Smart may not make a profit but its cars have a cult following

In a leaked letter to Smart employees, Ulrich Walker said that while the firm was still not making money, "the existence of Smart is not at stake".

His comments came after a Daimler senior director said "all alternatives" for Smart were being looked at.

The distinctive city car firm has not made a profit since it started in 1998.

"Giving up the Smart brand or selling our business is not being discussed," said Mr Walker.

"[Chief Executive] Juergen Schrempp and [Mercedes Car Group head] Eckhard Cordes confirmed this to me personally in conversations yesterday."

Persistent losses

A DaimlerChrysler spokesman said the closure or sale of Smart is not under consideration but the group is discussing plans to make the company profitable.

The persistent losses at Smart were a major contributing factor to the quarterly fall in profits at Mercedes, DaimlerChrysler's key German car-making division, of which Smart is a further subsidiary.

Third-quarter operating profits at Mercedes were down 62% year-on-year at 304m euros (�211m; $386m), it was announced on Thursday.

DaimylerChrysler chief financial officer Manfred Gentz said Smart had shown a "strong deterioration".