Autoline on Autoblog with John McElroy
HOW FORD WILL SAVE MERCURY
When Alan Mulally came to the Ford Motor Company two years ago he finally forced the company to face reality. It wasn't going to go anywhere, he told his executive team, unless it put all its resources into resuscitating the Ford brand on a global basis.
So Jaguar and Land Rover were given the heave-ho, and Volvo was put "under review." The decision was made to let Mercury slowly die, and Lincoln's turn-around was put on the back burner until the Ford brand revived.
But as the company formulated its turn-around plan, it slowly dawned on everyone involved that there was a real opportunity to save Mercury. They figured out a way to give the brand a unique line-up of vehicles without breaking the bank. So in April of this year they took their ideas to Mulally, and after extensive studies they got the go-ahead in June to save it.
John McElroy is host of the TV program "Autoline Detroit". Every week he brings his unique insights as an auto industry insider to Autoblog readers. Follow the jump to continue reading this week's editorial.
Mercury was worth saving for a couple of reasons. Even though Mercury sales have been sinking for a decade, Lincoln-Mercury dealers still need the volume that the brand provides. Many, if not most, Lincoln-Mercury dealers couldn't survive without it. Second, Mercury brings in younger buyers than the Ford brand does, and a more diverse group of buyers at that, especially women.
Historically, Mercury's sales volume was never enough to justify the cost of tooling up unique models for the brand. Most Mercury models are nothing more than re-badged Fords. The fact that it's still alive shows there's a lot of power in that brand. But how to give it a terrific line-up of unique models?
Back to the plans to resuscitate the Ford brand. The company determined that it was going to build its product portfolio around C-segment vehicles. After all, it's the biggest segment in the world. And where there's volume, there's economy of scale. That's how mass marketers make money in this business.

Ford has a slew of C-segment vehicles in Europe. There's 3-door, 4-door, 5-door and station wagon versions of the Focus. Then there's the C-Max and Kuga that are built on the same architecture. Mazda and Volvo use that platform, and the B-class Fiesta shares a lot of it, too. With a little bit of modification they can bump it up to the C/D segment, where they have three different body styles of the Mondeo, plus the S-Max crossover and Galaxy people mover. Talk about manufacturing volume!
Up to now it didn't make much sense to build small cars in the U.S. Sky-high UAW labor rates were twice as much as Toyota or Honda had to pay their American workers. But last year's UAW contract changed all that. Now the Detroit Three have a fighting chance to build compact cars profitably in their home market, and Ford is going at it with a vengeance.

The plan is to retool a number of its U.S. plants with flexible manufacturing lines that can build just about any of these C-segment vehicles. The company is going to put six of these models (including the Transit Connect) in Ford showrooms in the next few years. But that leaves a lot of other models to choose from, and that's where the company realized it could sell some of them as Mercurys.
After all, if the cars are already designed and they've got the plants to build them in, the financials just became attractive enough to justify giving Mercury a unique line-up of models. For example, why not give Mercury dealers the 5-door version of the Mondeo, and the S-Max and the Kuga? OK, so they're still re-badged Ford's, but to most Americans they'll be completely different than anything they'll see on the lot at a local Ford dealership.

Ironically, the plan to save Mercury rose directly out of the plan to kill it off. And so a brand that was literally on its last legs will finally get a shot at proving what it can do.
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Click here to subscribe in iTunes
Last week's show: "Hypernova"
When Alan Mulally came to the Ford Motor Company two years ago he finally forced the company to face reality. It wasn't going to go anywhere, he told his executive team, unless it put all its resources into resuscitating the Ford brand on a global basis.So Jaguar and Land Rover were given the heave-ho, and Volvo was put "under review." The decision was made to let Mercury slowly die, and Lincoln's turn-around was put on the back burner until the Ford brand revived.
But as the company formulated its turn-around plan, it slowly dawned on everyone involved that there was a real opportunity to save Mercury. They figured out a way to give the brand a unique line-up of vehicles without breaking the bank. So in April of this year they took their ideas to Mulally, and after extensive studies they got the go-ahead in June to save it.
