Wednesday, June 02, 2010

Ford to Kill Off Mercury (Probably)--But Why Did They Wait So Long?

It looks like Ford is going to announce the demise of the Mercury Brand, which seems to me to be an obviously good idea. Mercury has offered slightly-modified versions of Ford cars for years, with the main difference being slightly higher equipment levels. The result was lots of unnecessary costs for producing slightly different sheet metal, emblems, and other cosmetic differences, with no clear benefit. GM did the same thing when it eliminated the Oldsmobile brand 2004, and the Pontiac, Hummer, and Saturn brands in 2009. Personally I think they should kill off Buick as well (in the U.S., anyway--it's still a big deal in China). All these brands lacked clear identities. Some of them had a clear identity at one time (Pontiac was a performance brand, Saturn produced small cars that were more reliable than the average GM car), but "badge engineering" diluted these brands. Ford also sold off the  Land Rover, Aston Martin, Volvo, and Jaguar components of its Premier Automotive Group.

I think successful car companies like Toyota and Honda have shown that two or, at most, three brands is optimal. For example, Toyota has Scion for the youth segment, Toyota for the mainstream, and Lexus as its luxury brand. Honda gets by with just Honda and Acura. Ford is now down to Ford and Lincoln (with some technological cooperation from Mazda). GM has Chevrolet, Buick, GMC, and Cadillac.

Here's my question: Why did these companies wait so long to clean up their messy brand identities? These problems have been around for years. Did it have something to do with labor agreements and the revisions to them necessitated by the recession? Or was it simply reluctance to kill off old traditions? Why didn't the stockholders force the companies to take these steps earlier? Maybe it was a good idea before, but it's not now--but why? What changed to make badge engineering become a bad idea in the last few years?

UPDATE #1: Nathan Prey suggests it has something to do with dealership legalities (by which I assume he means contracts). Katie Francisco suggests that the thing that allows Ford to kill off dealerships now (as opposed to earlier) is a decline in Mercury sales. I think that's borne out by this graph. I pointed out that this suggests Buick should be killed off, too, but Nathan says that big sales in China will keep that from happening here. I still think it would be fine to kill off Buick here and let them continue in China, if only to avoid the costs of the tweaks to distinguish them from their Chevrolet versions (or the shipping costs, if they're shipped here), but maybe those costs are really low, or maybe the Chinese market success depends on them being sold here for marketing reasons.

UPDATE #2: Autoblog asks the same question, and comes to pretty much the same answer.

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