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Mercury in reverse as star has fallen: Ford denies division's future is in question
(Chicago Tribune (KRT) Via Acquire Media NewsEdge) May 17--Sales are sinking and jobs are disappearing in the auto industry. When production cuts aren't enough, there is another option: eliminate a division.
And that talk is swirling around Ford Motor Co.'s Mercury brand.
Founded in 1939 by Edsel Ford as a bridge between Ford's everyman vehicles and upscale Lincolns, Mercury has lost nearly two-thirds of its annual sales volume since 1999. This year alone, its sales are off 23 percent in the U.S.
On top of that, industry analysts can find no evidence of plans for new products for the division that sells spiffed-up Ford models for some $1,000 more.
"The Ford party line is that Mercury has a bright future, but we can't see any future for them," analyst Aaron Bragman of industry forecaster Global Insight said. "There's nothing in the product pipeline for Mercury, and it looks like it's just going to be left to die."
Ford denies Mercury is going anywhere, but it hasn't said enough to quell speculation that Mercury will join Oldsmobile and Plymouth in the automotive graveyard.
"We've said consistently that Mercury has a role to play and that it brings in new customers," spokesman Jim Cain said, declining further comment. "We've also been very clear that Lincoln is going to become the volume brand in the Lincoln-Mercury franchise."
Dan Marks, owner of Libertyville Lincoln-Mercury, said dealers have been told a decision on Mercury's future could be made this year.
"It's somewhat frustrating. I would hope they would give a direction so we can go forward," Marks said, adding that he and other dealers think Mercury could survive with a smaller lineup.
The Milan sedan and Mariner sport-utility are most popular at his store, and he said both attract buyers younger than are typical for Mercury. (J.D. Power and Associates says the average Mercury buyer is 55.)
"It would be a great fit as a niche brand on a smaller scale. It could be two or three models instead of five or six," Marks said. "Obviously, you have to have new product behind it."
And therein lies the rub. The only fresh thing Mercury has coming is the 2010 Milan sedan, which like the similar Ford Fusion will receive new styling and features and a hybrid model.
Lincoln, on the other hand, looks to be in line for a version of the Ford Flex, a seven-passenger crossover that goes on sale next month, and Global Insight is forecasting that the next-generation Mariner will be rebadged as a Lincoln.
Lincoln and Mercury have been a combined division since 1945.
Jerome York touched off the latest speculation about Mercury. In an interview, the representative of activist investor Kirk Kerkorian, who recently took a 4.7 percent stake in Ford, said there was no "rational reason" for Ford to keep Mercury and Volvo.
Though he apologized for the "off-the-cuff" remark, it was too late, considering Kerkorian's tendency to tinker with companies in which he holds stakes. Aside from a small uptick in 2005, Mercury sales have been on a steep slide the last eight years, falling to 168,422 last year, a little over 1 percent of the market, from 438,000 in 1999.
General Motors' Buick division has seen a similar slide in the U.S., to 185,791 in 2007 from 445,611 in 1999, sparking similar speculation about its future.
But Buick sold 332,000 vehicles last year in China, where it has cachet. There's no such prospect for Mercury, which is sold only in the U.S. and Canada.
Mercury and Buick have suffered in the U.S., in part, because both are perceived as brands for older buyers, Young drivers and the next generation are seen by some analysts as being more open to import brands, perhaps willing to buy even a Chinese vehicle expected here in future.
Japan's Isuzu had limped along in the U.S. for year before its parent announced in January that it would leave this market in 2009. But other than Mercury, Bragman doubts other brands are endangered.
GM is consolidating dealerships into multifranchise outlets that sell Buick, Pontiac and GMC vehicles, and others that sell Cadillac, Hummer and Saab. Chrysler has a similar strategy to put Chrysler, Dodge and Jeep brands into one showroom.
"You can get rid of clutter without getting rid of a brand," Bragman said.
Eliminating a brand cuts product-development and marketing costs, Bragman said, but carries its own liabilities, including the risk of alienating owners.
"There's no good way to do it" because dealer franchise laws vary by state, he said, and Ford could face lawsuits from dealers seeking compensation. It took GM more than four years to phase out Oldsmobile and cost about $930 million.
And though an automaker can't force dealers to combine, a lot have. Of 1,897 Mercury franchises, 450 are paired with Lincoln, and the rest are either Ford and Mercury or all three brands. None are stand-alone stores.
rpopely@tribune.com
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