Daimler is planning to end an agreement with Penske Automotive Group regarding the distribution rights of Smart cars in the United States and transfer all activities to Mercedes-Benz USA, starting from the end of the second quarter of 2011.

“We are very excited about working toward integration of Smart into the MBUSA organization, and look forward to working with our dealer partners to exceed customer expectations for this unique vehicle,” said Mercedes-Benz President and CEO, Ernst Lieb. “The addition of smart, combined with our Autohaus dealer initiative, will help us build upon the tremendous momentum the Mercedes-Benz brand has achieved here in the U.S.”

Penske began selling the Lilliputian Smart Fortwo in the USA as an independent distributor in January 2008, and partially thanks to sky rocketing gasoline prices at the time as well as the initial shock factor, the company managed to sell close to 25,000 units that year. However, sales plummeted the next two years dipping to 14,600 cars in 2009 and to less than 6,000 units in 2010.

“Introducing the smart brand to the U.S. has been a unique opportunity for us,” said Penske Automotive Group Chairman Roger Penske. “Over the last three years I’ve experienced the passion consumers express for the brand as we delivered over 45,000 vehicles. Aligning smart distribution with Daimler, as it is worldwide, is the logical next step for the smart brand in the U.S. This alignment will enable the smart brand to grow through the Mercedes-Benz dealership network and lead the way in conservation and meeting future fuel economy standards.”

The decision to break up with Penske also marks the end of the firm’s plans to add a Nissan Micra-based model to Smart’s U.S. lineup in late 2011.

The company is readying its own five-door model (see our most recent scoop story here) using a new rear-wheel drive platform that is being currently developed in cooperation with the Renault-Nissan Group, but the four seat hatchback isn’t expected for another two to three years.

Sources: SmartUSA via Autonews (Sub. Required)