeks of discussions would normally circumvent any conflict, the aggressive, ‘strike first, talk later’ tactics of some French employees of Magna caused not only shock but fear. Picket lines blocking roads and the highly symbolic burning of car tyres simply didn’t figure in smart’s lexicon of labour relations. At issue was a demand for higher wages by 30 staff at Austro-Canadian system partner Magna, supplier of the smart’s tridion safety cell. The strikers, who it later

turned out had been urged into action by a union intent on gaining influence at the plant, blocked the main access road within smartville and established their picket

line. People were allowed to walk through the line, but vehicles and supplies were

not, meaning that workers clocking on for their shifts faced a walk of up to half an hour, often carrying heavy items, to reach their locations. The strike spread to two other system partners — Magna Doors and Surtema — as other workers came out in

sympathy, and plant director Harald Bélstler put the facility onto short time. The situation threatened to turn ugly at one point when a picket was hit by a car which refused to stop at the line; the picket suffered a broken leg, but the atmosphere was

said still to be calm. The strike itself was settled within a few days, but it had nevertheless disturbed

the management on several completely different levels. It came across as adversarial and shocking in an enterprise which until that date had run entirely on the lines of partnership and mutual agreement; the fact that a few workers blocking a single road could completely halt so many logistics movements within the complex was a cause for concern; so too was the very fine meshing between systems partners in the component flow, meaning that a hold-up with one had immediate consequences

both up and down the line. The third wake-up call sounded by the strike was on the social level. The three founding fathers of smartville had shown

great

inspiration in the way they scoped the plant and assured the smooth flow of components and services between the fourteen companies operating within the — 152

>> smart&serious

industrial

park; yet, according

to

Guth and Naulleau in their study La machine qui a changé Ventreprise,

they had completely neglected the human resources dimension and had

given scant consideration to the social

context

the

themselves

firms’

employees

found

in. There was little or no co-

ordination between system partners in terms of wages, hours and conditions, and it was inevitable that workers would

compare their pay packets with those of their colleagues from other operators; it was equally inevitable that discontent and resentment would result. Bolstler, backed by new boss Andreas Renschler, dealt swiftly and decisively with the situation, setting up a social forum to guide human resource issues horizontally

across all the companies on the site, and declaring that the 900 vehicles lost during the strike could be built by running overtime. It was a dramatic beginning to Renschler’s presidency, and there were more upsets, crises and tense moments to come. But with the new man beginning to plan

ahead, rather than firefight, with Helmut Wawra firmly in control of a strengthened development department, and with the talented Michael Mauer designing the cars,

smart was beginning to gain the stability and the structure it so badly needed if it was to grow and prosper. At last the team was complete, unified, well trained and ready for the big match.

153

154

Smarti:success! >> now fashionable and selling fast, smart

plans to triple its model range Soon Andreas Renschler was getting to grips with Smart’s workings, finding out how everything ticked and beginning to establish where its internal strengths and weaknesses lay. His task was a broad-ranging one: not only to boost sales in the short and medium term to strengthen the cashflow but, more importantly, to look at the fundamentals of the business to improve its cost structure and decisionmaking processes so that its long term viability could be guaranteed.

“When I arrived at smart I found a very motivated team with very talented people,” he said in an interview for this book. “However there was also a certain lack of efficiency and a kind of uncertainty — it was if they had never got beyond the project stage to face the real world: a lot of the project people were not accustomed to a normal business situation.” The major difference between the smart project and the M-Class programme, 155

>> chapter 11

said Renschler, was that the M had the benefit of an existing brand: “The M-Class

was also a project organization. It too had responsibility for everything, with its own purchasing, its own development and so on. Apart from using the established Mercedes-Benz brand, things were quite similar.”

The reason smart had had so many traumas in its short life was because it had tried to do too much right away, reasons Renschler: “From my point of view it was way too much at once at the beginning. New product, new brand, new sales

network, new production facility — to do it all at once is a big undertaking. If I were to do it again, I would not focus on all the new things which have to be done at once. To have a new production system is OK, the brand is OK because you're using a new brand, and the new concept is OK, too. But maybe you need astable factor, because it is like an equation: if you have two unknowns then you have a problem. Maybe it’s speculation, but if from the first day you had used the [existing Mercedes] sales network, you might have been able to focus better. If you focus too much on everything, somehow you will lose the substance in some directions. “You have to use the synergies, you have to use the know-how.

Because

Mercedes-Benz has over 100 years of experience it cannot be everything bad, so use it intelligently and be independent enough to make your decision on what to use and what not — that will bring you one step further.”

There were also drawbacks with the structure of the organisation: echoing Helmut Wawra’s observation on his arrival that there was an almost complete lack of hierarchy in the design and development department, Renschler also found that the idealistic "flat? management hierarchy set up by under Hayek’s influence by Tomforde, Baubin and Schar was inappropriate for this later phase of the company’s evolution: | “For sure, the organisation was structured already. But the only thing I know is that there were three people and no boss. How can this work? You have to draw your own conclusions, but I would straightaway say that I cannot work in such an environment. People can write books about theoretical organizations without a hierarchy, but in reality this does not seem to work. So you had to ask yourself the

question ’is this an organization which can survive?” The answer was a very firm ’no’ — just as Jiirgen Hubbert had reasoned two years previously when he appointed Lars Brorsen to supervise the activities of the — 156

>> smart&success!

three founder directors who were felt to be difficult to control.

Costs, however, presented a more pressing concern than management theory: price cuts and standard-equipment

upgrades forced by market pressures had

eroded away at what little margin there was in the smart — some analysts even

contend that the smart never traded positively on a cash basis at all. “The first thing I did was to talk very openly about the situation with everybody,” recalls Renschler. “Next, we looked into several of the programmes that were being

started at around that time and ‘came to the conclusion that we could build on some of them. We called our new programme ’fit for future’ — it was a programme that centred on efficiency, because before you can adopt a strategic approach you have to

prepare your organisation first. If you want to achieve a turnaround you have to look into the organisation to establish what the potential is.” Renschler established that material costs could be slashed by 15 per cent, and that overheads could be trimmed by 35 per cent. “With these results in mind we then developed a strategy, which became known as the 2000 strategy. It was based on three pillars: product offensive, entering new markets — when we started smart it was only available in nine markets, but it’s in over 30 now — and, thirdly, the dealer

network. That was something we achieved by using the Mercedes network, because we are very close to Mercedes.”

>> smart’s last chance Encouraging though those estimates of cost-saving potential undoubtedly were, they did little to comfort the many board members and external commentators frightened by the business position smart found itself in towards the end of 1999. Yes, sales were beginning to pick up slightly, but they were running nowhere near the spectacular rate required to cover the overheads and depreciation of the Hambach plant; certainly, the coming diesel and cabrio promised acertain stimulus to sales, but again the increases would not be enough to bring useful profit; thirdly, the investment involved in bringing any significant boost to sales would be very high. To enter right-hand drive markets such as the UK, for instance, would involve substantial engineering costs to

convert the steering and controls, while Japan, also right hand drive and equally promising, would require even more complex re-engineering — estimated at ten per 157

>> chapter 11

The business media were

wp

AUTOMOTIVE WORLD

frequently critical of smart's performance: in January 2000, FT

Automotive World's

dramatic headline proved uncannily accurate

cent of the car’s original price — to make it narrow enough to fit the advantageous Keicar taxation category.

The international business magazine Financial Times Automotive World splashed

smart on the cover of its January 2000 issue under the strapline “Last chance for smart?”. Inside, the report initially made grim reading, the magazine’s editors concluding that the present position was serious but that DaimlerChrysler must have had long-term ambitions for smart simply because it had invested so much in the company, had hired such a strong team of engineers and executives, and had not blanched at future investment commitments. “The simple arithmetic of DaimlerChrysler’s investment in smart was pretty borderline,” wrote Financial Times Automotive World. “Smart had to sell 200,000

copies a year to generate sufficient trading profit to pay for the depreciation on the start-up costs. At that rate — and if the manufacturing operation had been at maximum efficiency and the car a roaring success — it might just have broken even. On afirst-year registration rate of 60,000 (with a sold stock of 20,000) it would

158

> smart&success!

only break even if the initial investment were written off. “Why then,” asked the magazine, “would DaimlerChrysler invest in the first place if the best case was breakeven? The answer can only be that it had a grand plan beyond a model range of one funny little two-seater town car. In other words, the DM

2.3bn

(€1.18bn/$1.21bn/£748m)

invested so far could only have been a

beginning, not the end.”

