July 23, 2008

Fleet-footed once more, Mercury will lead Ford's transition with new cars from European market

It is no secret that the auto industry has been hit hard by the double whammy of high gas prices and soaring inflation. Amidst this bad news, Ford's Mercury division appeared to be wilting much the same way that Chrysler's Plymouth brand did a decade earlier.

The lack of investment in new vehicles was readily apparent by 2007. While Ford CEO Alan Mulally insisted last fall that Mercury was not circling the drain, news leaked that suppliers had stopped renewing their contracts and that no new vehicles had been planned beyond 2012.

At the time, Ford had just sold Jaguar and Land Rover to Indian automaker Tata Motors for $2 billion, barely breaking even on their investment to rescue the iconic British marques from the clutches of then ailing British Leyland.

In poker parlance, the fire sale of Jaguar and Land Rover was a tell. A desperate move amidst a tidal wave of red ink.

But it appears that rumors of Mercury's death were greatly exaggerated.

The New York Times has reported that Ford will revitalize the Mercury brand with an entirely new model range, drawn increasingly from Ford's European offerings. An official announcement is expected tomorrow morning as the automaker releases their quarterly earnings report.

The move is similar to General Motors' strategy to redefine the Saturn division as the US line for their European models. The strategy has paid off so far; as sales of trucks and SUVs have flat-lined, demand has risen for smaller cars. The Saturn Astra - itself a rebadged Opel Astra from GM's European division - has been selling a pace the outgoing ION sedan could never match.

As a part of the shift in product strategy, Ford is expected to make permanent cuts in truck and SUV production. According to the New York Times report, three plants will be retooled for car production -- the Wayne, Michigan plant (which builds the Ford Expedition and Lincoln Navigator) and the Louisville, Kentucky plant (which builds the F-250 and F-350 pickups).

The location of third plant chosen for retooling has not yet been released. Besides Kentucky, Ford builds trucks and SUVs in Dearborn, Michigan, Kansas City, Missouri and Cuautitlan, Mexico.


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