Debate: Did Ford pull the plug on Mercury prematurely?

[NickF1011]

Wow Nick, you really don't get the whole brand thing do you....

 

No one said that Ford had done a good job of differentiating Mercury. By your logic, the only choice was to operate Mercury very badly, or to shut it down.

 

So basically, Lincoln is in the same boat as there are even fewer customers there? How many other sales should Ford walk away from?

 

Lincoln really is in pretty much the same boat as Mercury. That's why one of them had to go. I really wouldn't have cared if it was Mercury OR Lincoln that went. But one of them had to.. Ford does not have the resources to make TWO more brands differentiated enough from Ford to justify them. The reason Mercury made more sense? 1. They had fewer vehicles. 2. The vehicles they do have are closer to the end of their product cycle than Lincoln's. 3. Lincoln is already differentiated from Ford more than Mercury is, making them an easier case to move even further away.

 

The success of Ford has nothing to do with Mercury. What is your point? With Mercury, without Mercury, Ford as a brand, will do what it will do. Mercury has been unsuccessful based on the way Mercury has been operated. Operating Mercuy badly, or not at all, is not the key to Ford brand success, unless you already believe that Ford's growth has already come at the price of Mercury sales.. What will be interesting is to see if Ford Corporate can retain the sales it was making to Mercury customers by now somehow converting them to Ford Brand customers. I am suggesting that they will not be able to do so. Time will tell.

 

In order to run Mercury "properly" as a stand-alone brand would require an enormous investment which Ford has decided would be better spent on Lincoln.

 

Every other manufacturer will also be vying for those sales... to customers that already decided once NOT to buy the product from Ford. You just don't get it. People bought from Mercury because they were not satisfied with the Ford brand offering, and that offering is more than just the vehicle: it is the meaning of the brand, the dealer experience, and a hundred other factors. To you there is no difference between a Ford and a Mercury. To you. So you would never buy the Mercury, and you don't understand why any one would. But a significant number of buyers do see a difference, and they are the ones that matter.

 

I would have bought a Mercury, if I thought they were worth the extra money, which most customers obviously didn't think they were. Mercury's sales were so small at the end it wasn't worth chasing after them anymore. Okay, so they shop around another brand. I think Ford is really okay with that. As long as Ford Motor Company as a whole is growing without Mercury, then fine. Let someone else chase after the elusive (and rare) Mercury customer if they so wish. But what is going to make another brand instantly more appealing than Ford or Lincoln? Does any other brand offer the "Mercury experience", whatever the heck that even was? I mean really? Does a particular other brand appeal to you suddenly now that Mercury is gone? Or are you going to consider a different brand just to spite Ford for killing its Ford-clone-with-a-different-badge brand? Face it, the closest thing to a Mercury is a Ford or a Lincoln. Mercury buyers aren't going to suddenly say that Hyundai or Nissan or Buick are the equivalent of their Mercury and flock there. They are, for the most part, going stick to the brands and dealerships they know. And what brands do they see next most often and what do those dealerships sell? Fords and Lincolns in most cases.

 

I understand that you don't like Mercury, you don't understand the reason that it exists, and so on. It must be like a piece of glass in your eye. Not to worry, it is going away. You'll feel better soon. For the rest of us, we are just watching the game. Will the strategy work?

 

This has nothing to do with liking or disliking Mercury. It's simply supporting what seems to me like a clear-cut logical long-term business decision. Ford couldn't support Mercury the way it needed to be supported. Why let it continue to limp along and lose even more customers? Fixing it properly was not an option anymore.

Edited June 30, 2010 by NickF1011

[akirby]

The success of Ford has nothing to do with Mercury. What is your point? With Mercury, without Mercury, Ford as a brand, will do what it will do. Mercury has been unsuccessful based on the way Mercury has been operated. Operating Mercuy badly, or not at all, is not the key to Ford brand success, unless you already believe that Ford's growth has already come at the price of Mercury sales.. What will be interesting is to see if Ford Corporate can retain the sales it was making to Mercury customers by now somehow converting them to Ford Brand customers. I am suggesting that they will not be able to do so. Time will tell.

