While design of the car was proceeding, SMH CEO, Nicolas Hayek feared existing manufacturers would feel threatened by the Swatchmobile. Thus, rather than directly competing, he prefered to cooperate with another company in automotive industry. This would also relieve SMH of the cost burden in setting up a distribution network.
Hayek approached several automotive manufacturers and on July 3, 1991 he reached an agreement with Volkswagen to share development of the new project.
By 1993, Volkswagen had already been working on their own "three-litre car". Hayek had suspected that Ferdinand Piëch (the CEO of Volkswagen) would seek to end the agreement with SMH, he discreetly began approaching other car companies with the Swatchmobile project.
He finally reached an informal agreement with Daimler-Benz AG, maker of Mercedes-Benz cars.
While they are setting up the new company, Nicolas Hayek insisted it retain 'Swatch' in some way: "Swatchmobile", or "Swatch Car". Daimler-Benz refused, and pushed for a neutral name.
The final name settled upon was Smart, an acronym for Swatch Mercedes Art.
source from: http://en.wikipedia.org/wiki/Smart_(automobile)