John McElroy is host of the TV program "Autoline Detroit". Every week he brings his unique insights as an auto industry insider to Autoblog readers. Follow the jump to continue reading this week's editorial.
Mercury was worth saving for a couple of reasons. Even though Mercury sales have been sinking for a decade, Lincoln-Mercury dealers still need the volume that the brand provides. Many, if not most, Lincoln-Mercury dealers couldn't survive without it. Second, Mercury brings in younger buyers than the Ford brand does, and a more diverse group of buyers at that, especially women.
Historically, Mercury's sales volume was never enough to justify the cost of tooling up unique models for the brand. Most Mercury models are nothing more than re-badged Fords. The fact that it's still alive shows there's a lot of power in that brand. But how to give it a terrific line-up of unique models?
Back to the plans to resuscitate the Ford brand. The company determined that it was going to build its product portfolio around C-segment vehicles. After all, it's the biggest segment in the world. And where there's volume, there's economy of scale. That's how mass marketers make money in this business.

Ford Kuga
Ford has a slew of C-segment vehicles in Europe. There's 3-door, 4-door, 5-door and station wagon versions of the Focus. Then there's the C-Max and Kuga that are built on the same architecture. Mazda and Volvo use that platform, and the B-class Fiesta shares a lot of it, too. With a little bit of modification they can bump it up to the C/D segment, where they have three different body styles of the Mondeo, plus the S-Max crossover and Galaxy people mover. Talk about manufacturing volume!
Up to now it didn't make much sense to build small cars in the U.S. Sky-high UAW labor rates were twice as much as Toyota or Honda had to pay their American workers. But last year's UAW contract changed all that. Now the Detroit Three have a fighting chance to build compact cars profitably in their home market, and Ford is going at it with a vengeance.

Ford Mondeo Titanium S 5-Door
The plan is to retool a number of its U.S. plants with flexible manufacturing lines that can build just about any of these C-segment vehicles. The company is going to put six of these models (including the Transit Connect) in Ford showrooms in the next few years. But that leaves a lot of other models to choose from, and that's where the company realized it could sell some of them as Mercurys.
After all, if the cars are already designed and they've got the plants to build them in, the financials just became attractive enough to justify giving Mercury a unique line-up of models. For example, why not give Mercury dealers the 5-door version of the Mondeo, and the S-Max and the Kuga? OK, so they're still re-badged Ford's, but to most Americans they'll be completely different than anything they'll see on the lot at a local Ford dealership.

Ford S-Max
Ironically, the plan to save Mercury rose directly out of the plan to kill it off. And so a brand that was literally on its last legs will finally get a shot at proving what it can do.
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Autoline DetroitAirs every Sunday at 10:30AM on Detroit Public Television.
Autoline Detroit Podcast
Click here to subscribe in iTunes
Last week's show: "Hypernova"












Reader Comments (Page 1 of 4)
knifetramp 6:57PM (9/20/2008)
I think Ford was right the first time.. kill off Mercury. Badge engineering will get them nowhere.
Reply
Nightcrawler 7:41PM (9/20/2008)
O.k., say they kill off Mercury. Then what happens to Lincoln? The article says Lincoln alone wouldn't
t have enough volume to survive, so do you kill Lincoln too?
Or do you make all the Lincoln dealers Ford/Lincoln dealers? That probably wouldn't work, because those dealers would overlap with the existing Ford dealerships.
Or do you close all the current Lincoln dealers and move the Lincolns to Ford dealers? That's sounds good in theory, but it's not easy to manufacturers to force dealers to close.
bc 8:16PM (9/20/2008)
If it's "badge-engineering", it's the way Toyota and Honda practice it: take a selection of your models and badge some of them as Toyotas and some as Scions and some as Lexus, or some as Honda and some as Acura.
Let the 2012 Fusion be based on the Mondeo sedan, and the 2012 Milan on the Mondeo liftback. With different front and rear clips and different greenhouses, they're not going to look too similar--even two C1-based cars under the same brand, the Mazda3 sedan and liftback, don't have any common body panels.