Judging that smart had now passed the point of no return, the magazine predicted that DaimlerChrysler would “roll the dice again and throw more money into an expansion of the range.” While DaimlerChrysler accountants

might have winced at the thought of

additional nine-digit investments in smart being mere rolls of the dice, the fact was that money was already flowing into new projects — not only the efficiency drive but extensions to the model line-up, too. Accepting that it was impossible for smart to survive as a one-model company, Renschler told Financial Times Automotive

World that the roadster would be a good way of putting more emotion into the smart brand, that a four-seater was actively being considered, and that the US

market

could be interesting for smart

in the mid to long term. All these

programmes have since materialised.

“Tt is very tough to be the first with a new car in a new segment,” said Renschler in that late °99 interview. “But we think we can reach the profit zone with the

second lifecyle of the current car and additional products.” The new millennium began with a renewed sense of purpose and the old corporate slogan — ‘reduce to the max’ — quietly set to one side. Surveys had

revealed that 90 per cent of consumers had no idea whatsoever what the phrase was meant to express: for Jiirgen Hubbert, interviewed in 2004, it is one of the things that, with hindsight, he would have done differently.

“The first advertising campaign was too sophisticated, talking about mobility. The slogan ‘reduce to the max’ was, I think, was a mistake,” he said. “Nobody wants

to reduce: people want to have fun and gain something instead of reducing... This

raised some issues which we didn’t need, so I would have done this first campaign differently. As for the car, I surely would do the same again — and we will do the same with the successor model.”

159

>> chapter 11

Smart would switch advertising

agencies before the year was out, selecting Hamburg-based Springer

Jacoby,

principal

agency

for

Mercedes-Benz, in a four-way pitch which included the Swiss shop Weber Hodel Schmidt, who had built the whole

‘reduce to the max’ campaign since the very beginning. Smart had the great advantage that the brand name, the core message and the brand promise were identical,

said Springer Jacoby. “This was the first major change in our advertising strategy — to leave the mobility idea and to focus on the car,’ says smart sales and marketing director Philipp Schiemer, who joined smart early in 2001. “We wanted to say that smart is a real car and a serious competitor. We are helping to ease urban mobility for people, for sure. but we are not a solution for all the problems in the cities. We are first of

all a real car, this was the first major change. The second step was when we changed our claim from ‘reduce to the max’: with the new products set to arrive we had to change our policy because today for many people the benchmark is the city-coupé — but nobody talks about the city-coupé, they all call it the smart. We have to make

a change in the mind of the people so that they realise that smart is not only one car but it is possible to have a smart idea ina lot of cars.” >> at last: smart becomes the hot tip Thanks to the arrival of the cdi diesel model at the beginning of the year and the

cabrio in March 2000, sales were gathering pace and smart was beginning to become something of a hot tip in the auto trade. In the first quarter, one in five smarts sold was a diesel, and the cabrio was accounting for 21 per cent of orders. By the mid-year point 44,000 smarts had found buyers — almost double the number of the year before — and in August the trade newspaper Automotive News Europe

named both Klaus Fricke, smart vice president of marketing and sales, and Mercedes-Benz executive vice president Jiirgen Hubbert among its ’2000 Eurostars 160

>> smart&success!

— 12 talented leaders who got the tough jobs done. Hubbert was praised as a proven crisis manager who had played a direct role in improving smart sales, while Fricke earned the newspaper’s admiration for “managing to embody the smart brand with the values it should always have possessed.” The little two-seater was brought back from the brink of failure and is now perceived as trendy, fashionable, clever and

desirable, said the paper. The cdi diesel version, with its fuel economy rating of just 3.4 litres per 100km — that’s 83 mpg — was one of only’two so-called ‘three-litre’ cars in Europe at the time and was head to head with Volkswagen’s high-tech Lupo 3L in the battle for the favours of buyers in search of the ultimate in fuel saving car. In the event, however,

it proved an unfair fight, with the smart outselling its pricier and bulkier rival by almost three to one. Rental customers had caught the smart bug, too: demand for the vehicle surged so strongly in the summer that Avis — the exclusive rental partner for the brand — was forced to enlarge its fleets by a third to 6,000 vehicles. There were even reports of customers complaining about having to take upgrades to

bigger cars when the whole stock of smarts had already been hired out for the day. Everywhere in Europe the buzz was that the smart was the car of the moment,

the most fashionable vehicle on the market. Automotive News Europe singled out the company for a second time in November 2000 when under the headline “What's hot and what’s not’ it highlighted smart as Europe’s fastest-growing brand, with a year-on-year increase of over 60 per cent and putting it on track to easily beat the year’s target of 100,000 sales. “A complete change in marketing, with a proper sales force and sales through Mercedes-Benz dealers” was the secret behind the success,

said the paper. It is hard to credit, then, that throughout this period uncertainty continued to hover over the smart project. Though sales were looking good, the financial figures were not: smart was losing money fast — though DaimlerChrysler never discloses

break-out figures for individual divisions — and the promised 30 Per cent cost reductions had yet to have a major influence. Another

important factor had entered the equation too. In March 2000 DaimlerChrysler had announced that it was to take a controlling 34 per cent stake in Japan’s Mitsubishi Motors at a cost of $2 billion (£12.7bn), and at a press 161

>> chapter 11

conference the following month Jiirgen Schrempp outlined model plans involving co-operation between the two groups. One of the first programmes would be a

four-seater smart which would share components with a forthcoming Mitsubishi, the Japanese version of which was already under development, said Schrempp:

“Our engineers will immediately meet and discuss all possibilities and join forces in developing a new family of small cars,” he declared. The proposal to share development work with Mitsubishi threw up several consequences. Talks with PSA on co-operating on a supermini-sized car were broken off, a small car under development for Europe by Chrysler in the US was

cancelled, and DaimlerChrysler bought out Ford’s half of the joint MitsubishiVolvo plant at Born in the Netherlands, which was building the Volvo S/V40 and the Mitsubishi Carisma, models sharing a common platform. This plant would make the future four-seater smart as well as its related Mitsubishi counterpart, with

output due to begin in late 2003. “We were very lucky that Mitsubishi was very far along with developing engines and gearboxes for a new minicar, but not so far that

we could not have joined the project,” said the DaimlerChrysler CEO. Later, when these proposals came up for approval at a DaimlerChrysler board meeting in June, there was said to be much debate over the wisdom of replacing the Mercedes A-Class, whose profitability had always been disappointing. The decision

eventually came down in favour of the second-generation A-Class, with a limited degree of component sharing with the future four-seater smart and its Mitsubishi partner. The board gave the formal green light to the programme to develop a fourseater smart, which became the forfour in 2003; it also approved the smart roadster

for production at Hambach, while at Renningen Helmut Wawra and his team were already working on a heavily-revised second-generation city-coupé. Yet even at this late stage — and despite the agréement with Mitsubishi — the closure of smart was still a possibility that came up for discussion, remembers Renschler. “There was a decision point in 2000 when we talked about a lot of

strategies — and one strategy is always the easiest one: close it of course. But if you are responsible for a business and you have the choice whether to grow or to do nothing you need to ask what happens if you do close.

