DETROIT -- Ford Motor Co., moving to wind down Mercury, is offering dealers the chance to be guaranteed that their cash settlement is paid out by year end.
The catch is dealers must report their Mercury vehicles as sold by Nov. 12 and then sell those remaining vehicles as used.
Ford announced in June it would discontinue the Mercury brand by Dec. 31. There are about 1,294 Mercury dealers still in business, a Ford spokesman said Tuesday.
The automaker is giving dealers the option to report any new Mercury vehicles they own as sold using a “final pay” system, Ford spokesman Steve Kinkade wrote in an e-mail.
Final pay is the amount the automaker pays dealers when they sell a vehicle. It includes dealer cash and other vehicle incentives, Kinkade said.
“If a dealer has 10 vehicles left on the lot, they can report all 10 sold and get paid out for those vehicles and then go ahead and sell them as used,” Kinkade said.
If final pay is chosen, the dealer must do it by Friday to get paid by the end of the year.
“Then our team would guarantee the deal would be complete by end of year,” Kinkade said.
Dealers still have the other option: sell the vehicles as new until Dec. 31. Ford will offer final pay or retail incentives on all remaining 2010 and 2011 model year vehicles, Kinkade said.
Many Mercury dealers are reluctant to sign a settlement with Ford because they want larger payments.
Dealer lawyers have seen settlement offers ranging from $100,000 to nearly $800,000. Ford has declined to comment on the amounts. The company says it will pay 100 percent of what dealers paid for parts. Dealers also may keep and sell them, Ford says.
A quick shutdown
Analysts say Ford is making the latest offer to expedite the shutdown of Mercury and avoid lawsuits.
"You want to create an incentive to get things taken care of quickly," said Dave Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Mich. “Ford can afford it right now. They're in a good financial position, and they want to clean things up as soon as possible.
“These guys are going to go away anyhow, so how do you make this happen as painless as possible? That's what we're looking at here. How would you like the check sooner?"
Cole said Ford's offer is not a bad deal, considering used-vehicle prices are strong right now. But he said that if dealers accept it, they sign the deal and it's all over.
And if a majority of dealers elect to take final pay for their remaining Mercury vehicles, Cole speculated those who don't may need a better offer to go away. That could create resentment from those who opted out early.
"Whatever happens, I'm sure there's going to be litigation,” Cole said. “I don't see how they avoid it, frankly, unless they pay such an astronomical amount to dealers that they go quietly and happily."
Ford has a 35-day supply of Mercury vehicles left or “well under” 10,000 vehicles, George Pipas, Ford's lead sales analyst, said during a recent conference call.
Ford expects to be sold out of any remaining Mercury vehicles by mid-December, said Kinkade.
Through October, Mercury sales are up 4 percent this year to 78,656.