DaimlerChrysler AG on Friday announced a restructuring plan for its ultra-compact Smart car maker, a program that it said would cost up to euro1.2 billion (US$1.56 billion) and let Smart break even in 2007.
Smart is part of the German-U.S. automaker's troubled Mercedes division and has been losing money, but the company has not said how much.
The restructuring will also involve job cutbacks, but DaimlerChrysler offered no immediate details on how many posts could be affected, saying only that it was a "significant" number.
"The new business model aims to put the small-car brand onto a financially sound basis, with the goal of breaking even in 2007," DaimlerChrysler said. It said the plan would increase Smart's earnings by some euro600 million (US$778 million) in 2007.
DaimlerChrysler said the program would result in costs of up to euro1.2 billion (US$1.56 billion) this year.
"Excluding the exceptional charge from Smart, DaimlerChrysler, after a weaker first and second quarter, still expects a slightly higher operating profit for full year 2005 compared to 2004," a company statement said.
Shares of DaimlerChrysler were down 1.3 percent at euro34.10 (US$44.34) in early trading on the Frankfurt exchange after the announcement.
DaimlerChrysler said a new product concept for Smart "calls for the intensified development of the successor" to the original two-seat car, "including fulfilling the requirements for the U.S. market."
The company said it would cease production of its Smart roadster by the end of 2005 and a planned sport utility version model will be scrapped. Work with Mitsubishi Motors Corp. on its four-seat model, the forFour will continue .
Another aspect of the model includes shifting Smart sales, procurement and service into Mercedes-Benz operations.
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