Report: Daimler to Sell 50% of Smart to Geely

Daimler AG plans to sell a 50% stake in its Smart minicar unit to Zhejiang Geely Holding Group Co., sources tell the Financial Times.

The deal will be confirmed ahead of the Shanghai auto show in mid-April, according to the London-based newspaper. Geely became Daimler’s largest shareholder in February when company chairman Li Shufu amassed a 9.7% holding in the German carmaker.

Daimler doesn’t report separate results for Smart. But analysts believe the unit has failed to turn a profit throughout its entire 21-year history. CEO Dieter Zetsche has championed the unit, but he is retiring in May.

Incoming Ola Kallenius is widely expected to focused on steps to improve the overall company’s shrinking profit margins. Handelsblatt reports that he is pushing for a resolution to Smart’s future by the end of this year.

FT notes that Germany, which was alarmed by Li’s stealthy acquisition of Geely’s 10% stake in Daimler, may object to the Smart equity sale. But the newspaper notes that Smart’s plan to convert all models to pure electric power by 2020 might make the brand a better fit for China’s booming EV market.