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Ford to close Mercury division despite higher auto industry sales

Major American automakers posted double-digit sales gains last month, but the industry’s recovery was not strong enough to save Ford Motor Co.'s Mercury brand.

Ford said Wednesday it would shut down the struggling Mercury division, which accounts for about 5% of Ford sales, later this year.

Mercury’s demise follows a string of famous American nameplates that have been dropped over the last year, including General Motors Co.'s Pontiac, Saturn and Hummer.

Ford plans to focus on the design and marketing of its more upscale Lincoln brand — including offering a compact Lincoln sedan — to replace sales that dealers will lose from the closure of the Mercury line. Mercury and Lincoln vehicles are often sold side by side in auto showrooms. There are no standalone Mercury dealers in the U.S., and Ford doesn’t expect the closure of the brand to result in any job cuts at the automaker.

“We have made tremendous progress on profitably growing the Ford brand during the past few years. Now it is time to do the same for Lincoln,” said Mark Fields, Ford’s president of the Americas.

Analysts saw Ford’s decision as a smart but difficult move that could be for naught if it is unable to pull off a massive renewal of the Lincoln brand, which through the first five months of this year trailed GM’s Cadillac and every other major German and Japanese luxury line in sales.

“Lincoln needs to be more youthful, and it needs to be a luxury brand with sex appeal, and it doesn’t have those characteristics right now,” said Rebecca Lindland, an auto industry analyst at IHS Global Insight.

Some dealers say closing Mercury will help Lincoln.

“Previously, with Mercury paired with Lincoln, it was kind of like selling Cartier watches and Timex watches side by side. It was hard to get the luxury experience,” said Brian Allan, general manager of Galpin Premier, a Lincoln Mercury dealer in Van Nuys.

Freed of Mercury, Lincoln can now become a “true competitor to Lexus and other imports,” he said.

Others were frustrated by Ford’s move.

“It’s a sad day for this 70-year-old marque, and its loss is disappointing for the more than 1,700 dedicated dealers who sell the Mercury brand,” said Ed Tonkin, chairman of the National Automobile Dealers Assn.

He said the trade association is concerned about the 276 dealers that only sell Lincoln and Mercury cars. They will be left with a sales gap until new Lincoln models arrive to replace the Mercury lineup, which includes the mid-size Milan sedan, the Mariner and Mountaineer sport utility vehicles and the Grand Marquis sedan.

Mercury loyalists were already mourning the brand’s passing.

“If you have a bunch of loyal customers, why don’t you build what they want? The people who own these cars love them,” said Gary Richards, 67, of Sun City, Calif. “They give them no cars to sell, and then they wonder why they don’t sell any cars. You don’t have to be a rocket scientist to figure that out.”

The Mercury brand was introduced in 1939 by Edsel Ford, son of company founder Henry Ford, to fill what he considered a void between the automaker’s mass-market Ford brand and the upscale Lincoln line.

Its sales peaked in 1978 at 579,498 vehicles and have since fallen precipitously. Mercury sold only 92,299 vehicles last year. By comparison, the Ford brand sold about 1.4 million.

Mercury continued to lose sales in May, a period during which the Ford brand had a robust performance. Sales of Mercury vehicles fell 10.7% to 9,128 last month, while Ford-badged auto sales rose 28% to 175,129, according to Autodata Corp.

Fields, the Ford executive, said it made sense to shut down Mercury now, when Ford’s finances are improving, because it has the funds to absorb the short-term costs of discontinuing the brand. He declined to say how much the shutdown will cost the automaker, but noted that Ford was sticking by its guidance to investors that it would “remain solidly profitable in 2010.”

Ford plans to offer extra incentives on Mercury vehicles to help the 1,712 dealers who carry the line sell off remaining inventory.

The decision to discontinue Mercury came as major automakers reported higher sales in May.

Overall, Ford sold 196,671 vehicles for the month, a 22% increase compared with a year earlier.

GM said Wednesday that its sales rose 32% in May compared with a year earlier, after factoring out the Pontiac, Hummer, Saturn and Saab brands it closed or sold as part of its bankruptcy reorganization.

Total combined sales for GM’s remaining brands — Chevrolet, Buick, GMC and Cadillac — hit 221,893 vehicles for the month, according to Autodata. Including the discontinued brands, sales rose 17.5% to 223,410, Autodata said.

GM appears to have regained much of the market share it lost when it discontinued Pontiac and the other brands, but part of its rebound was attributed to higher sales to rental car companies that are replenishing their fleets rather than a boom in retail business.

“We see this as a gradual recovery,” said Steve Carlisle, GM’s vice president of U.S. sales operations.

Chrysler Group sales jumped 32.7% to 104,819 vehicles. “May was another positive sign as sales momentum continues to build for Chrysler Group, exceeding the 100,000-unit threshold for the first time in more than a year,” said Fred Diaz, the automaker’s chief executive.

Toyota Motor Corp. reported a slim sales gain last month only because of robust sales by the company’s luxury Lexus division, which was offering aggressive sales incentives.

Toyota sales increased 6.7% to 162,813 vehicles, but its core Toyota brand rose just 3.6% to 140,597. The division’s passenger car sales fell 1.9% to 86,464 from the depressed levels of May 2009.

The effectiveness of incentives it offered for its Toyota line to maintain its market share amid a series of image-damaging recalls appears to be waning, analysts said.

The program, which offered cut-rate financing and low lease payments, sparked consumer interest when it was introduced in March, partly because Toyota rarely offered these types of deals on its vehicles, said Jesse Toprak, an analyst at auto information company TrueCar.com.

“For the most part, it caused loyal Toyota buyers who have been on the sidelines for the past year or so to go to the showrooms and pull the trigger. The incentives were too good to pass up,” Toprak said.

Overall industry sales came in at an annual pace of about 11.6 million vehicles, about on track for the 11.5 million to 12 million autos most of the industry estimates will be sold this year.

Through the first five months of the year, automakers have sold just under 4 million vehicles, up 17.2% from the same period a year ago, according to Autodata.

jerry.hirsch@latimes.com

Times staff writers Tiffany Hsu and William Hennigan contributed to this report.


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