“The decision was taken to go with the four-seater and to make smart a big 162

>> smart&success!

brand in the middle of 2000. You could also say that was the acceptance of the overall turnaround plan. However, the first product offensive wasn’t the four-seater: the first one, decided at the meeting in June 2000 was basically the roadster and the

restructuring plan — and then of course there was a recommendation that we should look to further products. The decision wasn’t so clear on the four-seater.” >> engineers improve smart chassis

Conscious

of the decisions the board was

development

director

Helmut

Wawra

likely to go for, smart’s vehicle

had for some

while been busy with

significant updates to the chassis of the city-coupé to counter persistent criticism of its slow steering and, especially, its uncomfortable ride. The change was just about

>>

August 1st, 2001: Jurgen Schrempp and Mitsubishi President Katsuhiko Kawasoe shake on the

DaimlerChryslerMitsubishi alliance

ALERQ MITSUBISHI MOTORS

Roadster and roadstercoupé undergoing winter testing prior. Parts commonality with citycoupé meant it was easy to establish a good business case for the models

as fundamental

as it could have been, short of a new

platform:

it involved

discarding the transverse leaf spring front suspension of the original car and replacing it with a more orthodox MacPherson strut type, a layout which would

not just provide more comfort but which would allow the fitting of wider tyres which would in turn improve braking performance. The cleverness of the move was that the improved suspension could be applied as a running change to the city-coupé well before appearing in the roadster, now given the go-ahead and scheduled for the first quarter of 2003, and for which superior handling, steering and braking were absolutely essential. Typically, smart began fitting the new suspension from January 2001 production but never made any announcement about the change, even though it resulted in an enormous improvement in the tiny car’s steering, handling, ride and braking. Also high on the engineering to-do list were improvements to the semi-automatic gearbox to speed up its notoriously slow shifts and improve its shift quality. Again, with the roadster

making

use

of a

slightly lengthened

city-coupé platform,

improvements made in one vehicle could be copied directly across to the other. After the success of the original smart roadster concept car at the 1999

Frankfurt show, and aware that the production car was now due in three years’ time, Wawra and designer Michael Mauer resolved to spring a further surprise for the Paris show in September 2000 — a closed version of the roadster, christened coupé. By this stage smart had already gone public about its plans to manufacture the roadster: what no-one expected was for the company to give sports enthusiasts a double treat by offering both versions when the design entered the smart catalogue in March 2003. 164

> smart&success!

At the same time smart strengthened its position as a leader in the integration of telematics functions in cars. Already, it had been the first car to be available for ordering on the internet: now it was the first car with built-in internet access. Initially presented in Paris, smart webmove allowed owners with compatible WAPenabled mobile phones or PDAs to call up navigation services and a feature known

as smart finder, which directed drivers to smartmove partners offering special reductions for smart owners. These included three-metre parking bays specially set aside for smarts, car washes offering reductions

for the shorter smart, and

reductions on Avis rentals for the occasions where more than two people needed to travel. Three years later smart was to score another automotive exclusive when it

became the first car company to offer the stylish Apple iPod, with its week’s worth of music stored on an internal hard drive, pre-wired into the car.

Unveiling the smart coupé on the 2000 Paris show stand, Andreas Renschler

paid tribute to the 1,800 ‘highly motivated’ workers at Hambach celebrating the third anniversary of the plant’s inauguration when President Chirac and former German Chancellor Kohl cut the ceremonial ribbon. To many, conscious of the number of setbacks suffered by smart in the interim, that event seemed a long time ago. But the statistics listed by Renschler straightaway showed how far smart had come since that grand occasion: to the end of August 2000 over 70,000 cars had been sold over Europe, a 67 per cent increase, and including more than 13,000 cdis, making it much the most popular ‘three-litre’ diesel, and 15,500 cabrios. The end of the year would see well over the planned 100,000 smarts sold, he predicted.

With three new models on the stocks, plus plans to enter the British and Japanese

markets that year and a further twelve territories over the coming 24 months, smart was well and truly on track. Now,-with imaginative but determined and stable management, strong backing from its DaimlerChrysler parent and an increasingly - fanatical fan base spreading the message far and wide, it seemed as if nothing could get in the way of the smart phenomenon. Nicolas Hayek, Johann Tomforde, Christoph Baubin and Hans Jiirg Schar, as the original inspiration behind the project had, together with all the struggles and setbacks, long since been left behind.

165

ear

166

>>

Robbie Williams began his involvement with smart after he had fallen for the extrovert minimalism of the

crossblade prototype at the Geneva show in March 2001

Smarti:moret;:more >> crossblade, roadster and BRABUS take

smart brand into exciting new territory In the first five years of smart’s existence it seemed all too often that anything that could go wrong did go wrong. But by October 2000 everything was at last falling into place and whatever used to go wrong suddenly went right. Smart finished the first year of the new millennium ona triumphant roll as sales shot past the 100,000 mark, the city-coupé was proclaimed the most fashionable small car on the market, and the business pages finally began writing about smart’s future model strategy rather than ~ asking whether it would survive. It was acknowledged, even by the most resolute sceptics, that the corner had been turned: smart had arrived and it was here to stay. But it wasn’t just any old car that had arrived; it wasn’t even something that just happened to be blessed as flavour of the moment. It was much more than that, for what had appeared was more of a phenomenon, a movement, a new mindset among consumers and car buyers: a new way of thinking, no less. This new way of 167

>> chapter 12

thinking had taken a year or two to spread from the early adopters, pioneering purchasers of smarts whose mantras — such as ‘less is more’ — were greeted with bafflement by the ordinary mortals outside the inner circle of trendy design critics, new-living advocates and the ‘wired’ generation of communications technology enthusiasts. Now, however, a new and open-minded generation had become

switched on to what was soon identified as smart thinking. This was the generation who realised that small and subtle was the way to go, that intelligent solutions often carried greater kudos than symbols of conspicuous consumption and, most importantly, that you don’t have to be large, powerful or pricey to have big fun. The emerging ethos saw smart begin to push the frontiers of not only its designs, but its marketing empire, too. The company name was changed from 168

>>

Outrageous crossblade started as a show concept but enthusiastic reception ensured a limited edition run was built for sale

Micro Compact Car smart gmbh to smart gmbh, not just for simplicity but to

reflect the expansion into multiple models, not all of them micro compacts like the city-coupé. The past year had shown how much more effective it was to tap into the experience and local expertise of each country’s network of well established and

highly regarded Mercedes-Benz dealers, rather than — as was the original, idealistic ‘intention in 1998 — to go it alone with new people finding their feet in a solus smart start-up. The Mercedes hook-up had been the key move in sparking the smart breakthrough, but it did also mean that during the course of 2000 only three new markets — the UK, Japan and Greece — were added to the original nine.

But as the smart phenomenon spread, so too did pressure from consumers not just in Europe but in the far east and in the Americas, too. The growing groundswell 169

>> chapter 12

of demand

for smart

cars saw Sweden, Portugal, Slovakia, Slovenia, the Czech

Republic, Croatia, Hungary and Poland added to the list by the following year: soon, the more distant territories of Taiwan, South Africa, Hong Kong and Israel came on board, and by the end of 2003 Australians, Turks and Finns could also buy smarts. Mexico, symbolically, became the first market on the American continent to host a

smart importer. Smart now had over 740 dealers in 30 markets, just on the strength of one tiny car, available in just four different versions. However, smart planners, happy

at last to be counting high and positive numbers, knew that it would take more than the city-coupé to sustain the new-found momentum of the marque. It was time to

branch out, turn up the fun factor and go for a bit of fast-moving glamour. >> outrageous crossblade causes a sensation

The moment

it was unveiled at the Geneva motor show in March 2001 the

crossblade began drawing gasps of breath and cries of “I want one!” A funky, stripped down derivative of the city-coupé — though you would never have realised it until you looked more closely — the crossblade was dramatically cross-cultural,

too: with neither roof, nor doors or windshield to protect its two thrill-seeking occupants, it combined the raw, open-air freedom of a beach buggy with the sensation of a four-wheeled motorcycle and the grippy, naked-wheeled stance of a Caterham Seven — all dressed up in sleek custom bodywork that would have done credit to a West Coast customising shop. The unkind insisted it looked like a turbocharged golf buggy, but to everyone else it looked like irresistible fun. Public

interest became electric: magazines vied with each other to get a drive, and rising superstar Robbie Williams publicly declared his total love for it. Smart described it as “an open leisure car uncompromisingly designed for blue skies and high spirit... MCC’s design engineers are demonstrating the broad scope

of diversity harboured by the smart concept. Crossblade drivers cruise along in the open air, enjoying the bracing breeze in their face... it appeals to active people for whom fitness and dynamism are indispensable attributes of their leisure pursuits. The car is intended to provide these drivers with an exhilarating feeling of motion such as they can otherwise only experience with rollers under their shoes - on roller blades or skateboards.” However, even in its hedonistic pursuit of the ultimate 170

>> smart&moreimore

thrill, safety had not been forgotten: packaged in the steering wheel and dashboard were two full-sized airbags, and the tridion safety cell provided equal rollover protection to the standard cabrio or city-coupé. Astonishingly, the crossblade was road-legal, too: smart’s engineers had studied the minutiae of the European vehicle

regulations and made sure that everything — even the semi-open wheels — complied faithfully with the rules. Robbie Williams — see chapter 14 — was in luck: such was the hysteria whipped up by the Geneva concept car that smart decided to build a limited run of 2000 individually numbered crossblades to go on sale from June 2002. Williams put his name down for car number one, and by the time he took delivery the whole limited

edition had been sold out. The number 0001 crossblade, signed by Robbie Williams, was then put up for auction on eBay. Bidding began at one euro and by the time it closed ten days later it had reached over €51,000 ($48,000/£33,300) — almost two and a half times the