A brand that is not intended to sell mass-market volumes it the perfect place to put cars like liftbacks and mini-minivans that have customers but not huge numbers. Now that Mazda has dumped the Mazda6 liftback and wagon, Mercury has a chance to get those customers, and serve them profitably. But put a Fusion liftback in Ford showrooms, and the same thing happens as happened with the Focus--the 4-door outsells the other models many times over, so dealers stock more of them and fewer of the others, so it becomes almost impossible for someone who wants one to find one with the right equipment and color, so sales and transaction prices go down even more, until they're not worth building even though some people still want them.
REALITYCHECK 9:06PM (9/20/2008)
They will be using cars that Americans don't know about just like Acura does with Euro Honda to make the TSL. This is the best ways for American to get the fun and good gas MPG Euro cars and they will do very well if the cars are have engines that Americans will buy.
This will not be brand enginering!!!!!
Flashpoint 9:22PM (9/20/2008)
Ford should not drop Mercury, they just need to make it a specialty brand that does something differently than Ford and Lincoln.
GM has Cadillac at the top, Buick and then Chevy. Buick comes across with designs you won't find on Chevy or Cadillac but, so long as you make it desireable, it will sell.
Ford's problem is, they aren't trying enough to make good Mercury's. I would bring back the Cougar as a mid-priced alternative fuel vehicle.
Ford also needs to step up the quality of its key models. The Focus, F150 Mustang, Edge, and Flex should be its only regular models. Explorer and Expedition should be alternative fuel, limited production vehicles because big truck days are OVER.
Lincoln REALLY f*CKD up releasing the underpowered MKS. That car won't even be interesting until they get the Twin Turbo V6. Until that day, Hyundai's Genesis will be the clear winner. Lincoln's lineup isn't bad, I just think they need to replace that ugly assed Navigator and focus on bringing gas mileage up throughout its line.
ed 11:07PM (9/20/2008)
Ok so after Ford kills Mercury people like you would say things like "oh it needs to kill lincoln and volvo" and then "oh GM must kill Saab, Saturn and Pontiac" and then "oh Chrysler must kill dodge, jeep and itself", come one people why do you always have to bash American car companies????
tekdemon 8:37AM (9/21/2008)
Kill Mercury and shore up Lincoln sales by moving the lower-end luxury stuff that Mercury sort-of represents into Lincoln. And work a little more on actually differentiating the models than they've done previously (no grand marquis please).
No Welfare for GM 9:45AM (9/21/2008)
@ Ed, i think i would make sense to kill Saturn and Pontiac as automakers, not as brands. Meaning the two should not have any design, RD, and development teams. If heads of Saturn and Pontiac want a car they will simply have to choose a car GM makes outside of USA and either import in here or build exactly the same car in here.
What i am trying to say is that it is too expensive to develop unique cars for those two. And as you can see that is pretty much the direction GM is heading, G8=Holden, Saturn as a whole=Opel. That will result in huge cost savings, Saturn can simply get the same car Opel teal designs.
It took GM a few decades to realize this, but then again when you pay your CEO "only" 16+ mill a year, you get what you pay for.
knifetramp 2:20PM (9/21/2008)
Believe me, I live in an area where we need Ford to succeed. It's a difficult decision to cut Mercury, but it was the right decision. Ford needs to shed dealerships and Mulally was on track... at least up until now.
I wasn't commenting negative against the principle of Ford bringing European models to the US. The models are Fords in Europe and they should be Ford models here as well.
MachinaDC5 2:52PM (9/21/2008)
I'm going to say I absolutely agree with knifetramp. It's dead weight, cut your losses and get on with it. This isn't the same car world as 30 years ago where it made sense to rebadge unappealing cars and sell them for slightly more. Either they retool Mercury entirely (too costly) or move on, and I say move on and make Lincoln the luxury brand.
Clarence Young 7:03PM (9/20/2008)
I'm delighted that the company wants to save the brand. I miss Plymouth and Oldsmobile. I wonder if the Saturn/Opel plan played a role in this.
Reply
Scoobyless 7:31PM (9/20/2008)
I say it's a good plan. It will still offer the unique products and volume, and the additional plant volume would hopefully add a shift. Honestly, I think Mercury should compete directly with GM's Saturn in terms of offering the slightly upscale, European-based cars.
