Smart is being pared back to a single model, the ForTwo. In a shock announcement, DaimlerChrysler admitted it was in negotiation with manufacturing partner Mitsubishi to terminate production of the ForFour.

The slow-selling supermini will be mothballed this year, at a cost of around £700m. It follows the demise of the Roadster and ForMore SUV, both canned a year ago.

The decision means Smart will be back where it started in 1998, albeit with a new version of the ForTwo, due for launch in spring 2007.

The city car blueprint is identical to today’s car’s: two seats, rear-engine, rear-drive. For once, an all-new model won’t have a massive growth spurt – it would be rather missing the point. However, the new Smart is based on a modular architecture, which this time should support a long-wheelbase version with a 2+2 seating arrangement. The chassis will be more sophisticated than today’s, with beefier brakes, greater refinement and less edgy handling. 

The standard version remains a two-seat, three-door hatch. A soft-top cabriolet is also a given, but sources suggest other variants are on the drawing board: a speedster picking up from the wildly impractical Crossblade, and a van with echoes of last year’s hideous Crosstown concept.

With Smart’s clever plastic clip on panels, the front and back ends should be customized to suit each body style.

The drivetrain is being supplied by Mitsubishi. The engine is an all-new 660cc triple, introduced in the iCar. Breathed on by a turbocharger, Mitsubishi’s petrol engine produces 64bhp and 61lb ft.

It’ll be pokier than today’s engine, and like the Aygo’s triple, emits a mellifluous humming sound. Power is sent to the rear wheels via a smooth, four-speed automatic transmission. Expect a manual over-ride function for self-shifting.

The ForTwo has been homologated for the United States, and DC bosses are tipped to give exports the green light within weeks. With a broader range of bodystyles, and almost certain US sales, ForTwo volumes could grow by almost 50%.

They’ll have to. DaimlerChrysler may have taken down the ‘for sale’ sign that’s been towering over its small car division, but the new ForTwo family is clearly the last throw of the dice for the brand. The 52 UK Mercedes-Benz dealers carrying the Smart franchise will be watching with interest.