The Smart ForTwo is manufactured at Smartville, a purpose-built factory complex in Hambach, France. This was established in 1994 as a joint-venture of Daimler-Benz and the Swiss watch manufacturer Swatch. The project was originally supported by Swatch, and was nicknamed the "Swatchmobile". The car was supposed to use innovative features (such as a hybrid engine) and to be an affordable car for young people. Its purpose was to "transport two people and a case of beer" (later replaced by a case of water).
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Being inexperienced in automobiles, Swatch CEO Nicolas Hayek sought an established car maker to produce his Swatch car, and found a partner in Volkswagen. Plans never reached a final stage so Swatch teamed up with Daimler-Benz. The car proved to be far from expectations: technology was conventional and it was more expensive than most small 4 seater cars sold in Europe. The joint venture experienced heavy losses and Swatch pulled out.
In 2005, Daimler-Chrysler decided against purchasing a 50% share in the Dutch NedCar plant used to manufacture the Forfour supermini. DC also halted development on the Formore and decided to discontinue production of the Roadster.
In 2006, after dwindling sales, smart GmbH was liquidated and its operations transferred within the Mercedes-Benz automobile group. It was later revealed that smart GmbH lost nearly 4 billion euros from 2003 to 2006. In the same year, Daimler-Chrysler announced that it would also cancel the Forfour and redesign the Fortwo to debut in Europe in 2007.