€21,000 showroom

price. At the same time Williams had bought crossblade

number 008 to keep for his own private use. By now the crossblade had become, according to smart, “the expression of personal freedom and independence” and, more importantly, it became the first smart to be available with increased engine power, an electronic tweak boosting the

tiny 600cc turbo motor to a heady 70 horsepower. In a car weighing just 740kg this gave startling responsiveness, aided too by a wider track, wider tyres and a lower

centre of gravity. >> guerrilla publicity stunt As if the crossblade needed any more promotion than it had already brought upon itself, smart managed an ingenious ’guerrilla marketing stunt to bring it a further shot of publicity. With a well-known luxury car maker providing free chauffeurdriven courtesy limousines for the stars and VIPs attending a prestigious tennis tournament in Monte Carlo, smart decided it would be a great idea to get the exciting crossblade in on the act, too. Sensing that the players, the film stars and

their entourages would jump at the chance of a ride in something as truly original and photogenic as the crossblade, smart hired a squad of students as drivers, placed 171

Paris, September 2002:

show debut of the

production-ready roadster

and roadster-coupeé

them in the specially-prepared fleet of crossblades, and instructed them to pull up at all the posh hotels in the principality and offer to drive any of the waiting VIPs anywhere they wanted.

The ruse worked brilliantly. The weather stayed good, the stars adored the cars, and for the next few weeks the TV bulletins, the tabloid papers and the celebrity gossip magazines were full of Hollywood’s finest getting into and out of crossblades or speeding along in them, their faces grinning with excitement. Not all the media coverage of smart was quite so favourable: a spate of incidents

of city-coupé glass roofs shattering at speed briefly grabbed

the headlines,

especially after one driver was slightly injured by glass fragments from her shattered roof. Fewer than 30 cases were reported and the matter was soon settled after investigations had been conducted with the glass supplier. Some while before, a batch of 45,000 smarts had been recalled to have their leaking front suspension ball-joints replaced.

.

Overall, however, smart was receiving a far better press than at almost any time

in its history: new developments

from the company,

such as the customer-

requested permutation of the cabrio body and the economical diesel engine, were 172

> smartimore&more

welcomed as logical steps and the more glamorous models helped the brand feature extensively in many of the world’s enthusiast and style magazines — quite an

achievement for a low-priced range of cars with tiny 600cc engines. Interest stepped up still further once the countdown to the launch of the roadster

had

been

announced.

Smart’s

pre-promotion

for the April 2003

introduction began the October before with a 15-city European extravaganza whose schedule made a rock-band’s tour itinerary seem like a picnic in the park. Beginning in smart’s home city of Stuttgart and ending up in London in February 2003, the tour stayed three days in each location and offered visitors what smart described as a virtual roadster world on three levels, the first being a no-touch

viewing of the car in a glass case, the second a ‘virtual’ test drive and the third a

hands-on encounter with the two models in the so-called roadster suite. The presentation of two models rather than a single edition was an added bonus: buyers would be able to choose either the roadster, with its twin, detachable

roof panels and a flat rear deck, or the more novel roadster-coupé, with similar removeable roof panels but also a sleek hinged glass hatchback rear roof section offering greater luggage capacity. Both models promised a further unique feature: an electrically-operated soft-top which retracts into the rear luggage compartment but which — uniquely on any open car — can be opened or closed at any speed. The roadster’s body design had been lavishly praised when each of the two

concept cars had been presented — the notchback at the Frankfurt show in September 1999 and the roadster-coupé 12 months later in Paris. It was hard to believe that these low and lithe sports cars were directly derived from the short,

chunky and upright city-coupé, though the silver-colour tridion safety cell — this time running along the door sills and up behind the doors to form the B-pillars and across the car’s width for the roll-over structure — was a theme taken from the little car and later developed into a smart brand characteristic with the forfour. Under the skin of the roadster there was a lot of commonality with the citycoupé — or, at least with the massively improved second-generation city-coupé that was to be launched in January 2003. The major chassis systems, the engine and transmission, the electrics, the emission control all became

common,

and each

incorporated the biggest design overhaul ever implemented at smart. The new 173

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>> chapter 12

MacPherson strut front suspension system gave better ride comfort, stability and steering precision than the original transverse leaf spring setup; the improved suspension allowed more powerful brakes, and both roadster and city-coupé were

(and still are) unique in their sectors in offering big-car levels of electronic chassis aids — both ABS, emergency brake assist and cornering brake control for the brakes and ESP for the dynamic stability of the complete car. The combination of these systems allowed a useful hill-start control where the handbrake does not have to be applied to prevent the car rolling back. The improvements to the engine were no less significant. A capacity increase from 599 to 698cc, raising horsepower to 50 or 61, depending on the version,

promised increased flexibility and performance as well as compliance with the upcoming

Euro

IV

emissions

standards;

changes

to

the

much-criticised

transmission were implemented in order to speed up shifts and add a kickdown function to the automatic mode. The move to a more sophisticated electronics platform allowed a whole host of features — some of them standard, others optional depending on the version — normally only seen on luxury cars. Examples include electronic calculation of when the next oil change is due, cruise control and speed limiter, air temperature gauge

and

frost warning,

‘see you

home’

lighting

and

a sports

steering

wheel

incorporating formula one-style sequential gearshift paddles. Principal options,

again dependent on the version, were expanded to include electric power steering, side airbags, leather seats and alloy wheels.

The roadster was in fact the first second-generation car to appear, its chassis platform incorporating all the innovations of the city-coupé but lengthened in wheelbase to create the right exterior look and generous enough interior space for the lower and more-reclined seating position the sports car format demanded. The engine was uprated to 80 horsepower by turning up the turbo boost: with an all-up weight of just 700kg this gave a power to weight ratio much better than many much bigger sports cars. ; Unusually in an industry where

adventurous showtime concept cars are normally followed by deliberately toned down production versions, the roadster and roadster-coupé remained faithful to their design inspirations: the only 176

>> smart&more&more

noticeable from

change

four-spoke

three-spoke

items.

was

the move

alloy wheels The

car

to was

immediately hailed as something of a novelty on the market, not just as

“in image terms the roadster and roadster coupé were a brilliant idea”

a smart in a new sector, but as a welcome revival of the classic concept of a lightweight sports car. Not since the middle decades of the previous century had there been a lightweight sports car that promised such fun in such an attractive and convenient package; low running costs, top safety

and Mercedes-group quality were part of the lure, too. Once again the roadster succeeded in gaining blanket coverage in most of the world’s enthusiast auto magazines as well as the style press: publications compared it with a wide variety of sports car icons ranging from the Mazda MX-5 and Toyota MR2 to the Lotus Elise. The verdicts were generally very favourable, especially from the point of view of style, quality and handling: where there was criticism it was of the price — felt to be somewhat premium for the absolute performance levels offered — the over-assisted steering and, once

again, the improved but still

unsportingly slow gearshift.

The scale of the roadster and roadster-coupé’s success astonished even the most optimistic planners within the company. Smart had hoped to sell a minimum of 8000 in the remaining eight months of 2003 after the launch: the final year-end sales total for the two roadster models was in excess of 20,000, as smart president

Andreas Renschler proudly pointed out when presenting the new forfour to the international press in Rome in February 2004.

>> fun cars that make business sense too In image terms the roadster and roadster-coupé were a brilliant idea and, sharing

40 per cent of the components of the city-coupé, they made good economic and business sense too. There was just one headache, and a big one at that: how to build them. The original Hambach ’plus’ production line was running flat out to meet 177

Roadster: faithfulto smart approach of compact dimensions, low weight and modest power to provide fun driving

the demand for city-coupés and cabrios, and in any case it would not have been able to cope with the greater body length of the sports model. Nor could Dynamit Nobel, supplier of the plastic outer body panels for the city-coupé, raise its capacity to embrace the extra volume and extra complexity of a set of panels for a

completely different car. Only limited extra space in existing buildings was available on the smartville site: since the smart spare parts supply had just been integrated with that of Mercedes-Benz the modestly-sized TNT parts warehouse would soon become free and it was decided that this building would house the manufacture of the roadster

and roadster-coupé.