 

If this is such a great business strategy, please explain why none of the imports have created a successful 3rd mainstream brand? Scion doesn't count. Where is the brand in between Toyota and Lexus? Honda and Acura (or above Acura if you consider Acura to be the mid level brand)? Nissan and Infiniti?

 

If Ford had a shot at 50% market share then maybe they could afford 3 brands, but no auto mfr is going to get back to that level.

[RichardJensen]

If this is such a great business strategy, please explain why none of the imports have created a successful 3rd mainstream brand?

Legacy situations present certain messiness that new companies can avoid.

 

In this instance new Ford management 'inherited' Mercury. While the market may not have supported a brand new 3rd brand, the market reality was that Ford had these three US brands.

 

That does present certain opportunities--but those opportunities have cost. The cold-blooded approach is 'what is the ROI on doing x, y, and z, assuming business conditions a, b, and c.'

 

Depending on where the company is at, you may choose an option that minimizes cash expenditure while simultaneously minimizing potential upside (a classic case: adapting the Mazda6 for CD3 instead of developing a whole new platform--the platform is compromised, reducing potential return, but the initial cash outlay is significantly lower).

 

Now assume that Ford considered investing $800M in greater diversification of the Mercury lineup through entirely different sheetmetal, and (potentially) unique variants of these vehicles.

 

Say the incremental increase in volume projected out to a 3% profit margin assuming a 14 million unit market, and a loss at an 11M/year market.

 

Now consider that Ford looked at investing $1B in better Lincoln products. Say that this projected out to an 8% profit margin @ 14M units per year and 3% at 11M/year.

 

Even though the Lincoln option costs more, it has better upside.

 

Now, say Ford has to choose one or the other of these options, as they can't pursue both....

 

----

 

I'm not saying this is what happened. I continue to believe that Mercury needed different advertising more than it needed different product. Good product is good product. Put in a few bits here and there to make the car look and feel different (it doesn't necessarily cost more), and support it with different advertising and sell the car to people that don't want a Ford.

 

As has been said before, you can't sell Fords to everyone.

 

----

 

Regarding autocratic decisions by Mulally: He insisted on reinstating the Taurus, and (to hear him tell it) insisted on the 2010 update to the Taurus.

 

My belief, regarding business practices, is that the decision is right only if the process is right. The end does not justify the means. Bad business processes beget bad business processes. People who are not required to think and who are not rewarded for thinking will stop thinking.

[FordBuyer]

Ford does not have the resources to make TWO more brands differentiated enough from Ford to justify them.

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Huh? How come bankrupt GM and Chrysler have the resources to run four brands, and Ford doesn't have the resources to run three anymore after 70 years. GM seems to be doing a good job of differentiating Buick from Chevy for most part with new products. Dodge and Jeep have lots of products. As recently as a few months ago, a new Mercury C car was to be shown to the publi, and then pulled at last minute. Ford could have put more effort into Mercury, but chose not to. They haven't put much effort into Mercrury for a long time, and it still seemed to survive somehow. A new C compact would have probably put Mercury over 10,000 vehicles/month even with the loss of the GM and kept LM dealers in business. For Lincoln to survive, it will have to have its own dealership network as it does now. But without Mercury, that is now in question. LM customers love the LM dealer experience and chose them over Ford because of it. They aren't going to a Ford dealership to buy a $50,000 Lincoln unless Ford dealers spend millions to set up separate showroom and lots. Anyway, I don't agree that Ford didn't have the resources to give Mercury some more product like a Merc B and C car plus a Merc SUV. Even a new Cougar wouldn't have been impossible resource wise.

[akirby]

Anyway, I don't agree that Ford didn't have the resources to give Mercury some more product like a Merc B and C car plus a Merc SUV.

