Lincoln surely has a slot to fill below the MKZ sedan (think 1-series or compact Caddy competitor), but Kuzak said in the past that Mercury will be repositioned to fill the gap between Ford and Lincoln, with a focus on smaller, premium cars. If that plan has any chance of success, Lincoln has no business getting into the compact marketplace. Ford's mid-level luxury brands are in desperate need of definition, but brand overlap seems to be de rigueur for the domestics, and if a compact Lincoln comes to fruition the cannibalization will continue unabated.
[Source: Automotive News – Sub. Req.]