Much-Maligned Smart to Turn Profit With New-Gen Model, Exec Says

NEW YORK – Daimler’s Smart turns up frequently on lists of the biggest money-losing brands in the history of the auto industry, but that's going to change with the introduction of the second-generation car, promises Chief Financial Officer Bodo Uebber.

The ’14 Smart, developed jointly with Renault and sharing components and architecture with the Renault Twingo, will wind up in the black next year, the executive predicts in a wide-ranging backgrounder with reporters here.

Smart gets part of the credit for funneling younger buyers into Mercedes-Benz showrooms, the CFO says. The entry-level A-Class has helped cut the average age of Mercedes customers in Germany by 10 years. The brand’s fastest growing market, China, also boasts its youngest customers.

Offering smaller, lower-priced models is part of the brand’s strategy to appeal to younger buyers. “We are a bit of a late comer in compact cars,” Uebber admits, but says Mercedes’ small cars will offer features not available from competitors.

Mercedes soon will make a bigger push in electric-vehicles, the Daimler official says, including launching a B-Class EV next year that uses a Tesla powertrain. The German automaker owns a 4.3% interest in Tesla.

The Tesla stake was purchased when the EV maker's valuation was much lower, and Daimler Chairman Dieter Zetsche is resisting pressure to unload its shares now and book a huge profit while the price is high.

Uebber agrees with Zetsche, saying holding on to Tesla is part of a long-term strategic move, with Mercedes planning to use more of the California-based automaker’s advanced technology for its future EVs.

However, Mercedes will not follow BMW's lead in employing a large amount of carbon-fiber components in its EVs.

“We think different,” Uebber says. “Let's wait and see who has the better answer to this (use of lightweight materials).”

The CFO is highly critical of government tax credits for EVs. “It's wrong,” he says. “We should get credits for innovation,” not one particular technology.

Mercedes’ strategy is to increase fuel economy by improving internal-combustion engines, developing more hybrids and EVs, bettering vehicle aerodynamics and introducing fuel-cell models in 2017.

Diesels are a big part of the Mercedes effort to boost mileage, as well. Uebber says 50% of Mercedes-Benz vehicles sold in Europe are powered by diesels. Mercedes has sold 11,718 diesel vehicles in the U.S. year to date, not counting the Sprinter commercial vehicle.

Noting that Mercedes soon will begin assembling C-Class cars in its Alabama plant, Uebber says other cars also might be built in the U.S. facility. In addition, Daimler is studying production of its models at a Nissan facility in Mexico, he confirms, though he declines to offer a timetable for a decision.

Mercedes-Benz is on track to sell more than 1.4 million vehicles globally this year. The company's target is 1.6 million units annually by 2015, a volume Uebber says can be accomplished without diminishing Mercedes’ premium-brand status.