Odds Look Good, Even If Goods Look Odd

Commentary

Detroit has a reputation for making oversized vehicles.

So it’s ironic that two Detroiters – Roger Penske and David Schembri – are heading a U.S. effort to sell cars so small they look like they could fit in the back of a Chevrolet Tahoe.

Schembri is president of Smart USA, a subsidiary of dealership chain Penske Automotive Group, which was United Auto Group until a name change this month, in part, to leverage the name of its chairman.

Penske’s firm is handling the U.S. marketing, advertising and distribution (including the creation of a dealer network) for the Smart ForTwo, a French-made vehicle that resembles an enclosed golf cart. It goes on sale in the U.S. Jan. 1.

It is 8.8-ft. (2.7 m) long and 5-ft. (1.5 m) wide, which “is about the width of a wide-screen television,” Schembri notes. (That could make for some interesting “actual-image” TV ads.)

Americans might think a Smart looks cute driving down Rue de le Tight Fit in Paris.

But a lot of Yanks can’t envision it keeping up on I-75 in Detroit where, to many local motorists, the de facto speed limit is the posted 70-mph (112 km/h) legal limit plus 20.

The ForTwo’s top speed is 91 mph (146 km/h), so it should hold its own there. How about holding together in a collision?

“The first questions I usually get have to do with size and safety,” says Schembri, whose 32-year automotive career began at the former American Motors and included a stint with Mercedes-Benz, Smart’s corporate big brother.

He notes the ForTwo has four airbags, electronic stability control and an antilock braking system. It held its own in a crash test with a Mercedes 300 E-Class. It is designed and engineered to get a 4-star crash rating.

“The micro-car segment has never been in the U.S., so we need to address safety right up front,” Schembri says.

Since Smart debuted in 1998, about 800,000 units have been sold in 36 countries.

Although he declines to publicly set a sales goal, Schembri thinks Smart will sell well in the U.S., which increasingly is becoming a diverse auto market.

One indicator of potential success is that more than 20,000 U.S. consumers have paid $99 to “reserve” a ForTwo, he says.

On the other hand, reservations can be canceled and the money returned, so nothing is firm. Conditionally putting $99 towards a car that will cost $12,000 (base) to $17,000 (convertible) won’t bang the gong at a dealership.

Smart USA expects 45-60 dealerships will be ready by Jan. 1. Stores are in various stages of development. About 70% will be part of or next to Mercedes dealerships. The rest will be associated with dealers of other brands.

Most Smart outlets will be in major urban areas, “but we will also have dealerships in places you wouldn’t think, such as Jackson (MS) and Omaha (NE),” Schembri says.

Metro Detroit will get one, on Telegraph in Bloomfield Township. Penske Automotive will own it. It will be Smart’s only stand-alone facility in the U.S. The building, now under construction, also will house Smart USA headquarters.

Schembri likes the idea of corporate sharing space with a dealership, saying it can be a mutual learning experience.

“A salesman who has been on the floor one day knows more about auto retailing than any of us sitting in an office,” he tells the Automotive Press Assn. in Detroit.

He adds: “For someone who grew up in Detroit, it’s been a lot of fun building a car company.”

Some people say Smart is dumb. But APA President John Lippert says: “People usually don’t make money betting against Roger Penske.”

For Smart, the odds look good even if the goods look odd.

[email protected]