 

Of course they COULD have kept Mercury. That's not the question. The question is whether they'll be better off in a few years with 3 brands instead of 2. Obviously they ran the numbers and their plan to have just Ford and Lincoln looked better than having Ford, Lincoln and Mercury. And I'm sure the dealer network was part of that calculation.

 

 

 

As for GM and Chrysler being worthy of imitation.....what part of bankruptcy don't you understand?

[RichardJensen]

They aren't going to a Ford dealership to buy a $50,000 Lincoln

 

c. 1400 of the 1700 LM dealers are FLM dealers.

[jpd80]

The thought of a static 11 million SAAR level could have pushed Ford into ending Mercury

Edited July 5, 2010 by jpd80

[FordBuyer]

The thought of a static 11 million SAAR level could have pushed Ford into ending Mercury

 

For me, that's the only way I understand Ford ending Mercury. Not enough overall sales out there to support three brands. Good luck to Chrysler supporting five brands counting Fiat, and GM with four brands with 11 million total sales for everyone. Not sustainable in my book if market stays stuck at 11 million at best for a few more years. And probably 30%+ of that is fleet sales. And of course with Ford making premium Ford's, not much room left for Mercury. With $40,000 Tauruses, Flexes, Edges, and Explorers, it remains to be seen if there is room left for even Lincoln. Time will tell. I would expect to be seeing $30,000 Focuses within a couple years along with $24,000 Fiestas. Doesn't leave much room for Mercurys and Buicks of the world.

[RichardJensen]

The thought of a static 11 million SAAR level could have pushed Ford into ending Mercury

 

I think that's a pretty sound observation.

[NickF1011]

Huh? How come bankrupt GM and Chrysler have the resources to run four brands, and Ford doesn't have the resources to run three anymore after 70 years.

 

We'll see how well Chrysler's and GM's brand management pans out. Thus far, I'm not impressed. And seriously? You can't honestly be considering "Ram" as its own brand, can you?

[jpd80]

Last month's sales:

Ford Brands: 179K

GM: 196K

 

US Employees:

Ford 50K

GM 103K

 

Retirees:

Ford: +200K

GM: 377K

[akirby]

Last month's sales:

Ford Brands: 179K

GM: 196K

 

US Employees:

Ford 50K

GM 103K

 

Retirees:

Ford: +200K

GM: 377K

 

Thanks. Those are the numbers I was looking for. GM is still way too top heavy in terms of employees and overhead and having 4 brands only makes it worse.

[jpd80]

Thanks. Those are the numbers I was looking for. GM is still way too top heavy in terms of employees and overhead and having 4 brands only makes it worse.

Thought someone would like that.

Ford builds almost as many car as GM but does it with half the number of

employees and has about half the number of retirees to provide for.....

 

My money is on the Blue Oval, pity Ford couldn't have a stock release in front of GM's IPO.

Edited July 7, 2010 by jpd80

[mercurymichael]

Does a particular other brand appeal to you suddenly now that Mercury is gone? Or are you going to consider a different brand just to spite Ford for killing its Ford-clone-with-a-different-badge brand? Face it, the closest thing to a Mercury is a Ford or a Lincoln. Mercury buyers aren't going to suddenly say that Hyundai or Nissan or Buick are the equivalent of their Mercury and flock there. They are, for the most part, going stick to the brands and dealerships they know. And what brands do they see next most often and what do those dealerships sell? Fords and Lincolns in most cases.

 

Actually this is where you are most definately wrong. I have only ever driven Mercury cars, 6 in total. I would have probably bought another Sable, my 4th, if they were still around. Milan is okay and might have gone there. As it stands, I would by a Buick LaCrosse based on style and content and price. It is the closest thing as to what a Mercury is or was. Acura would be another example, however I do not like Asian cars. The only potential Ford I would consider would be a resurected Thunderbird, that seats 4. Again that would be based on style, content and price. I do not like the new Taurus, Fussion, Focus or Mustang and have no use for tucks, suvs or crossovers. Lincolns are simply to expensive for me. Yes I did like the Lincoln/Mercury dealership I shopped at, but with only Lincoln there is no point. The Ford dealers here are terrible-service and ESPECIALLY SALES STAFF!