Unfortunately, says Klaus Fischinger, project manager for the roadster at the time and now manager of the whole Hambach plant, there was one major snag: “Because the assembly line couldn’t be any longer than 100 metres, we could only fit in 18 assembly stations from the body in white stage to the complete vehicle — so we had to put a lot more work into each station.” The line for the city-coupé incorporates 145 stations; conventional cars in traditional factories can go through 300 or more stations on final assembly. 178

> smartSmore&Smore

The increased work content in each roadster assembly station means that the

line has to move much more slowly: its cycle time is six and a half minutes, compared with one and a half for the city-coupé. “This makes it much harder for the workers to learn,” says Fischinger. “Workers could learn the city-coupé job in two days: it takes a few weeks for the roadster, so that’s why new recruits go to the city-coupé line and we only bring in experienced workers for the roadster.” Astonishingly, the small building even manages to accommodate some of the systems suppliers for the roadster, though the proximity inside is so close that partitions have been erected in order to give each supplier what Fischinger terms its own social space. Some of the suppliers are different to those on the city-coupé, too — most notably for the coloured plastic exterior body panels. These are made offsite for the roadster and roadster-coupé by GE Plastics simply because the existing system partner, Dynamit Nobel, did not have enough capacity.

Introduced shortly after the roadster and roadster-coupé, the second generation of the city-coupé and cabrio marked the maturity of the tiny-two-seater. The incorporation of almost all of the engineering and electronic improvements featured

in the roadster made a tremendous amount of difference to the smaller, less exotic car — far more

than might be expected from its only marginally-altered external

appearance. Demonstrating how far the smart had progressed since its launch in

1998 is the number of parts changed or modified: only 30 per cent of the component count is shared between the second-generation car and its earliest predecessor. Perhaps the most welcome improvement shown by the second-generation car

was in ride comfort. No longer does the front end of the car bounce and jolt over bumps, and the steering — now power-assisted on request — is much more positive and reassuring. So, too, are the brakes, as development director Helmut Wawra explains: “With the second generation at the beginning of 2003, we had an ESP ‘system in the car and this gave us the opportunity to make the springalittle bit softer, to use wider tyres and, with the wider tyres, to improve the brake performance of the car. Now I think it’s complete technically.” Other improvements such as the revised gearchange, the higher gearing and the

electronics content helped make the city-coupé more refined to drive, especially in town and when cruising on the motorway. The dramatically enhanced

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>>

Not for sale: outrageous 170hp roadster-coupé vb

biturbo, capable of 220 kin/h, was created by joining two three-cylinder engines together. Ten were hand-built for promotional purposes and gained widespread press coverage

SS

electronics were especially eagerly seized upon by the growing band of buyers for whom the smart was a luxury style statement, not a cheap means of transport. Many of these affluent buyers had also been requesting leather upholstery in their smarts, an option that the factory at that stage did not offer; instead, the buyers went off to independent upholstery fitters and paid large sums of money to have

their smarts converted. BRABUS, too, had a thriving workshop converting smarts to leather interiors. With

the

second

generation

models

smart

rectified

the problem

and

immediately began getting a good uptake of the heated leather seats option, part of an evolving trend which has seen smart buyers ordering ever more sophisticated and more expensive extra equipment packages for their cars. This is immediately 180

evident when scanning the large parking area in Hambach full of finished smarts awaiting shipment to smart centers around the world: a good half or even three fifths of the cars are ultra-smart versions finished in gleaming black, silver or metallic grey and often fitted with BRABUS alloy wheels.

>> smart goes for the performance vote The steady move upmarket gained added impetus with the next logical move, that of a high performance version. The vastly-improved chassis now had the capacity to handle considerably more power, and the state-of-the-art ESP electronics could

be relied upon to keep that added power in check. And if there was pent-up demand among the more moneyed buyers, why not capitalise on it? 181

>> chapter 12

Smart advertisinghas

always been witty, provocative and

questioning. This recent campaign for the BRABUS roadster has a much more direct message

This thought had led to the formation in April 2002 of smart-BRABUS GmbH, a joint venture with the well-established Bottrop-based tuning firm which had a long history of semi-official collaboration with Mercedes-Benz and which had been best know for spectacular V12 conversions of smaller Mercedes models and wildly fast editions of Mercedes’ bigger cars. Among BRABUS’ 2004 model year offerings are a biturbo SL costing a quarter of a million euros ($300,000/£170,000) and a

fearsome 640 horsepower E-Class capable of 340 km/h (211 mph). BRABUS enjoys close enough links with Mercedes-Benz to be granted access to new models before their official launch (the tuner announced a 550 hp, 325 km/h version of the 2005

SLK at the same time as the standard model was launched in early 2004) but is not an in-house operation like AMG, which is reserved exclusively for Mercedes-Benz

branded performance models. BRABUS thus made the ideal choice for smart, also close to Mercedes but not an integral part of it.

By August 2002 BRABUS had developed a range of custom components and accessories for the city-coupé and cabrio; by the spring of the following year the tuning joint venture had developed its first complete car, the BRABUS smart, to coincide with the arrival of the second generation of the mainstream model. Available in both cabrio and city-coupé versions but only in black or silver, the BRABUS model has its engine tuned to 74 horsepower and 110 Nm torque,

substantially boosting performance and responsiveness. The electronic speed limiter 182

> smartimore&more

is raised to 150 km/h (94 mph), a speed made possible thanks to major chassis changes which include considerably wider wheels and tyres and an aerodynamic package incorporating a special BRABUS front spoiler and grille, side skirts and a

potent-looking dual sports exhaust complete with heat shield at the rear.

The result is a car which looks not just classy and elegant, but powerful and sporty; the classy theme is carried through inside, too, with top-grade leather sports

seats, steering wheel and gear lever. The effect, again, is astonishingly luxurious and sophisticated for such a small car, and prompted yet another turn of the virtuous circle as style magazines and car enthusiast publications once more seized on the smartest smart to add spice to their pages.

But most important of all as far as smart’s accountants were concerned was a feature that could not be photographed at all: the price. With a base price of just

>>

Smart roadster experience was set up in a succession

of European cities to give buyers a preview of the

sports models soon to go on sale

>> chapter 12

over €18,000 ($19,400/£12,300) the BRABUS was pegged at precisely twice the cost of the entry-level, €8980 city-coupé, making it a far better business proposition for the factory than the cheaper car. That was not all: the BRABUS buyer could — and often does — tick many of the boxes in the options list, adding high-ticket items such as satellite navigation to boost the invoice value up to €23,000 or more.

With a significant proportion of the cars emerging from Hambach as BRABUS

versions, smart now began to enjoy a much richer model mix, successfully boosting the overall revenue per vehicle and contributing a useful improvement in the business position of the operation. The roadster and roadster-coupé were helping,

too, driving the brand successfully further up market with the €21,000 base price for the main 60 kW (80 hp) model. Again, with some 20,000 of these higher-priced models having gone through Smartville during 2003, the beneficial effect on the smart bottom line and turnover is clear to see. In 2002, smart sold 122,300 vehicles for a turnover of €1.1 billion,

representing a value of just under €9000 ($9700/£6160) per vehicle, while the following year, with sales increasing only marginally to 123,500 but turnover jumping to €1.35 billion ($1.455bn/£923m), the crude measure of revenue per car grew by over 20 per cent to almost €11,000.

This progress in the average revenue per car set the foundations for a secure and profitable future business — and for the advent of further models reinforcing smart’s steady march up market. BRABUS versions of the roadster and roadstercoupé cost upwards of €25,000 ($27,000/£17,000) apiece when they were launched in March 2004, and the family-sized forfour has clear potential for premium

pricing when higher- specification and, in 2005, BRABUS versions are added. All this will set the stage for the four wheel drive sport-utility formore, to launch in 2006 in a market sector aimed at buyers with budgets of €20,000 to €30,000 ($21,500-32,300/£13,700-20,500). Astonishingly, these moves will bring smart into the same pricing zone not just as the Mercedes A-Class but also the lower end of the three-pointed star’s mainstream model programme, the C-Class Sport Coupé.

