DaimlerChrysler's Smart unit has revealed the second-generation version of its Fortwo city car. It's a little longer, more powerful, and claimed to be far better to drive. Smart president Ulrich Walker claims it's also 25% cheaper to make than the old model.

Major changes include a switch to a Mitsubishi engine for the petrol versions, the three-cylinder one-litre unit used in the Japanese firm's 'i' car. This is cheaper than the former unique Smart petrol engine, and enables a power increase to 84bhp for the top models.

The body is 195mm bigger to enable it to meet European pedestrian-protection measures at the front, and US impact laws at the rear. The interior has also been fully redesigned and meets US unbelted occupant restraint rules by using a knee bolster. Side airbags are optional and ESP standard. The manufacturer claims it will make four stars in the Euro NCAP crash test.

Ride comfort and handling are improved thanks to the longer wheelbase, lower centre of gravity and revised spring positioning and rates. Steering is more direct than before, and the automated manual gearshift is claimed to shift twice as fast as the much-criticised former unit. Top speed rises to a limited 145km/h.

The cabrio version has a canvas roof, with glass rear screen, that operates electrically even when the car is moving at top speed.

European sales begin in Q1 2007, from under €10,000. US sales, via Roger Penske's UnitedAuto, commence in 2008, at a claimed $11,000 upward.

Fuel consumption is stated at less than 5.0l/100km for the petrol engine, and less than 3.5l/100km for the diesel, and carbon dioxide output is under 90g/km. A petrol-powered stop-start version with integrated starter-alternator will also be sold, delivering a claimed 10-15% urban fuel saving. CNG and electric versions could also be developed, but management insist they will go on sale only if profitable.

One of the main aims of the redesign was to cut cost. By part number count, the car is 90% new, although 40% is now shared with other vehicles in the Mercedes or Mitsubishi ranges.

One year ago, Smart was close to being sold; discussions with an interested party were well advanced. Instead DC chose to review Walker's strategy for cost cutting. He now says, "The Smart brand will be profitable in 2007 and beyond."

The new car has 12% lower material costs than before, and assembly times are 20% less thanks partly to more modular manufacturing, Walker says. "We have reduced the break-even point, and the headcount at the plant is down, though we have not had a major restructuring."

However, he declined to give the volume projection on which that 25% unit cost cut figure is based. The previous model has sold 750,000 since 1999.

Walker says he is confident that the sales organisation, now more integrated into Mercedes but concentrating on selling this one model, will be effective. The Roadster was dropped last year; the Forfour supermini ended production at the Nedcar plant in June. He insists no other models are now planned.

Questioned on the gap between the Smart Fortwo and Mercedes A-class, and how DaimlerChrysler will thus now be absent from Europe's biggest market sector, DC CEO Dieter Zetsche told just-auto: "Yes, because that sector is the biggest but not the most profitable."

Paul Horrell