Why Ford Keeps Mercury

Mercury Grand Marquis

DETROIT TheStreet) -- General Motors may be shedding brands, but Ford (F) has no plans to dump the 70-year-old Mercury brand, despite lagging sales.

After all, without Mercury, what would Lincoln-Mercury dealers do?

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Mercury sold just 93,000 vehicles last year -- about half of what Pontiac sold and only 20,000 more than Saturn sold. Moreover, Mercury accounted for just 5% of Ford sales, while Pontiac was 9% of General Motors sales. Still, Mercury will likely remain, even though Pontiac is gone, Saturn is gone, and Toyota (TM) and Nissan continue to focus on two brands, one aimed at the broader market, one at the luxury market.

Ford pursues a differ strategy, primarily to buttress its distribution structure, which pairs Mercury with Lincoln. "We have a great distribution channel, we have many Lincoln-Mercury dealers, and they make a reasonable return," said Ford CEO Alan Mulally, in a recent interview. "It's a good brand in the U.S. and it's been a good brand for a long time.

"The main focus is on Ford, absolutely, but we're also focused on Lincoln, and we repositioned Mercury -- we are focusing on the smaller vehicles in the Mercury brand (because) it's a very good compliment to Lincoln," Mulally said.

Analyst John Wolkonowicz of IHS Global Insight said Ford would like to build Lincoln into a stand-alone luxury brand, but that is a work in progress. In fact, in 2009, Lincoln sold 83,000 vehicles, fewer than Mercury and significantly fewer than the 109,000 vehicles sold by Cadillac, which supports its own dealership structure.

"It's not a good idea to combine Lincoln with Ford, to sell a premium car in a high volume store with cars and trucks," Wolkonowicz said. "So as long as Lincoln volume remains insufficient to be a standalone brand, there will be Mercury."

Ford created Mercury in 1939 as an effort to squeeze a brand in between mass-market Ford and high-end Lincoln. "It has always been Ford-plus, with a bigger engine, more chrome, more trunk space," Wolkonowicz said. Sales topped out at 580,000 in 1978 and reached 480,000 in 1993, but have been in decline since. Today, Wolkonowicz said, "It is a brand that is a favorite of the Depression generation, people who bought it when they were kids in the 30s and 40s." The pool of these buyers is not increasing.