Lincoln Mercury: Rich Brand, Poor Brand

While one nameplate thrives, the other is stuck in low

A sparkling $50,000 Lincoln Navigator sport-utility sits like a crown jewel, front and center, in the Lincoln Mercury showroom John Evans spent $2.5 million overhauling this year. Flanking the chromed behemoth along the glassed front of his Garden City (Mich.) dealership are sleek Lincoln LS sedans. Along the back wall, a starburst sign identifies the store: "Stu Evans Lincoln." Where's Mercury? Tucked around the corner, in what was once the parts department. Says Evans: "If I could start with a clean sheet of paper, I would separate these two brands."

So would the analysts who follow parent Ford Motor Co. and some executives at corporate headquarters. Ford is on a roll: It's the world's most profitable auto maker and No. 1 in the sport-utilities market. Even Jaguar has clawed its way to quality (see story below).

Then there's Lincoln Mercury. Once, the two aging brands foundered together. Now, Lincoln and Mercury are driving off in different directions. Lincoln, which dethroned Cadillac last year as America's top-selling luxury marque, is picking up younger buyers, thanks to the Navigator. And the new $33,000 LS gives it a chance to reestablish its car credentials among baby boomers. "The LS could transform Lincoln," says automotive consultant Christopher W. Cedergren of Nextrend Inc. in Thousand Oaks, Calif. Adds Lincoln Mercury President Mark Hutchins: "This is really a watershed product."

Mercury, in contrast, remains a muddled mix of models, ranging from the edgy Cougar to Grandpa's land yacht, the Grand Marquis. Ford's better and best brands have been yoked together since Mercury--a tarted-up Ford--first appeared in 1939. But today the pairing makes little sense. Ford dealers offer many upscale models, and Lincoln makes no clear connection to Mercury. "Mercury's image is the same as it was 30 years ago: fuzzy," admits Hutchins.

Is Ford ready to abandon Mercury? Not quite. While that debate has raged at Ford since CEO Jacques A. Nasser took the wheel on Jan. 1, he has only agreed so far to ask dealers to segregate the brands like Evans does. Nasser is hoping new models that blend attributes of cars and SUVs will make Mercury a well-differentiated, affordable alternative to Lincoln.

"DEAD BRAND." Could Mercury go it alone? Ford is still weighing that option. But there's a big argument against it: No dealer could support a stand-alone Mercury store. Even with the Cougar lifting sales 9% this year, Mercury loses money. "Mercury doesn't make us a dime," says Martin "Hoot" McInerney, a Southfield (Mich.) dealer.

As for Wall Street, it wonders why Ford is investing millions to revive Mercury when Lincoln makes most of the division's estimated $1.6 billion profit. "Mercury is a dead brand," says analyst Maryann N. Keller of ING Baring Furman Selz. "They should get rid of Mercury and give whatever products they need to Lincoln."

Meanwhile, Lincoln continues to ride the truck trend. Coming next year: the $50,000 Lincoln Blackwood, which fuses the Navigator's passenger compartment with a short pickup bed. And Ford insiders say Lincoln might get a version of the giant Excursion sport-utility, which analysts estimate would sell for over $50,000 and generate $20,000 in profit per vehicle.

This year's new Lincoln, the LS, is off to a promising start. Dealers report brisk sales for the sporty sedan, which looks more like a Lexus than a Lincoln. But since Ford acquired Volvo, the plan to turn the LS into Lincoln's export vehicle has been shelved. "Now, with Volvo, we have to come up with the ideal strategy for which brand in which countries," explains Ford's new luxury-car czar, Wolfgang Reitzle.

Still, Lincoln is looking more like a brand that can stand on its own four wheels. Hutchins insists Mercury can, too. But he concedes that if new models don't connect with young, affluent buyers, "there's no reason for the brand to exist." That might cause John Evans to think about converting his Mercury space back into a parts department. Or better yet, fill it with Lincolns.

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