Mercury lineup could begin dwindling away soon

DETROIT -- Ford Motor Co. plans to kill the 71-year-old Mercury brand slowly by starving it of product, two sources tell Automotive News.

Ford leaders plan to propose eliminating Mercury to the board of directors in July. They believe Ford no longer can justify the cost of supporting Mercury in light of the brand's declining volume, the sources say.

The company has been laying the groundwork for eliminating Mercury for years.

Decades ago, Lincoln dealers were encouraged to add Mercury franchises to give them the volume they needed to survive. In recent years, Ford has pushed consolidation of those dealerships into Ford-Lincoln-Mercury stores. Those dealers now derive their volume from Ford brand sales.

At the end of 2009, Ford Motor had 1,780 Mercury franchisees, but there were only 292 stand-alone Lincoln-Mercury stores. There are no stand-alone Mercury stores. Lincoln-Mercury dealers sold 175,146 vehicles in 2009; only 92,299 were Mercurys.

Ford also has eliminated separate Ford and Lincoln Mercury divisions within the company. It has merged the Ford and Lincoln Mercury dealer councils. Some Mercury franchisees say that Ford has stacked the Lincoln Mercury side of the council with dealers who also have Ford stores.

"They were at least signaling this a year or so ago," says a Ford dealer who asked to not be named.

Another hint was Ford's exclusion of Lincoln-Mercury dealers at a recent dealer meeting in Detroit, some dealers say. Ford says it will hold a meeting for Lincoln-Mercury dealers this fall.

Still, some Mercury dealers were surprised by the news.

"We're totally blindsided if this is true," says Dan Pfeiffer, owner of Pfeiffer Automotive Group in Grand Rapids, Mich., where he sells Lincoln and Mercury vehicles. "It shakes your faith in Ford Motor Co. if they do that without even the dealers knowing about it."

As of Friday, May 28, Ford had not sent a statement to dealers or arranged a conference call with them to address the issue, which surfaced earlier in the week in news reports. Ford spokesman Mark Truby said Ford's plans for Mercury were unchanged, but he added, "We constantly assess our business portfolio."

Mercury currently sells four models: the Milan and Grand Marquis sedans, the Mariner crossover and the Mountaineer SUV. Two of those could be gone soon.

Ford is expected to introduce a slightly smaller, redesigned Ford Escape crossover for the 2012 model year based on the next-generation European Kuga. That would be a convenient time to discontinue the Escape's sibling, the Mercury Mariner, a source says.

Ford had planned to revive the Tracer name with a Mercury version of the Focus small car early next year. Both sources say that car is likely dead. Ford is expected to drop the Mountaineer SUV this year. In 2011, the Grand Marquis is expected to die, and the plant that builds it will cease operations. That would leave Mercury with just the Milan sedan.

Lincoln and Mercury's combined sales each of the last two years was less than a plant's worth of production. Mercury's sales have fallen 74 percent since 2000.

Ford simply doesn't have a business case to justify the cost of maintaining a separate organization, marketing and advertising for Lincoln Mercury's small levels of production and sales, one source says.

Some Lincoln-Mercury dealers are angry and worried about their future. If Ford kills the brand, they fear the value of their stores will plummet and their ability to leverage the Lincoln Mercury assets to buy a Ford shingle will be severely compromised. They also worry about selling current inventory now that rumors of the brand's demise are out.

"It's certainly a misfortune that this news comes out," says Ed Witt, owner of Witt Lincoln-Mercury in San Diego. "Whether it's on purpose, by accident or a leak, it was by no means the way to treat the public or the dealer body."

But Witt is optimistic Ford will offset the loss by investing in Lincoln.

The biggest issue Ford would face in dropping Mercury is figuring out how to pair Ford dealerships with the remaining Lincoln franchises, says a source. Ford doesn't want Lincoln-Mercury dealers to die without giving them a chance to make deals for survival by selling to a Ford dealer or acquiring a Ford franchise.