DaimlerChrysler and Mitsubishi have signed a non-binding terms sheet which will see them negotiate measures to cancel production of the Smart Forfour.

The signing marks the start of formal negotiations, with the goal of entering into a binding agreement.

Daimler announced this week it would put all focus onto its Fortwo to ‘ensure the long-term sustainability of the Smart brand’.

The cut of the Forfour model will mean a loss of approximately 300 employees at the Smart plant in Boblingen, Germany.