June 2 (Bloomberg) -- Ford Motor Co., after selling its European brands, said it will discontinue its 71-year-old Mercury brand by the end of the year and expand its Lincoln lineup with a new small car.
Ford’s board voted today to cease production of all four of Mercury’s models in the fourth quarter, Mark Fields, the automaker’s president of the Americas, told reporters. Ford will send letters to 1,712 Mercury dealers this week offering them buyouts and giving some the chance to merge the Lincoln half of their franchise with Ford showrooms, he said.
“Given our improving financial situation, it really allows us to absorb the short-term cost of discontinuing Mercury,” Field said, declining to reveal the expected expense. “We’re very proud of Mercury’s history, but we’re now looking forward.”
Chief Executive Officer Alan Mulally has emphasized the company’s namesake brand as he revived the only major U.S. automaker to avoid bankruptcy. Mercury sales fell 74 percent from 2000 through 2009, and Ford said today they dropped 11 percent in May. The Dearborn, Michigan-based automaker will put more resources into the Ford and Lincoln lineups, Fields said.
“Sales had sunk too low to keep Mercury around,” said John Wolkonowicz, an auto analyst with IHS Global Insight in Lexington, Massachusetts. “The volumes are now probably too small for it to be profitable.”
Mercury will join Pontiac, Saturn, Oldsmobile and Plymouth among the departed Detroit brands of the 21st century. Edsel Ford, son of founder Henry Ford, established Mercury during the Great Depression as a mid-priced alternative to mainstream Ford and upscale Lincoln.
“It’s a sad day for this 70-year-old marque,” Ed Tonkin, chairman of the National Automobile Dealers Association, said in a statement. “Ford also needs to move quickly to take into account the millions of dollars that dealers have invested in facilities, equipment, personnel and training. They deserve fair compensation.”
Fields said there are 276 stand-alone Lincoln-Mercury dealers in the U.S., with the remainder combined with Ford showrooms. Fields said the Mercury dealers “will be fairly and reasonably compensated.”
Bob Tasca Jr., head of the Lincoln-Mercury dealer council, said Ford’s decision will hurt stand-alone dealers the most.
“The emotional side is that this affects people,” said Tasca, who owns Lincoln-Mercury and Ford showrooms in Rhode Island and Massachusetts. “Some dealers have got their homes mortgaged. A lot of them will make it and prosper, but some of them will go out of business.”
Ford canceled plans for the Mercury Tracer, a version of the Focus small car going into production late this year, said Derrick Kuzak, the automaker’s product development chief.
Lincoln’s new small car, one of seven new or refreshed models for the luxury line in the next four years, won’t be based on the canceled Tracer, Kuzak said.
“It will be designed to be exclusively Lincoln,” Kuzak said at a briefing in Ford’s design dome, surrounded by Lincoln models. “It will not be a badge-engineered version of another Ford or an outgoing Mercury product.”
Mercury sales peaked in 1978 at 579,498, when it had the slogan “At the Sign of the Cat.” Deliveries fell 84 percent to 92,299 last year. As the U.S. auto market recovers, Mercury’s sales are up 12 percent this year through May, less than Ford Motor’s overall gain of 30 percent, according to researcher Autodata Corp. of Woodcliff Lake, New Jersey. Mercury had 0.9 percent of the U.S. market through May, unchanged from 2009.
Mulally, since arriving from Boeing Co. in September 2006, worked to improve quality and expand the offerings of the Ford brand to lessen its dependence on pickups and sport-utility vehicles. He ended three years of losses at the automaker by earning $2.7 billion last year and has said 2010 will be “solidly profitable.”
Mulally also is unloading Ford’s European luxury brands, after the automaker failed to achieve a goal to have them generate one-third of automotive profits. Ford in March agreed to sell Volvo to China’s Zhejiang Geely Holding Co. It sold off Jaguar, Land Rover and Aston Martin in the last three years.
“This does not change the financial guidance where we’ve said we’ll be solidly profitable in 2010,” Fields said. “We decided we’re going to focus our efforts and our resources on continuing to grow the Ford brand and to accelerate Lincoln.”
Ford rose 44 cents, or 3.9 percent, to $11.85 at 4:15 p.m. in composite trading on the New York Stock Exchange. The shares have risen 19 percent this year.
To contact the reporter on this story: Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net.
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