Ford's Lincoln: Rough Road Ahead

Ford faces big challenges as it positions Lincoln in the luxury market to take share from Lexus and Cadillac.
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DETROIT (TheStreet) -- The U.S. luxury car market is a tough one, dominated by foreign automakers and long consistent in not rewarding companies that seek to make luxury cars of common cars.


(F) - Get Report

faces a big challenge as it moves to position its Lincoln brand to take share from Lexus, the top-selling luxury car made by


(TM) - Get Report

, and from Cadillac, the No. 4 car. Theirs are the customers that Ford says it is targeting, rather than those who buy European cars from BMW and Mercedes, brands that rank second and third in the market.

"Lincoln can be a very successful brand, but it will not compete with Mercedes, BMW or Lexus," said auto analyst John Wolkonowicz of IHS Global Insight. "I think Lincoln has become a Buick competitor, and there it will stay. There's nothing wrong with that -- it might be a good strategy. But Lincoln is not going to wind up at the top of the premium heap."

Instead, Lincoln's best shot at the luxury market will come in trying to outpace Cadillac. "Clearly, being domestic, going against Cadillac is where they have the highest chance of conquest," said analyst Jesse Toprak. "They can also try to tackle Lexus, which right now, because of the whole

Toyota fiasco

, is as vulnerable as it has ever been."

Wolknowicz said it's clear that by

shuttering its Mercury brand in the fourth quarter of this year, Ford is moving in the same direction as Toyota, which has one all-inclusive brand and one luxury brand, and

General Motors

, which has dramatically reduced its brand count. But while paring back has been a key element of GM's restructuring, and while it will undoubtedly enhance Ford's ability to

allocate more resources to Lincoln, it does not guarantee success.

Read on for more about Lincoln and a quick history of the country's luxury car market.

1927 Pierce Arrow Series 80 Roadster

America's first successful premium brand, the


, was built in Buffalo and gained stature when President William Howard Taft ordered two in 1909. Successor presidents also rode in them.

"It was the premium brand of preference," Wolknowicz said. But as sales fell, it was eventually sold to


and then closed.

1930 Packard Deluxe Eight

In the early 20s, the concept of chauffeur-driven luxury cars like the Pierce-Arrow began to give way to owner-driven cars, and a new brand,


, emerged as the favorite. "In the 20s, owning a Packard was like owning a BMW," Wolknowicz said. "Pierce-Arrow still had a lot of prestige, but if you were a young, up-and-coming wealthy person and you drove it yourself, the superior car was Packard, which was easy to drive and had a lot of power."

Packard benefitted from superior design and from developing a smoothly operating V-8 engine.

1956 Cadillac Eldorado Seville

Founded in 1902, Cadillac was purchased by General Motors in 1909. It was known for precision engineering, but according to Wolknowicz, the Packard engine was superior and Packard continue to dominate until Cadillac introduced the Lasalle in 1927.

During the Depression, when there was no market for luxury cars, GM survived on sales of Chevrolet and Pontiac. Packard was forced to develop a cheaper car as well, but putting its premium name on a less exclusive lineup diminished the brand. "After the war, Packard moved from a premium brand to a middle-priced brand," Wolknowicz said. "Americans wouldn't buy the premium version anymore. Cadillac went to first place and took off, outselling all the other luxury brands combined."

The LFA 12 F-Performance LEXUS

Today, Lincoln is mostly likely to compete with Cadillac and Lexus. Of late, Toyota's lux brand seems especially formidable: Lexus scored a 31% sales gain in May, its best sales month of the year. Lexus sales easily eclipsed the 6.7% increase by Toyota as well as the 19% overall gain in U.S. vehicle sales for the month.

1947 Lincoln Continental

Founded in 1917, Lincoln was acquired by Ford in 1922. It was operated by Henry Ford's son Edsel, who turned it into a luxury brand that periodically moved ahead of Cadillac in sales, including a stretch in the 1980s. But eventually, Lincoln became "a purveyor of fancy Fords with the same platforms and the same engines," said Wolkonowicz.

While Ford CEO Alan Mulally's One Ford vision is clearly benefitting his company, it may be a disadvantage when seeking to differentiate a luxury car. "It's an uphill battle," said Toprak. "If you go way back in history, Lincoln had its moments, but in the last couple of decades, Lincoln has never been a volume brand or a brand with tons of credibility."

-- Written by Ted Reed in Charlotte, N.C.