 

So unless there is a resurected Thunderbird and Chrysler pulls something out of there hat, Buick here I come!

[mercurymichael]

If this is such a great business strategy, please explain why none of the imports have created a successful 3rd mainstream brand? Scion doesn't count. Where is the brand in between Toyota and Lexus? Honda and Acura (or above Acura if you consider Acura to be the mid level brand)? Nissan and Infiniti?

 

If Ford had a shot at 50% market share then maybe they could afford 3 brands, but no auto mfr is going to get back to that level.

 

Why does Ford have to reflect Asian counterpoints? How says their strategy is the best? It may have been successful for them, but that does not mean it will be for Ford. Ford does not a have a great track record for maintaining success. That goes all the way back the the Model T. Throughout their 100+ years of existance they have had great success followed by near disaster. So when Ford branded cars and trucks wane from favor, as the most definately and eventually will, and there is no Mercury branded and most likey no Lincoln branded vehicles to help add the the bottom line, what will they do? That is where and why a multiple brand strategy makes sense--the strong can carry the weak until problems are resolved.

[akirby]

Why does Ford have to reflect Asian counterpoints? How says their strategy is the best? It may have been successful for them, but that does not mean it will be for Ford. Ford does not a have a great track record for maintaining success. That goes all the way back the the Model T. Throughout their 100+ years of existance they have had great success followed by near disaster. So when Ford branded cars and trucks wane from favor, as the most definately and eventually will, and there is no Mercury branded and most likey no Lincoln branded vehicles to help add the the bottom line, what will they do? That is where and why a multiple brand strategy makes sense--the strong can carry the weak until problems are resolved.

 

Honda has been very successful and Toyota also up until recently. But that's not the point.

 

The point is IF having 3 full line brands is a good business move then SOMEBODY else would have done it already.

 

If Toyota said they were inserting a new brand between Toyota and Lexus then they would be called nuts.

 

The only difference here is Mercury has history and a few loyal and emotional fans.

[jpd80]

Why does Ford have to reflect Asian counterpoints? How says their strategy is the best? It may have been successful for them, but that does not mean it will be for Ford. Ford does not a have a great track record for maintaining success. That goes all the way back the the Model T. Throughout their 100+ years of existance they have had great success followed by near disaster. So when Ford branded cars and trucks wane from favor, as the most definately and eventually will, and there is no Mercury branded and most likey no Lincoln branded vehicles to help add the the bottom line, what will they do? That is where and why a multiple brand strategy makes sense--the strong can carry the weak until problems are resolved.

 

A lot of questions pointing to is this the best strategy for Ford?

Well, all I can say is that Ford is following the path of least clutter and distraction.

Frankly, Ford's recent history with trying to resurrect luxury brands is not good,

so bad indeed that it's walked away from the whole stinking PAG mess after spending

billions and finally admitting that they are no closer to a profit.

 

Luxury cars and add on brands are a pain in the ass, they appear to add more

high end products but cost a bunch in resources and money to implement.

 

Sometimes it's easier to give up on the whole mess and just build good Fords.

Edited July 8, 2010 by jpd80

[NickF1011]

Actually this is where you are most definately wrong. I have only ever driven Mercury cars, 6 in total. I would have probably bought another Sable, my 4th, if they were still around. Milan is okay and might have gone there. As it stands, I would by a Buick LaCrosse based on style and content and price. It is the closest thing as to what a Mercury is or was.

