DaimlerChrysler confirmed today it has cancelled development of the Smart Formore 4×4 and will cease production of the Roadster at the end of the year.

The Smart Formore compact 4×4 had been specifically designed to launch the brand in the USA.

These shock decisions are part what the DaimlerChrysler board described as part of a new business model for the Smart brand, with the apparent intention of giving the company a sound financial basis and achieving break-even in 2007.

Development will instead focus on creating a successor to the current Fortwo for which Smart is best known, which will eventually be introduced in the US. A new generation three-cylinder petrol engine will be sold to other manufacturers as part of the new development programme.

Despite dumping its stake in Mitsubishi, DC has vowed to continue to work with the Japanese car maker on for the Forfour.

A plan to cut costs by 30 percent with two years will also sees Smart’s development, sales, aftersales and servicing operations integrated into the existing Mercedes-Benz network. Workforce reductions will occur, although more Smart sales outlets, including those within MB dealerships, are being considered.