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>> smart6morefmore

>> faster and faster: smart breaks the 100 horsepower barrier The Brabus edition of the roadster and roadster-coupé marks an important point

in the ultimate evolution of the original smart platform: it is the first version to exceed the psychological 100 horsepower threshold — a remarkable development of the original 599cc three cylinder engine giving less than half that figure. More importantly, the extra boost helps the BRABUS improve on the roadster’s already good power

to weight ratio, taking full advantage

of the car’s lightweight

engineering to provide a lot of fun on what, in absolute terms, is still a small and low powered car. However, despite its undoubtedly thrilling performance, the BRABUS roadster cannot claim to be the fastest or most powerful smart. That honour belongs to the astonishing smart roadster-coupé v6 biturbo, capable of 220 km/h (136 mph) and 0-100 km/h (62 mph) acceleration in less than six seconds. Unfortunately, no-one but a few famous racing drivers have been able to enjoy this ultimate smart experience as the v6 biturbo is a special prototype designed for track use only, and made by smart-BRABUS inastrictly limited run of ten hand-built examples. The edition was commissioned in the summer of 2003 with the dual purpose of commemorating

100 years of the famous

Solitude

race

near

Stuttgart and

demonstrating the sporting potential of the smart roadster and smart as a whole brand; the recipe was radical and exciting, with smart-BRABUS engineers, helped

colleagues, joining two smart three-cylinder engines together to form a V6 with a capacity of 1396cc and an output of 170 horsepower. The results were spectacular, both on the track — with dramatic performance

by their Mercedes-Benz

and lurid, tyre-smoking power slides — and in the enthusiast magazines, where testers raved about the roadster’s speed, responsiveness and controllability, again

giving smart valuable exposure in the automotive media as a high-performing brand with strong ambitions. Later — see chapter 14 — the v6 biturbo would be granted special permission to run in the 2003 smart rally from London to Brighton.

185

186

smart thinking >> the model becomes a brand —

and the brand becomes a new way of thinking Way back in 1998, when the series production city-coupés first hit the streets, you would have had to have been a pretty unusual person to have bought a smart. You would have been pretty brave, for a start, to have invested in a brand new

type of vehicle from an untested marque, even if that marque did enjoy the discreet backing of Mercedes-Benz; you would have been unusual, too, in the way you were prepared to give a new ideaatry, the way you were able to cast off conventional stereotypes and recognise a more intelligent solution to your travel needs. Perhaps most crucially, you would have had the ability to think differently from the great mass of consumers, whether it was by adopting a radical design ahead of the general taste, in rejecting the existing off-the-peg solutions, in freeing yourself from

the notion

that all cars have to be big and cumbersome,

or in being

187

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>>

Smart promotional material is often more about challenging preconceptions than depicting cars

determined to get noticed by being conspicuously different. Either way, a smart

buyer in 1998 was something of an individualist, a free-thinker and a believer, an evangelist for the cause of revolution among the ranks of the automobile. Six years later, that same person still exists, but his or her voice is one of a great multitude expressing a variety of different tastes, different preferences and different

priorities. The original city-coupé smart, now rechristened the fortwo to fit in with the new forfour, is just as revolutionary as it ever was — but with well over half a million examples now on the roads of Europe and around the world it has become such a familiar part of our automotive environment that we have long since taken the revolution on board and now conveniently forget how radical it once seemed, how sharply it divided opinion both professional and private. Now, with the smart

brand firmly established, a smart center in every major city and the tiny car’s design 188°

>"

>> smart thinking

well known to all, you don’t have to be brave or be part of an avant garde fringe to invest in a fortwo:

its much

more

of a practical, logical choice, a decision

independent of the socio-political overtones that might have motivated smart buyers in the very earliest days. But even so, it continues to be a conscious,

determined choice, something that still marks you out as more individual than the rest, more open-minded and confident in your acceptance of original and inventive solutions to driving and travel needs. This is how smart thinking differs from

standard thinking, and this is the type of thinking smart is seeking to appeal to as it grows from a single-model company to a complex brand offering a full range of models in the compact to medium sector.

The roadster and roadster-coupé are cases in point. The conventional wisdom in sports car design is that you fit a larger and more powerful engine in order to provide a high level of performance; you add beefy brakes and wider wheels and tyres to sharpen up the handling. By this time the car has become pretty expensive — but of course buyers at this level now expect every creature comfort from air conditioning and automatic transmission to power seats and an electric roof, which puts up the weight, and thus sparks another cycle of power increase and weight gain. The smart sports car approach, as we have seen, is to provide driving fun and responsiveness by making the car in the first instance compact and light, and only then to seek to increase power — provided no weight gain is involved. Successful racing cars are often those which adhere most closely to this formula and among road

cars Lotus, slightly higher up the price and power scale than smart, has long made a virtue of this principle, the company founder Colin Chapman famously professing to “just add lightness”. In the roadster the compactness and lightness provide a win-win situation for the driver: the low weight allows the same, modestly-sized engine to give exciting performance, the low inertia allows the chassis to deliver quick handling responses, and the combination — aided by the sleek, light body — proves very economical on fuel. This capacity to provide a lot of fun and a lot of style on low

power and a low budget is most definitely a characteristic smart quality. So, too, are many of the novel solutions and pleasing details of the roadster’s design, among them the soft-top roof that can be electrically opened or closed at any speed, and the clever storage for the hardtop and roof bars. 189

Marketing director Philipp Schiemer: “everyone at smart shares a unifying vision — that’s what makes it so different”

The question of what constitutes the smart style or the smart solution would never have arisen had smart never strayed beyond the bounds of the original twoseater city-coupé: smart would simply have been compact, fun and original. Its principal defining characteristic would have been the 2.5 metre length — which would clearly have been an impossible proposition the moment smart expanded into other shapes and sizes.

This, according to smart sales and marketing director Philipp Schiemer, is where the impending arrival of new products forced smart to adjust its thinking: “It’s one of the milestones we have to pass. For many people the benchmark is still the citycoupé, but nobody calls it that — everyone simply talks about ‘the smart’. We have to make a change in the minds of people so that they think about smart not just as one car but so they realise it is possible to have a smart idea in alot of cars” But before the smart idea can find its way into this new range of cars, it needs to be defined. Philipp Schiemer again: “The idea of smart is first and foremost that we have a car which differentiates the customer from the normal cars available on the

market. For this reason we have this two colour concept which is very important for us: smart is the only manufacturer doing this. We are working with body panels in plastic, a material which gives the customer, especially in the cities, a lot of advantages as the small knocks repair themselves. Secondly we provide our customers with very functional cars, cars which have some very clever ideas — not necessarily hi-tech ideas, but ideas which are clever solutions for your daily life. If you ask our customers today what the best thing is about a smart they will say that 190

> smart thinking

it is a pleasure to drive this car every day because every day it gives me the feeling that my life is being made that little bit easier with the car. The next idea of smart is to give our customers cars which are fun to drive: we want them to smile when they

get into the car and smile when they get out again.” Smart president Andreas Renschler is equally clear about the values which define smart: “smart stands for innovation, for functionality and emotions, for the joy of life. But for me the emotion and functionality are very important for the car and that belongs to the brand of smart. The word smart is the best definition of our brand value because the smart word stands for much more than just clever. I think the word smart is one of the most positive words in the English language. Everybody wants to be smart. On styling, we said we wanted extraordinary styling, we want to always be alittle bit ahead of competition, and we can do this if we look to brand values and to our two-material concept we can use a very good styling

approach — you can see it in the forfour.” “It is very important for such a young brand to be ina stable state so that customers can always see ‘oh, that is a smart?” counsels Renschler. “And that is the

feedback we’re now getting back from our potential customers for the Forfour: their first reaction is ‘oh, that’s a smart.

2»

>> collective consciousness of what makes a smart a smart While

much

of this may seem

uncomfortably like standard MBA

textbook

marketing and brand-building teaching, there is nevertheless the strong impression that brand awareness and the brand ethic reach rather more deeply at smart than at

other car companies. In particular there is a real sense of a collective consciousness within the company of what makes a smart a smart, and what makes the smart company what it now is.

“Tt had been working with DaimlerChrysler for 20 years and also had a lot of experience with other companies before I joined smart,” says Philipp Schiemer. “But what I found at smart is totally different.”

