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Northstar

Zetsche plays down idea of ditching Smart

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Reuters / September 02, 2005 FRANKFURT -- DaimlerChrysler's designated CEO Dieter Zetsche expressed confidence in the future of loss-making minicar business Smart as he took over control of the Mercedes Car Group. "I am extraordinarily optimistic that Mercedes Car Group is on a fast track higher. I am equally optimistic that we will make progress with Smart along the way," he wrote in a memo to staff of the German-American automaker's premium car division. "We have brands that are the envy of the entire industry, we have products that we can rightly be proud of, and we have in all areas staff whose competence and ability is second to none," he added. The company released the letter on Friday, a day after Zetsche left the Chrysler group to run Mercedes for an unspecified period. He replaces group CEO Juergen Schrempp on Jan. 1 as well. The Mercedes Car Group includes the Mercedes-Benz, Smart and Maybach luxury limousine brands. The financial community is watching eagerly to see what steps Zetsche has in mind for Mercedes, whose operating profit has plummeted amid model changeovers, a strong euro, spending to fix quality problems and hefty losses at Smart. The market wants to know whether Zetsche, 52, will simply tinker with predecessor Eckhard Cordes' plan to revive Mercedes profits and margins by cutting costs and boosting revenue, or whether he will take a more radical approach. Some analysts have suggested pulling the plug on Smart, which has not made a profit since its debut in 1998 and is slated to break even only in 2007 despite sweeping job cuts and a narrowing of the quirky city car's model lineup. It lost nearly 4,000 euros, or about $5,000 at current exchange rates, on each car sold last year.

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