Blog: Dave LeggettSmart for sale?

Dave Leggett | 27 January 2006

Retrenchment seems to have been the big theme this week. We had Ford’s ‘Way Forward’ announcement on Monday of course. Nothing too surprising there after the heavy trailing in the media over preceding weeks. Just the small matter of rolling the sleeves up and getting on with it all now.

US: Ford axing seven assembly plants and 25-30,000 more jobs

GOLDING’S TAKE: The Ford family has tried almost everything

However, I was a little surprised to see DaimlerChrysler in the news this week on two counts. Firstly, there was a headcount reduction announcement the day after Ford’s (was the close proximity intentional, I wonder?). DC’s restructuring appears to centre on management level fat trimming with some fairly grand talk of a ‘new management model’. As a result some 6,000 white-collar workers worldwide will be shown the door between now and 2008. Dieter Zetsche is perhaps stamping a little authority early on.

GERMANY: Restructured DaimlerChrysler will axe 6,000 administration jobs

And secondly, DC was in the news over its heavily loss-making Smart division. There were reports that Italian scooter maker Piaggio had recently been offered the whole Smart shooting match along with a sizeable soft loan. And Goldman Sachs (the merchant bank that put together the biggest industrial merger of all time that created DC back in 1998, by the way) was said to be making approaches to potential purchasers, who include private equity firms.

The reports that DC is looking for a buyer for Smart were followed by the usual official denials. But I would be surprised if they weren’t true. Carrying on losing money with Smart and its failing business model makes little sense for DC. Patching up Smart via the last restructuring effort obviously hasn’t made enough difference to the outlook. Better to cut the losses and get the thing off DC’s books if an industrial partnership remains elusive.

It could end up being a sad and slightly ignominious end to a project that, at inception, carried such high hopes; admirably innovative and forward-looking. What’s more, it was mighty Mercedes-Benz that wanted to create the Swatch on wheels. It could have rewritten a substantial chunk of the rulebook. Was it the ideas behind the project or their execution that were ultimately a little off-target? One to debate down the pub.

Tell you what though: if a firm like Tata buys the whole thing, it won’t want to carry on manufacturing in France, that’s for sure. But I reckon a private equity/venture capital firm is more likely to want to take it off DC’s hands – and there will be no shortage of potential customers for the various bits.

GERMANY: Smart stresses not for sale


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