“People working in automotive companies are normally highly motivated with regard to their product. It’s like that at Mercedes and BMW,’ he explains. “But I have never seen the people so enthusiastic about something as with smart. There’s a vision, 191

>> chapter 13

“if we havea

a unifying the idea to create and make

problem here at smart, we

discuss it

int ensively,

brand

in the automotive

world. This is a challenge everybody

and also

very lou dly” ;

a new

took very personally — it is not only a company

challenge but a personal

challenge. This is still the spirit.” Many

other

accounts

support

the

observation that smart is different to other companies in its atmosphere, its spirit and the way its

people decide things: it’s a feeling that pervades all levels, and people are aware of it and actively protect it. Some put it down to

the collective spirit born out of smart’s origins as a small company determined to operate on an egalitarian and inclusive level internally, as well as having a tilt at changing the world externally. Remarkably, this spirit seems to have survived the company’s rapid growth, several complete changes of senior management, and its absorption into the inner DaimlerChrysler empire.

Even though many people did join directly from DaimlerChrysler, observes Philipp Schiemer, they soon began to take in the smart ethos: “We have fewer levels of management here at smart, but that’s not really the most important difference. As a new company you have to discuss and create much more. In other companies — not just Mercedes-Benz — you have to look very carefully at your past first. For smart it is different: we have to create a future. The need to create new ideas is much more important at smart than it is at any other company.” New ideas are treated with great seriousness at smart, and Schiemer asserts that

‘no’ and ‘it won’t work’ are phrases which do not exist at the company’s new headquarters in Boblingen, near Stuttgart. This policy has recently found a strong echo in Detroit in the high-profile persona of Bob Lutz, who has made it his mission to revive the lacklustre model programme of General Motors, the world’s largest car maker. To the delight of his engineers and designers, Lutz introduced his “who says?” scheme, allowing staff to openly question many aspects of corporation decision-making procedures which habitually led to initiatives being stifled or compromised early on in their history. 192

>> smart thinking

“If we have a problem here at smart,” says Schiemer, “we discuss it intensively

and sometimes also very loudly, but we are able to decide very fast because we are a small company. We see this as a big advantage: we have a thousand people working for us in Béblingen, and this is something you can control very easily. This gives the company a lot of flexibility, and it’s something you can feel everywhere.” >>smart idealism: can it survive in a big-business environment? In view of smart’s radical beginnings as an idealistic and egalitarian co-operative pioneering new working practices and new relationships between staff, it is perhaps a

little disappointing to find its new Béblingen headquarters looking much like any other corporate head office. No chrome jukeboxes or avant garde sculptures enliven the reception areas, no conceptual art hangs on the walls of the boardroom or the president's office; precious few visual clues suggest that this is a young, lively and goahead company intent on rewriting the rules of an entire industry. No west-coast style T-shirts, shorts and sandals here, nor even mountain-bike helmets or backpacks: this is Germany, this is business, there is work to be done and the atmosphere is one

of calm and measured co-operation rather than overt mateyness. Nevertheless, there is an undercurrent of camaraderie and a sense of group mission which distinguishes smart. In particular, there is an acute awareness of

what is appropriate to the smart ethos, not just in terms of corporate policy but also in more mundane areas such as internal procedures, types of behaviour, associations with other organisations and even everyday objects and styles of

clothing. An Apple iPod, for instance, is instantly hailed as the ultimate smart-like lifestyle accessory: original, stylish and innovative in its approach, it’s a perfect fit with smart (and has indeed entered the smart catalogue as an accessory); large, cumbersome and elaborate machines lacking a user-friendly interface would not receive such an enthusiastic welcome. Discussions as to what is — and what isn’t — ‘smart-like’ are long and lively and reveal a strength of commitment and an individual identification with the smart ethos that simply does not come across in

other, larger and longer-established companies. One of the biggest differences is how young everyone is: at smart HQ in Boblingen the average age is 34, while at the Hambach plant it is even lower at 32. 193

>> chapter 13

So, first of all, it is definitely smart-like to be young; enthusiasm, too, is a very smart-like quality, but this does not spread across as one might expect into outright informality. Despite the absence of a dress code many of the men wear ties, women

tend to favour tidy rather than casual styles, and very few seem to come to work in jeans; desks are neat and well disciplined and managers are spoken to as ‘Herr X’ or ‘Frau Y’ and using the polite German ‘Sie’ form of address. Yet everyone from the president downwards eats in the same open-plan company restaurant and queues

up at the same till to pay with the same corporate ID smartcard; the few apparent formalities certainly do not get in the way of a relaxed and friendly atmosphere — a pleasant contrast to the stiff, hierarchical regimentation that can often be the German company norm.

>>social engineering, smartville-style

It might be imagined that at the smartville production plant across the French border in Hambach things would be somewhat different. Indeed, in some ways they are: for a start, smartville is not an exclusively smart site as no fewer than eleven

other companies share the immediate location and several more are within close proximity. This brings very different pressures on the way the operations and the social life of the establishment are structured, but even so there is a discernable air of co-operation and community, the sense of a common individual competition.

cause rather than

Even the names of the streets have been carefully chosen to reflect the virtues smart’s founders sought for the project: you enter the complex along the Route de la Qualité, turn right onto the Boulevard de Environnement and then take either Rue de la Flexibilité or Boulevard de l’Alliance towards the far end of the site, the

roadster production building and Boulevard de la Sécurité. Appropriately, Route du Dynamisme leads to the test track where cars are put through their paces, and Route de la Communication takes visitors to the communication centre with its lecture theatre, cafeteria and book store. Creativity, Mobility, Development and Innovation are among the other qualities enshrined in smartville road names. The whole site, as we saw in chapters 7 and 10, is structured from an industrial perspective around the flow of raw materials, components and work processes into © 194

>>

Andreas Renschler: “smart stands for innovation, for

function, for emotions —

and for joy of life”

the large central ‘plus’-shaped building, through its four limbs and then out as completed cars into the hands of the distribution partner Mosolf. Where the four limbs of the ‘plus’ intersect is a large clear space, known as the market place, and seen as neutral territory as it does not ‘belong’ to smart or any system partner. It is here that those few cars which need to be rectified or adjusted after manufacture (smart, like most carmakers, is reluctant to disclose the exact proportion) are parked and worked on. The area is visible from all four sides, making the re-work operations very public. It can also be viewed from overhead by the whole workforce during their breaks: for high up, encircling the whole of the tower above the market place, is the mezzanine floor with the tables, bars, cafés and food counters of the smartville restaurant, effectively as much the social centre of the site as the market

place is the industrial focus. The bistro area hums excitedly to many languages at mid-day as workers in the different overalls of smart and the various system partners mingle with smart managers, office staff, supplier representatives and the steady stream of visiting academics and business studies professionals who come to observe this real-life laboratory of industrial organisation. French, German and English are the main Panne: of communication,

and there seem

to be no barriers between

staff

nominally working for different on-site employers or contractors. The various ‘horizontal’ initiatives introduced by Harald Bélstler and aimed at building social links between the many companies on site are warmly praised by the

current plant director, Klaus Fischinger: “We meet with all the companies and unions every two months,” he says. “This allows us to co-ordinate everything very effectively and to make sure that no friction or resentment builds up. Through 195

>> chapter 13

these processes the wage levels and benefits tend to end up very similar — the

thirteenth month, for instance.” There are 11 companies on site, with each workforce free to choose its own

union. Five big unions operate at smartville and industrial relations have remained good after the minor showdown involving Magna in November 1999 cleared the

air. Wages are not as high as in Germany — something which the more extreme French unions are quick to point out — and France’s labour laws cap the working week at 35 hours, translated at smartville as four days of 8.4 hours. Smart itself

operates a bonus scheme linked to output and productivity: the bonus is worth 14 per cent of the monthly salary and is obtained 95 per cent of the time — a testament to the smooth operation of the system.

