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Will Mercury follow Olds?
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December 18, 2000: 12:15 p.m. ET
Analysts expecting Ford to follow competitors in thinning out brand lineup
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - The Mercury brand could be on a fast ride down a dead-end road.
The brand is in a difficult "middle ground" between the lower-priced volume brands, such as Ford, and the premium brands in the Ford Motor Co. family -- home grown Lincoln, and overseas acquisitions such as Volvo, Jaguar, and most recently Land Rover.
After last week's move by General Motors Corp. (GM: Research, Estimates) to phase out the Oldsmobile brand and the announcement by DaimlerChrysler (DCX: Research, Estimates) a year ago that it would drop the Plymouth brand, many believe Mercury will be the next model to be dropped.
 "The underperformance of the Mercury brand relative to the rest of Ford's brands is glaring," said Jonathan Lawrence, analyst with Dain Rauscher Wessels, who predicts an announcement by Ford as soon as the North American International Auto Show in early January in Detroit. "If you look at the Ford brands, every one has a distinctive identity. All of the Mercury models are basically twins of other Ford vehicles. The only model in there unique to Mercury is Cougar and that's being phased out."
Ford (F: Research, Estimates) officials deny there's any plans to drop Mercury, however.
"These rumors have been circulating for 30 years and they're still not true," said Jim Trainor, spokesman for Mercury. "Mercury makes a lot of money for Ford Motor Co. The economics are pretty simple. We don't have to be the biggest to make a contribution."
But even the company admits it is concentrating far more new vehicle development effort and dollars into the Lincoln brand, and relatively little to Mercury. The overwhelming majority of Mercury dealers are also Lincoln dealers.
"That's not to say Mercury will not get new product," said George Pipas, market analysis spokesman for Ford. "But in terms of the number of new products that the Lincoln-Mercury franchises are going to see coming to showroom, more investment and more product news will be on the Lincoln side of franchise."
Mercury has seen sales fall, although not quite as steeply as Oldsmobile. Still, sales of 339,069 vehicles by Mercury through the first 11 months of 2000 are off 17 percent from year earlier level, as its market share has slipped to 2.1 percent from 2.6 percent in 1999. As recently as 1993 the brand sold 483,845 vehicles and captured 3.5 percent of the overall market.
But Trainor says that some of the Mercury models are doing well in the face of the slowdown. He said the Grand Marquis, with sales of 114,946 year-to-date, should have its best sales in 14 years, although only slightly ahead of year earlier sales. The Sable, a twin of the Ford Taurus, also is ahead of year-ago sales through November.
Stepping stone brands become slippery
The middle brands were once seen as stepping stones for automakers to move their loyal customers from lower-price, entry level brands to the higher price luxury brands such as Lincoln or GM's Cadillac. But those lines have been blurring for years, and some competitors, such as Toyota Motor Corp. (TM: Research, Estimates) and Honda Motor Co. (HMC: Research, Estimates) have found success introducing luxury brands such as Lexus and Acura to the U.S. market without offering a middle brand.
 Even some of those who see a need for a Mercury brand say it no longer serves as a much of a transition to higher-priced brands as it once did.
Casey Johnson, owner of Fort Dodge Ford Lincoln Mercury in Fort Dodge, Iowa, a member of the Ford Dealers' Council, said that most of his Mercury customers are loyal repeat Mercury buyers, not people moving up the chain of brands. But he said the brand is still important, especially to the Lincoln Mercury dealers who don't also offer Ford.
"All the high-end cars are nice, but for dealer stability volume is key and Mercury is still a higher volume brand," Johnson said. "I think Mercury will be here for many, many years to come."
GM had eight domestic vehicle brands when it announced plans last week to drop the Oldsmobile line at the end of the product cycle of current models.
More complex marketing needs for Ford
While the Ford line-up was once a much simpler, with recent overseas acquisitions it has become far more complex in terms of its marketing needs. Ford must manage the three home-grown brands along with Mazda, Volvo, Jaguar, Aston Martin and the recently acquired Land Rover.
"Ford says it is committed to the Mercury brand but it's not investing in new products," said Mike Flynn, director of office for study of automotive transportation at the University of Michigan. "It has a much more complicated set of brands than it had five or six years ago. Mercury has a been a less visible brand than Oldsmobile in the last five years."
Mercury is also weighted far more to cars than the light truck models that have grown to capture about half of all U.S. vehicle sales. About 78 percent of its total sales are in car models, an even higher percentage than at car-dominated Oldsmobile.
The changes in the U.S. auto market makes ground very shaky for the middle brands, said Paul Ballew, general director, global market and industry analysis for GM.
"It's hard to be a niche, unless you're a niche with a specific point of differentiation. The middle market is a very difficult place to be a niche. That's lesson of what we've seen in recent years in Plymouth, Oldsmobile and Mercury."
Shares of Ford gained $1 to $23.50 in trading Monday. 
Click here to send mail to Chris Isidore
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