 

 

It's the closest to what a Mercury was based on what exactly? If you liked the Sable, the Taurus is undoubtedly the closest vehicle to it on the market. In fact, I'd say the Taurus is superior to the last Sable in every way based on your benchmarks - style, content, and price. Saying any other vehicle is more similar to the Sable is simply sour grapes at Ford over Mercury's demise.

Edited July 8, 2010 by NickF1011

[xr7g428]

Nick, look around you; if people bought vehicles only on price, they would all be driving Korean cars. People buy based on a a lot of factors, and one of the biggest is the meaning of the brand. People buy a Prius or Cadillac in part because of what the brand means. Mercury buyers bought Mercury because it meant something other than what it means to drive a Ford. I am completely on board that Mercury was not "branded" optimally. but even as poorly marketed and branded as it was, it still had enough cache to make buyers feel differently about owning a Mercury than they did about a Ford. I think some Mercury customers will buy Lincoln, but you have to remember, they ALREADY decided NOT to buy a Ford or a Lincoln. I think the brand that currently has the same "understated premium product with out being over the top" feel as Mercury probably is Buick. I believe that you are looking at this too literally.

[NickF1011]

Nick, look around you; if people bought vehicles only on price, they would all be driving Korean cars. People buy based on a a lot of factors, and one of the biggest is the meaning of the brand. People buy a Prius or Cadillac in part because of what the brand means. Mercury buyers bought Mercury because it meant something other than what it means to drive a Ford. I am completely on board that Mercury was not "branded" optimally. but even as poorly marketed and branded as it was, it still had enough cache to make buyers feel differently about owning a Mercury than they did about a Ford. I think some Mercury customers will buy Lincoln, but you have to remember, they ALREADY decided NOT to buy a Ford or a Lincoln. I think the brand that currently has the same "understated premium product with out being over the top" feel as Mercury probably is Buick. I believe that you are looking at this too literally.

 

See? Even you can't define what makes Mercury different except that "it's not Ford". That's not a brand identity. I'm looking at it literally because that's how most customers will look at it. In a lot of cases, they are buying the vehicle. Not the brand. There is very little loyalty these days.

[xr7g428]

Even you can't define what makes Mercury different except that "it's not Ford".

Hmmm....

 

"understated premium product with out being over the top"

 

I guess you stopped reading before you got to that part.

 

Any chance you are an engineer?

 

IF so, then what is the optimal color of wall paint?

 

Should other colors even be necessary?

 

Although it would be much simpler if humans behaved based on logic, they do not. In the real world, different colors evoke different feelings in different people. Brands are like that too: they have meaning beyond the functionality of the product. People are not loyal to brands. They are loyal to a perception of themselves, and they see some brands as being compatible, even supportive, to that self image.

 

Honda buyers see their own values reflected in the products that Honda makes. When Honda makes a product that contradicts those values it hurts the brand in the eyes of those buyers. So Honda couldn't build an F150, thy had to build "the Honda of Trucks" the Ridgeline. When Honda wanted to sell premium vehicles they had to create a new brand (Acura), as much to protect Honda as to capitalize on the opportunity. There is no magic number of brands an automaker needs to go to market. Toyota knew that two words that were never going to describe their products were; young, and exciting. This was the basis of Scion. Toyota could not effectively market to young people without creating noise that would negatively effect the Toyota image. Toyota is currently having brand identity issues with Prius and Tundra both under the same roof. Prius and Tundra do not share common values. There is much speculation that Prius will become the 4th Toyota brand if they can recover form the current nightmare. T

 

Mustang buyers don't like the idea of front wheel drive, or four doors. If Ford built 4 door front wheel drive vehicles and slapped Mustang badges on them, they might sell, but not to the current Mustang buyer. By the same example, if Ford builds an upscale luxury version of a Fusion, it won't appeal to the Ford buyer, and it won't appeal to the Mercury buyer. It doesn't really fit in the Ford brand window "great value, American heritage, solidly middle class". The Mercury brand added one missing element: prestige. The Mercury brand said " I can afford better than a Ford, but I still like to stay American and although I like the finer things in life, I am not ostentatious."

