Another famous American car brand is to bite the dust by the end of the year as Ford last night announced the axing of Mercury in favour of an expanded Lincoln line.

“Ford will end production of Mercury vehicles in the fourth quarter of this year to fully devote its financial, product development, production and marketing, sales and service resources toward further growing its core Ford brand while enhancing Lincoln,” the automaker said.

Detroit rival General Motors axed Oldsmobile several years ago and has recently sold Saab while winding down Hummer and Saturn after bids to sell them failed. Ford itself has got rid of Volvo, Jaguar and Land Rover in the last couple of years.

Ford said Mercury – once famous for its V8 models – originally was created as a premium offering to Ford and was an important source of incremental sales.

“However, the continued strength of the Ford brand – particularly during the past three years – has accelerated the migration from Mercury to Ford for many customers,” the automaker said.

“Today, Mercury’s customer profile, pricing and margins are almost identical to Ford, but Mercury’s incremental sales have been declining. The majority of current Mercury sales are to fleet buyers and customers purchasing through employee, retiree and friends and family discounts, which Ford anticipates largely can be satisfied by Ford brand vehicles.

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“Of Ford Motor Company’s 16% market share in the US, Mercury accounts for 0.8 percentage points, a level that has been flat or declining for the past several years. That contrasts with the Ford brand, which has increased market share by 2.2 percentage points so far this year on the strength of new products and improved quality, fuel efficiency, safety, smart design and value.”

Ford added its strengthening financial position – including the return to profitability and positive cash flow – allows it to absorb short-term costs associated with the discontinuation of Mercury and to consolidate future product investments into Lincoln.

“Today, there are no stand-alone Mercury dealerships in North America.  Ford is working closely with dealers to maintain properly located stand-alone Lincoln or Ford-Lincoln dealers, which will offer dealers and the company the greatest opportunity for long-term profitable growth.”

Mercury owners will have continued access to parts and service support at Ford and Lincoln dealers who will honour current warranties, including extended service plans.

Ford has notified Mercury dealers of the decision and provided details of a financial package that includes payment in exchange for resigning the franchise.

The automaker plans to expand its Lincoln lineup with seven new or significantly refreshed vehicles in the next four years – including its first-ever C-segment vehicle – with the aim of competing with Cadillac and Lexus in North America.

“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.  “The new Lincoln vehicles will transform luxury for North American premium customers through an unexpected blend of responsive driving enjoyment and warm, inviting comfort. We will also offer our customers a world-class retail experience through a vibrant retail network.”

A hybrid version of the MKZ will reach showrooms later this year and is expected to be the most fuel efficient premium sedan on the market. Also coming soon is the “significantly refreshed” 2011 MKX crossover, the first vehicle to feature MyLincoln Touch driver connect technology.

This will be followed by another six new or significantly redesigned vehicles within four years, the first-ever C-segment vehicle, new Lincoln-exclusive powertrains, including a new V6 engine, advanced fuel-efficient transmissions and range-wide EcoBoost engines.

Ford also wants to makes Lincoln the most fuel-efficient luxury brand in the US and add “more useful technology and features than any other competitor – with a special focus on comfort and convenience”. New advanced features include: fully retractable glass roofs; adaptive computer-controlled suspensions; electronic, push-button gear-selectors; active noise control; and exclusive MyLincoln Touch driver connect technology.

Ford said Lincoln’s share of the retail US luxury vehicle market has grown from 4.5% in 2005 to 6.3% to the end of the first quarter of 2010.

Ed Tonkin, chairman of the National Automobile Dealers Association (NADA), said: “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.

“NADA’s concern is that Ford treats each of its Mercury dealers fairly and equitably, especially the 276 of whom sell Lincoln and Mercury exclusively. Another important concern is that Mercury customers be reassured by Ford, and that all warranties will be honoured and parts and service will continue to be available.

“Ford also needs to move quickly to take into account the millions of dollars that dealers have invested in facilities, equipment, personnel and training. They deserve fair compensation.”

COMMENT: Lincoln needs a Ford LaNeve