Ford to shut down iconic car brand

Ford Motor Co. will cease production of its 72-year-old Mercury brand by the end of 2010 after years of declining sales.

Mercury’s death is the latest in a string of casualties as Detroit carmakers try to cut costs and invest more heavily in fewer offerings. By shedding a mid-range brand that was more and more irrelevant to buyers, the automaker can focus on accelerating sales of Ford and beefing up its luxury Lincoln brand.

Ford plans to expand its Lincoln lineup to make up for lost Mercury sales and support Lincoln-Mercury dealers who will suddenly be without a brand. Derrick Kuzak, Ford’s product development chief, said Lincoln will have seven new or revamped vehicles in the next four years, including the brand’s first compact car.

The automaker’s board of directors approved ending the brand Wednesday morning. Ford Americas President Mark Fields said the decision was made this spring as part of an annual business review. He said Mercury’s sales make up such a small percentage of North American market share — less than 1 percent, compared with Ford brand’s 16 percent — and that the profile of Ford and Mercury shoppers is so similar, it makes more sense to focus on Ford and Lincoln.

The move should help the Ford brand. Mercury was the No. 1 brand that was also considered by Ford buyers, said Aaron Bragman, an analyst for the consulting firm IHS Global Insight. Ford said 53 percent of Mercury shoppers consider Ford and Lincoln. Ford said it will offer discounts through the summer on Mercury vehicles to shed inventory.

Ford shares rose nearly 4 percent to close at $11.85.

Ford has 1,712 dealerships currently selling Mercurys, although none are stand-alone Mercury dealers. All sell either Lincolns, Fords or all three brands. Ford expects some of its 276 Lincoln-Mercury dealers will continue as stand-alone Lincoln dealerships and it will try to consolidate others into existing Ford dealerships.

All dealers will be eligible for compensation, although Fields wouldn’t say how much they will be offered.

Bob Tasca Jr., who owns two Mercury dealerships in Rhode Island and Massachusetts and is the head of Ford’s Lincoln-Mercury Dealer Council, said many dealers will get through the Mercury closure and do well selling Lincolns.

But he said the closure is still emotional, because dealers will have to lay off staff and, in some cases, close showrooms.

“From a financial standpoint, it was the only decision Ford Motor Company could make,” Tasca said.

Ford didn’t say how much it expects to pay to shutter the brand, but Fields said the closure doesn’t affect the company’s forecast that it will be solidly profitable this year. The company also doesn’t plan to lay off any workers at its Dearborn headquarters.

The story is a familiar one in Detroit. General Motors Co. recently shed the Saab, Saturn, Pontiac and Hummer brands. In 2004, GM spent more than $1 billion to kill Oldsmobile. Chrysler Group LLC dumped its Plymouth brand in 2001 after a sales decline similar to Mercury’s.

Mercury got its start in 1935, when Henry Ford’s son Edsel Ford began designing a more upscale car he planned to call the Ford Falcon. But he didn’t think it fit with the brand’s other offerings, so he created a new brand named for the winged Roman god.

The first Mercury, the 1939 Mercury 8, went into production in 1938. It sold for $916 and boasted a 95-horsepower V-8 engine. More than 65,800 were sold the first year.

For many years, Mercury remained the mid-range option between the no-frills Ford brand and the luxury Lincoln brand. But it struggled to find a niche. It tried importing some vehicles from Europe under the Merkur name in the late 1980s, but buyers weren’t ready for the advanced design and higher prices.

In recent decades, it has struggled to differentiate itself as Ford moved upmarket and the two brand’s vehicles became almost indistinguishable. The company also failed to give Mercury new products or advertising support. There is no Mercury version of the hot-selling Ford Focus, for example, or the Ford Edge crossover. Mercury currently has four models: The Milan sedan and Mariner small SUV and their hybrid versions. The Ford brand has nine.

Mercury’s sales peaked in 1978 at more than 580,000 vehicles. Just over 92,000 Mercurys were sold last year.

Even though some of its products such as the Milan have received strong reliability scores from Consumer Reports magazine and other outside groups, Mercury’s sales have never come close to Ford’s Fusion, which is nearly an identical car. While Ford sold more than 75,000 Fusions and Fusion hybrids through April of this year, it sold just 11,800 Milans and Milan hybrids.

But Mercury did have one thing in its favor: It consistently outsold the Lincoln brand, which has been struggling despite a relatively new lineup and high scores in dependability surveys. Mercury sold nearly 10,000 more vehicles than Lincoln last year, even though its sales fell 23 percent from the year before.

Ford will have to invest serious dollars into Lincoln to make the plan work, but it should be able to do that because it has unloaded Aston Martin, Land Rover, Jaguar and Volvo in recent years, said Bragman of IHS Global Insight.

He said the difference between Ford and Lincoln vehicles needs to be similar to the difference between Volkswagen and Audi or Toyota and Lexus.

Kuzak and Fields said that with the end of Mercury, Lincoln will have the resources it needs, and Kuzak said the brand will get more exclusive technologies in the future to differentiate it.

Pricing could be a stumbling block. A Ford Focus compact likely will run around $25,000 with options, Bragman said. Lincoln would have to charge more for a luxury compact, and Bragman questions whether people will pay that for a small car.

“There’s still some concern about whether Americans really do want these small cars,” he said. “We have to see the next-generation Lincolns.”

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