 

I think that Ford did a remarkably poor job of using that brand image as a basis for marketing the cars, but at least they had a heritage that had meaning to a large group of consumers. Keep in mind that some consumers will actively self select away from any brand. To those consumers the brand has no value because it does not reflect the values those consumers value. I suspect that this is the case with you Nick, the brand doesn't reflect anything that you value, and therefore it could only be a burden to the organization. I get that.

 

The point is, did Ford management make a good decision when they decided to throw this 71 year old brand away? How much exactly did they have invested in advertising this brand over the last 71 years? How much equity did they just throw away? Is Ford as a company as valuable with this brand in the trash heap? What will it cost when they make the inevitable decision to create a new brand in the future? Why now? Where is the cost benefit analysis? I am increasingly convinced that this may be just a bold (but stupid) move that the company will regret in the not so distant future.

[NickF1011]

I guess you stopped reading before you got to that part.

 

No. I saw that part. I just don't see how that was Mercury. There was nothing even semi-luxurious about them that you can't now get on a Ford-branded vehicle.

 

Any chance you are an engineer?

 

IF so, then what is the optimal color of wall paint?

 

Should other colors even be necessary?

 

Sure, make all the colors you want. But would you need to sell the same colors under a different brand name to make it more appealing?

 

Honda buyers see their own values reflected in the products that Honda makes. When Honda makes a product that contradicts those values it hurts the brand in the eyes of those buyers. So Honda couldn't build an F150, thy had to build "the Honda of Trucks" the Ridgeline.

 

Did you really just use the Ridgeline as an example of why Mercury should have stayed? :lol:

 

The Mercury brand added one missing element: prestige. The Mercury brand said " I can afford better than a Ford, but I still like to stay American and although I like the finer things in life, I am not ostentatious."

 

It did? To me and most people it said "I like Fords with different grilles."

 

The point is, did Ford management make a good decision when they decided to throw this 71 year old brand away? How much exactly did they have invested in advertising this brand over the last 71 years? How much equity did they just throw away? Is Ford as a company as valuable with this brand in the trash heap? What will it cost when they make the inevitable decision to create a new brand in the future? Why now? Where is the cost benefit analysis? I am increasingly convinced that this may be just a bold (but stupid) move that the company will regret in the not so distant future.

 

Frankly, what Mercury used to mean is entirely irrelevant to what it means now and what it would mean in the future. The entire industry has changed since Mercury first appeared. Its role in the past has been superceded by higher content Fords. I'm sure there was plenty of cost benefit analyses going on. We, the public, are not privy to such information though, so to say anything about it is simply conjecture. It can be inferred that those cost benefit analyses sure didn't weigh heavily in Mercury's favor though based on the decision of the board of directors.

[akirby]

What will it cost when they make the inevitable decision to create a new brand in the future?

 

Why in the world would they do that and why do you think it's "inevitable"? If they thought it was worth saving then it would have been far easier to just keep it around until they can get to it.

 

Why do people with no working knowledge of Ford's internal finances or their business case details believe they know better than Ford's management? Especially when the current mgt has a proven track record with no major screwups.

[RichardJensen]

I think JPD hit on a vital consideration:

 

The market isn't rebounding well, and Mercury might not pass the 'stress tests' Ford is demanding.

[jpd80]

I think JPD hit on a vital consideration:

 

The market isn't rebounding well, and Mercury might not pass the 'stress tests' Ford is demanding.

 

Richard, you might recall better than I but didn't Mulally say something about SAAR and keeping brands,

if it fell below certain levels, products like J/LR and then Volvo go away?

I wonder if that SAAR level is now pointing right at Mercury and empowering Ford to stop producing it

and concentrate on Ford brand only (Lincoln excepted).

Edited July 9, 2010 by jpd80