And I'll be the first to admit, I like the damn Milan.
Reply
elprogramer 7:30PM (9/20/2008)
Mercury's problems are a lack of unique designs in a crowded company portfolio.
Lincoln needs to move upmarket, and the company needs to invest in making Mercury different from the competition, and more importantly, from her sister marquees.
Reply
No Welfare for GM 7:30PM (9/20/2008)
As always interesting stuff John.
Here's how i see it, bring a good car from Europe or Australia to be a Mercury only car. That will revitalize the brand in the first place. Will Ford lose money on it? YEAH. But GM is losing money as well on many imported vehicles, so i think Ford can afford one money losing vehicle.
Bring one REALLY good car, like Ford Falcon, in high trim level only, V8, low price, tuned to be very sporty. That will make all the auto people start talking about Mercury, the name will start leaking to mainstream public. After a few shots on Car and Driver, Autoblog, Automobile, obviously Autoline Detroit the car will remind people that there's Mercury out there.
The way to improve all other Mercuries is to improve interiors, leather, and tech on the inside. Mercury is now a higher trim level of Ford, they need to move that trim level up one notch. Make it what Acura is to Luxury market, affordable luxury, a car that is LOADED with all the gizmos, latest tech and safety.
Meaning Ford would have to really work hard on the details, better plastics on dash board, out with cheap, in with Ipod quality, shiny plastics, make sure that audio is up do date, always (plays all formats, MP3 ,WMA) Include Ipod Jack, maybe Sony or Panasonic branded Audio, all for free. Affordable NAV, sunroof. Offer interiors with special editions (Eddie Bauer or LL. Bean will not cut it, most people do not even know who they are) make a deal with someone who is up and coming, someone who has a name, someone young people know. Tommy Hilfilger, Versace, Armani Exchange (all young, hip people know that brand), Apple Tech Package, Sony Tech package.
Hire people who can make interiors look modern, new, and hip, someone who who is responsible for designing Ipods, or HP laptops, both look gorgeous, use much higher quality of plastics everywhere.
If all else fails try to find the best up and coming rapper and have him sing these lyrics
"And I Got Plenty Room If Ya Think You Wanna Roll
See This Is What They Make Mercury Trucks For
Reply
Joel M 8:10PM (9/20/2008)
I love the idea of Mercury being near luxury. I am more in love with the idea of tech tripping it out. Make GPS Navigation standard on all Mercurys. Sync2.0 also standard. Why? Value. The GPS system on Mercury and Lincolns has been highly praised in the press as well as Sync. Justify the extra money you charge on Mercurys over Fords. It's a quick fix that won't set any fires on the sales charts but it's value the dealers can use now in ads.
Build interest now and get the name on people's shopping list then when the new cars roll onto the lots the buyers will be ready. If they wait til the new products arrive it'll take the shoppers that much longer to put Mercury back on the sales list.
No Welfare for GM 8:28PM (9/20/2008)
"If they wait til the new products arrive it'll take the shoppers that much longer to put Mercury back on the sales list."----------That seems to be Detroit biggest problem. They always talk about the future vehicles, instead of making current ones much better.
This Sync 2.0 system generated many positive reviews, i totally agree with you, it should be standard, Sync is something that people actually like and want. Also the fact that GM has nothing of the sort available should help the sales, and of course they better be ready with Sync 3.0 and 4.0 in the next year to keep competition at bay.
Holden Miecranc 9:34AM (9/21/2008)
Yeah, and if GM was smart, they'd bring over vehicles from Australia and Germany, too. Oh wait, they do and no one is buying them. G8- fail. Astra- fail. Before that, they brought over Opels and sold them as the Saturn L Series and Cadillac Catera. When those same models were sold in Europe, people claimed how great they were. No changes to driveline or suspension tuning and yet people over here claimed they were crap.
No Welfare for GM 10:02AM (9/21/2008)
@Holden Miecrank
This issue has been raised over and over here.
