The troubled Smart brand may shift towards cheaper pricing in its quest for profitability.

A source at Smart parent company Mercedes-Benz told Automotive News Europe making the premium-price small-car company more value-oriented to boost sales is one option being
considered.

"We have to acknowledge that we are competing with cars such as the Opel Corsa and the Ford Fiesta," the source said.

Currently Smart models carry premium prices because of the brand's "cult" image aimed at young, affluent consumers. Many expensive, high technology options are offered.

Smart has already started offering better-value models. When the Smart ForFour was introduced in April, a "Blackbasic" limited edition was offered for €11,700, €1,200 less than an identically equipped base model.

Smart sold 3,000 of them and an additional 1,500 Blackbasic diesel models at €13,920, €730 less than the standard model.

To help boost sales, DC is lowering its standards for Mercedes-Benz dealers to add a Smart franchise.

Future Mercedes-Benz dealers who want a Smart franchise will not have to re-tile in white the entire showroom area where Smarts are sold. A white podium will be enough.

Smart hopes the change will significantly expand the number of sales outlets. Smart currently has 840 sales points worldwide. In Germany, Smart has 118 dealers, including 63 in Mercedes-Benz dealerships.

DaimlerChrysler CFO Manfred Gentz put the Smart brand's future in the spotlight during a conference call with reporters and analysts.

Gentz spoke about Smart's weak performance. He said all options for its future are open.

Smart has not made a profit since its launch in 1999 and some forecasts say its losses for 2004 could be €400 million to 500 million.

Its models are selling at levels well below expectations.

The ForFour, which was introduced in the summer, is 25% below projections, the six-year-old ForTwo's sales continue to decline, and Smart executives openly admit the Roadster is selling at disappointingly low levels.

"Lowering the brand is dangerous not only to Smart but also to Mercedes," said Jochen Siebert, vice president Europe at CSM Worldwide in Frankfurt.

He said that the Mercedes-Benz brand image would suffer if Smart is taken downmarket.

But analysts agree that Smart needs new strategies to ensure its future.

"Going on as before is the worst of all options," said HypoVereinsbank's Rolf Woller.

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