In the late 1980's Swatch CEO Nicolas Hayek began on an idea to develop a car that would feature similar manufacturing and personalisation ideas as those used with Swatch watches. Hayek was convinced that the automobile industry had failed to provide any solution to customers wanting a smart and stylish "city car". The idea was born and quickly became known as the "Swatchmobile".
Concerned that established manufacturers would move to counter that "Swatchmobile" Hayek sought to establish ties with establish manufacturers.
Therefore in 1991 Hayek came to an agreement with Volkswagen which would mean the two companies would share and develop the project.
The partnership ended in 1993 when Volkswagen was looking to pursue its own "city car" project. Hayek had already expected this possible and had been talking to other manufacturers as potential new partners.
In 1994 an agreement was signed with Mercedes Benz to found a new company "Micro Compact Car AG" which would design and develop the cars.