G8 was brought to USA by GM execs at the WORST possible time. The car is great, looks great, from what i hear feels good on the inside and drives great too. But Lutz and Wagoner not smart enough to anticipate market trends, they do not get the fact that when gas goes up, it's time to bring MPGs in, so the car more than failed. Astra as priced and offered with wrong options, and is not exactly very efficient.
If G8 came to USA is say 2005 or 2006 and got 2-3 more MPGs it would have been popular, if Astra would cost $3,000 ( as it should, no GM small car has the right to cost more than Civic or Corolla) and offer interesting goodies for free or on the cheap.
Also Astra is for young people, and it doesn't even offer AUX jack let alone Ipod jack.
Think about this seriously, where do most young people have their songs? On CDs? no, On ipod. This many sound very silly not to buy a car over a $100 devise but if you really think about it is a total deal killer.
Holden Miecranc 10:57AM (9/21/2008)
@No Welfare
Okay, so let me get this straight, Lutz and Wagoner were not smart enough to anticipate market trends by bringing over the G8. You, however, know what the current automotive landscape is like but yet you believe you are right in suggesting Ford bring over the Falcon, a vehicle which suffers the same downsides as the G8. Brilliant!
You say had they brought the G8 over in '05, things would have been different, yet you seem to have forgotten that GM did bring the Holden Monaro here in 2004 as the GTO. It didn't sell.
The mistake GM made with the Astra is that they brought it over with its' original European packaging. Everybody rants and raves about how great European cars are, but when a manufacturer does bring one over, they fail and do so on a grand scale. Name one Eurpean model that a domestic manufacturer has brought to the US that has been a raging success. There are none.
People seem suprised that the Astra is a tad slow and not all that efficient because they don't comprehend the fact that European models are comparitively underpowered compared to what Americans are used to. Furthermore, people want to compare European gas mileage stats to American without converting the difference in gallon size. Then again, most people here make statements based more on rhetoric than fact, so why should that be suprising?
As far as catering Mercury to the 'young, hip' people you suggest, what exactly is the average expendable income for these 'young, hip' people versus someone in their 40's / 50's? Wasn't Scion supposed to be the brand built on 'young, hip' consumers? That plan has worked wonders. Scion's market share has just been growing and growing...
No Welfare for GM 4:16PM (9/21/2008)
@ Holden you make a few good points but let me reply with this. I said bring the Falcon solely to get Mercury's name back, a V8 Falcon will be all over the Auto press, all over magazines which will refresh the brand. It will lose money just like G8, i said that from the get go. But the hype will most likely be huge. When was the last time you saw a Mercury topic here on Autoblog. A Falcon will get the ball roling, BIG TIME. Will it lose money, yes.
You are right, up to date no American car maker was successful with a European/Australian car in USA thus far. Astra is a fundamentally bad vehicle that would not sell in any environment, that interior is criminal and price is outrageous. But Europeans do bring cars to USA that are made in Europe and are pretty much the same.
"As far as catering Mercury to the 'young, hip' people you suggest, what exactly is the average expendable income for these 'young, hip' people versus someone in their 40's / 50's? Wasn't Scion supposed to be the brand built on 'young, hip' consumers? That plan has worked wonders. Scion's market share has just been growing and growing..." -----------------------------------Well first of all, tech needs to be right, not necessarily expensive. If it is right young people will come and will not be driven away by a huge price tag.
As i said IPod Jack, the thing costs like $100, that thing should be standard on ALL cars, but heres my primary example of right tech that does not cost a lot.
Civic's audio can play all music formats, when Civic came out i saw a review of a Jaguar on Cnet.com. Jag had a far better sounding audio system, but a system that did not play MP3 disks, (MP3 disk can hold hundreds of songs), this is not a cutting edge technology that costs a ton, this is common sense. Also that very same Jaguar had a 6 disk system, one disk went into the dash, other 5 were held in a special drive that was in the trunk. So you had to get out of the car to load those 5 CDs. Another example with the very same cars is, display screen, Civics is blue and sharp, looks very cool and modern, Jaguars was old style, black on gray display. The tech in Civics is hardly all that, but it was presented in a much better way, a way that makes Jaguar look bad. That is something Ford would have to fix with its cars, they need to choose right technology that will standout and attract people.