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THE GARAGE

As sales dwindle, Mercury may come to end of the road

Speculation mounts that Ford could discontinue the nameplate soon

May 10, 2008|Martin Zimmerman | Times Staff Writer

Is Mercury headed for the junkyard?

Speculation is mounting that Ford Motor Co., preoccupied with reviving its Ford and Lincoln brands, might decide to retire the Mercury nameplate rather than spend scarce resources trying to restore its former luster.

Despite denials from Ford, the conjecture got a boost last week when Jerome York, a former auto executive and advisor to billionaire investor Kirk Kerkorian, said shedding the brand would be a smart move for the struggling automaker.

York's opinion carried some weight, considering that Kerkorian's Tracinda Corp. recently revealed that it owned 4.7% of Ford and said Friday that it might raise its stake to more than 5.5%.

An even more influential vote on Mercury's future is being cast in auto showrooms across America.

After regularly selling half a million vehicles a year during the mid-1980s, Mercury sold only 168,000 cars and sport utility vehicles last year. Its U.S. sales are down 23% this year -- the biggest drop for any brand except Chrysler and Hummer.

"Mercury has one more product cycle left in it, and then will almost certainly be retired as a brand," analyst Aaron Bragman of market researcher Global Insight wrote in a report this year.

It would be a sad end for a marque that had generated its share of automotive history. Launched in the 1939 model year as a "step-up" car for buyers between economy Fords and upscale Lincolns, Mercury was known for its powerful V-8 engines and became popular with hot rodders.

James Dean drove a black '49 Mercury Club Coupe in the 1955 movie "Rebel Without a Cause," cementing the brand's place in American pop culture.

"It became an icon for teenagers," said Gary Richards of Sun City, Calif., a member of the International Mercury Owners Assn. "James Dean was cool; he drove a Mercury; ergo, Mercury was cool."

Mercury cruised through the '60s and '70s on the momentum of popular cars such as the Cougar. But by the late 1980s, the brand was suffering an identity crisis. Most products were "twinned" with nearly identical Ford models, and beyond the badge and distinctive grille (it resembles a waterfall) there was little to differentiate a Mercury from a Ford except for the higher sticker price.

"It's hard to sell a Mercury when it looks just like a Ford that's priced at $4,000 less," said Tom Libby, an auto industry analyst at J.D. Power & Associates.

Eyebrows went up a couple of years ago when Ford opted not to produce a Mercury-badged version of the much-anticipated Edge crossover SUV. The vehicle has been a strong seller for the blue oval and could have given the Mercury lineup a boost, analysts say.

As its product lineup has aged, so has the brand's customer base. The average Mercury buyer is 55, according to J.D. Power, well above the industry average of 47. The yacht-like Grand Marquis skews even older, with an average buyer age of 72.

Brand loyalty is flagging as well, with 35% of Mercury owners opting to buy the same brand of vehicle compared with an industry average of 45%, according to market research firm R.L. Polk & Co.

Ford insists that it has no plans to sell or scrap Mercury. Although there are no all-new vehicles on the drawing board for the brand, an updated version of the Mariner mid-size SUV is scheduled to be in showrooms this summer, and updated versions of the Milan sedan -- including a hybrid -- are due early next year.

"Rumors of Mercury's death have been greatly exaggerated," Ford spokesman Mark Schirmer said this week. "We've been very clear to the dealers that no decision has been taken to discontinue the brand."

The dealers, in fact, could be the key to Mercury's fate. Although there are no stand-alone Mercury stores left, about 1,900 dealerships sell the brand in combination with Ford or Lincoln or both.

Because of franchise agreements and state laws that protect car dealers, killing off a line of vehicles can be a real pain, as General Motors Corp. discovered when it pulled the plug on Oldsmobile eight years ago. GM set aside almost $1 billion to handle the transition and still spent more than five years battling dealer lawsuits.

"Discontinuing a brand isn't as easy as you might think," said Libby of J.D. Power. "It's a long-term process and it can be very expensive."

Given all of the other issues on Ford Chief Executive Alan Mulally's plate right now, the headaches that would accompany the demise of Mercury might help keep the brand alive -- at least for now, said Lonnie Miller, director of industry analysis for R.L. Polk.

"I think it's premature for Ford to cross that bridge when they have so much else to worry about," Miller said. "Beyond two or three years, though, anything goes."

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martin.zimmerman@latimes.com

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