All things considered, the brave industrial experiment of bringing together a dozen or more companies and integrating them deeply in the design and development processes as well as the manufacturing and assembly has worked smoothly, too. System partners will readily admit that there were teething troubles at the very beginning and that these led to tensions between the companies on site,

Typical of the smart approach is to integrate communications equipment into the vehicles. It was the first maker to feature Apple's ubiquitous iPod, playing through the car's hi-fi system

> smart thinking

but most early difficulties were overcome and the list of system partners in 2004

looks very similar to its equivalent in 1997. The only major casualty occurred right at the beginning when, despite much help from smart’s engineers and other consultants the original door supplier Ymos proved simply incapable of meeting the stringent ‘fit first time’ quality requirements and was replaced at short notice by a Magna offshoot, Magna Uniport. Bosch, too, was one of the original systems suppliers, producing headlights for its front-end module on-site; however, Bosch

realised that the volumes were too low to justify a separate headlight facility at Hambach and reverted to being a standard supplier. Smart itself was able to take on the rest of the module with no difficulty. The middle years of this decade will see the introduction of a brand new twoseater smart to replace the current fortwo; the design was signed off in 2003 and

the system partners are on board. But, as smartville director Klaus Fischinger explained in the October 2003 issue of unis pour smartville, the monthly newsletter published for all the employees working on the Hambach site, the decision on where the new model would be built was still to be taken: smartville was up against

several other plants for the new fortwo contract, and it would have to continue to pursue the highest standards in flexibility and quality in order to be sure of retaining the model. These could of course have been token doubts designed to spur the Hambach workforce into still greater efforts: certainly, few in the auto industry believe that

the replacement for the original smart car could be built anywhere else but at its original home, smartville. As a factory, smartville is not especially big by multinational standards and its facilities would not be well suited to larger vehicles — so it would be a harsh decision indeed which took a revolutionary product away from the revolutionary organisation that did so much to shape it and the brand that developed out of it. Such confidence was rewarded in March 2004 when, at the Geneva show, smart announced that the fortwo successor would indeed be made at

smart’s spiritual home of Hambach.

197

‘ EY

198

>>

The crossblade section draws attention as over 1,300 smarts gather on the

Brighton sea front after the 2003 rally from London. Smart experts judge it the biggest-ever gathering of enthusiasts

smarti:fans >>

web fans, American art experts, racetrack aces, rock stars and marathon

runners figure among smart’s worldwide followers It’s often said that you can tell a lot about a music act — be it a rock band, a solo

artiste or a jazz icon — by the fans that show up for the live performances. Much the same holds true for car fans, too — but the big difference here is that motor ‘enthusiasts tend only to gather together when the object of their admiration is

either fast, exclusive or expensive (preferably all three, as with Porsche or Ferrari, for instance) or when the model in question is out of production and therefore becoming rare and worthy of preservation. The Citroén 2CV is a good example. But smart, true to its character, has broken all the usual rules — not deliberately,

but by sheer force of demand. Even before the original city-coupé had celebrated 199

>> chapter 14

its first birthday there were signs of a grassroots movement of smart believers and before long there were half a dozen clubs in Germany and a couple in each of the other mainland European countries. “There are now about eight or ten clubs in Germany,” says Al Young chairman of thesmartclub, based in Edinburgh but with members all over the world. “There’s

even a club in North Germany that has six members and uses ‘reduce to the six’ as its tag line rather than ‘reduce to the max. Greece has a fast expanding membership and Australia is also growing fast, adds Young. “Mexico and North America are two other areas that are also growing quickly,” he observes. Smart has just recently launched in Mexico but won't be in the US until 2006. What

distinguishes

all these

grassroots

movements

is that

they have

mushroomed very quickly thanks to the internet. Smart people have always been one of the most highly wired, web-aware groups in society and, right from the start, passion for the smart was an international phenomenon with online communities

sharing their enthusiasm for the tiny car and exchanging ideas and anecdotes. Internet communication also helped enthusiasts outside the original nine European markets to buy smarts and import them back into their home countries, planting the seeds for further fan networks. Pretty soon, a smart sub-culture was beginning to build up as these pioneering owners shared their radical take on car culture with like-minded people across Europe and, increasingly, around the world. Before long, a growing sense of solidarity and a fervent belief that small and stylish was the way to go inspired smart fans to make their obsession official, and the first of the smart clubs was formed. Today, reckons Al Young, there are around 40 smart fan clubs

worldwide: the aggregate membership numbers are harder to judge, because some enthusiasts are members of more than one club. An educated estimate would be a worldwide membership of perhaps 28,000, thinks Young. His own thesmartclub is comfortably the biggest of them all, with 16,500 members in 51 countries and growing by 25 new members each day. Germany’s smartclub-de is also big, with

some 3000 members.

Founded in July 2000, thesmartclub represents over two-thirds of all UK smart owners — a participation rate that is unequalled across the whole spectrum of UK 200

>> smart&fans

car clubs. Even on the broader global perspective you don’t have to be a mathematician to realise that, with

just over half a million smarts having been built since production began in 1998, approximately one in every 18

smart owners is also a club member — an astonishingly high membership figure for an affordable and everyday car still in production.

Smart has shown itself a car which truly involves its owner,

not just in the driving experience but also in the

ownership

and the community of other like-minded

instinct is clearly strong in smart

owners.

society: club calendars

The group

are packed with

gatherings, rallies, trips and other events. Thesmartclub runs an annual pilgrimage to the Hambach factory which, according to Al Young, is always an instant sellout: “These are always booked to capacity. We are restricted in numbers by the logistics of the factory tour itself, which is limited to 35 people per tour. We have morning and afternoon

tours, which

means

we

can accommodate

70 people, which

is

approximately 50 smarts. It’s always a popular event: when Hambach application forms go live we receive online applications at the rate of three per minute.” The UK’s London to Brighton Smart rally, held in September, has become an

annual fixture, too. Smart was taken aback at the huge, thousand-plus attendance at the 2002 event, but 2003 proved to be bigger still, attracting over 1,300 cars and 2,000 people from five countries, some of them a long distance away. Smart HQ in Germany took the event seriously, too, and was even persuaded to specially prepare its originally track-only roadster-coupé v6 biturbo for use on public roads. Driven

by a journalist from a national motoring magazine, it created a big sensation among the thousands of enthusiasts on the run, and was granted pride of place in the VIP car line-up at the finish. “There are always enormous gatherings in Germany,” says Al Young, “particularly around the Chiemsee. We had understood that the maximum number of smarts in any one place was in Germany where 1,100 cars gathered — so this 201

>>

Among the thousand-plus

smarts gathering for the annual London-Brighton rally in 2003 were customised, tuned and even dressed-up examples. Similar events take place in many other countries

jww.thesmart.co.uk

>> chapter 14

means that our 2003 London-Brighton, with 1,300 smarts, has attained the honour

of being the largest gathering yet.”

>> fans — from Michael Jackson to New York’s Museum of Modern Art Long before the grassroots movement had begun to roll, those who really know about design, about industry and about driving had become fascinated by the smart concept. One of them didn’t waste any time at all: the day the city-coupé

went on sale at the beginning of October 1998, the legendary racing driver Sir Stirling Moss, aged 70, showed up at the Cologne smart center to pick up his topspecification limited/1 and drive it all the way back to London. His was without doubt the first smart in the UK, as official imports didn’t begin until two years later. Moss, who shot to fame as a grand prix driver in the 1950s, earning victories in both formula one and the epic Mille Miglia sports car race with Mercedes-Benz, still races in historic events and is widely acknowledged as one of the most talented racing drivers

of all time.

"Both the design and the inherent safety and environment-friendliness of the smart appealed to me,” commented Moss as he collected his car. “I’m looking forward to experiencing greater mobility and driving enjoyment, even in London." The art world was quick to take to the smart, too. Musicians, actors, film stars

and painters were drawn by its compactness and neatness as well as its very obvious style and convenience. One story, perhaps apocryphal, tells how Michael Jackson, on tour in Europe, once drove past a smart center near Paris. Spotting the brightly illuminated smart tower stacked high with colourful city-coupés and looking like a giant display case, he is reputed to have stopped his motorcade and tried to buy the entire tower, complete with its contents. This proved tricky to negotiate, despite Jackson’s undoubted wealth, and he was persuaded to settle for half a dozen crossblades. These now have pride of place at his NeverLand ranch in California, so the story goes.

Robbie Williams was another musician to be inspired by the originality and extreme sensation of the crossblade and, as we saw in chapter 12, bought the first one and auctioned it on eBay for charity. Two years previously, the 100,000th smart had been handed to the Linda McCartney Foundation, again to be auctioned for 204

© smart aa:

>>

||

||

The singer Robbie Williams

was sponsored by smart on

his 2003 European Summer Tour and features in the

|

launch TV campaign for |

the forfour

smart forfour >> together on tour.

Press-information —_—_—

charity. Since the crossblade auction Robbie Williams has established a working relationship with smart to promote the company generally and the forfour in particular. A short and amusing forfour video clip, featuring the star in a surprise walk-on part, was played each night of Williams’ Summer Tour 2003 and, says smart, has proved remarkably effective in broadening awareness of smart in the customer target group for the forfour. 205

Thesmarthasappeared in several exhibitions at