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By 2g1c2 girls 1 cup

Bloomberg is reporting today that Ford plans to kill the Mercury brand – again. At least twice in the last decade, Mercury was on the chopping block, only to be given a stay of execution. The Ford family, specifically Elena Ford, has vetoed efforts by management to kill off the brand in the past.

Mercury was created in 1939 by Edsel Ford as a bridge between the mainstream Ford brand and the luxury Lincoln brand. Mercury products have lately been nothing more than Fords with more features and (slightly) fancier styling. Mercury’s present lineup shows this: Milan (Fusion twin), Mariner (Escape), Mountaineer (Explorer) and Grand Marquis (Crown Victoria). The last time Mercury had a unique vehicle (not shared with a Ford) was in 2002, when Mercury last sold the Cougar and the Villager minivan (though the Villager was engineered by, and shared with, Nissan).

1967 Mercury Cougar

1967 Mercury Cougar

In 1999, Ford planned to kill the Mercury brand by phasing out the lineup and eventually “encouraging” Mazda dealers and Lincoln dealers to dual with the other brand. They saw Mercury sales dwindling and Mazda sales going in the opposite direction. The plan was set, and the future product (“cycle”) plan was modified to reflect Mercury’s demise. Then the company got cold feet. A powerful combination of the Ford family and Lincoln Mercury dealers killed the plan before it really got going. The Ford family opposed it due to sentimental reasons (the tragic story of Edsel and Mercury being his creation was a big part), while the dealers didn’t like the idea of selling Japanese cars.

1982 Mercury Capri RS

1982 Mercury Capri RS

Many at Ford had already mentally written off the Mercury brand, and the reversal left Mercury without a plan for future products. Instead of taking the opportunity to “reboot” the brand into something other than fancy Fords, the company went back to the old ways and hastily threw some money at Fords with different lights and grilles. It was a self-fulfilling, defeatist attitude that went something like this, “Mercury sales suck, so let’s not spend too much money on Mercury products. That way, we won’t have to sell too many to get a return on the money.” Of course, spending very little on badge-engineering ensured the sales would suck, and the geniuses who made the decision patted themselves on the back for not spending the money (“See, I told you the sales would suck – aren’t you glad we didn’t spend the money?”).

Ford missed an opportunity to have its cake and eat it too. Ford had (and still does have) wonderful products in overseas markets around the world that it could have used to give Mercury unique products without the cost of developing a stand-alone product for Mercury. Ford could have assembled a collection of Ford’s European and Asian products, including some vehicles that Mazda sold in Japan, but not in North America. There would have been costs associated with homologation and importation, but nowhere near the costs of engineering a new product from scratch.

1955 Mercury Montclair

1955 Mercury Montclair

Again in 2005, Ford looked at eliminating Mercury. Detailed analyses of sales volume and profit & loss were presented to senior management, but again, the idea was crushed. There were fears of Lincoln Mercury dealer profits and the heavy hand of the Ford family was in the middle somewhere.

Since Alan Mulally showed up, Mercury has seen its lineup shrink to the present 4 vehicles mentioned above. And now Ford is apparently going through the same exercise again. So what’s different this time? Mulally and the cash situation are the major ones. Mulally isn’t so tied to the past and will make the decision that is best for the company, regardless of sentiment. Also, while Ford is doing better than just about anybody in the industry right now (though that isn’t saying much), they still have a tremendous amount of debt to consider, and cash is tight.

1971 Mercury Cyclone GT

1971 Mercury Cyclone GT

What about the dealers? The Lincoln Mercury dealers have made the argument in the past that they wouldn’t have enough volume to survive if Ford pulled the plug on Mercury. Is that still true? Lincoln has, arguably, its best lineup ever right now, but is it enough to keep the dealer body healthy? They have 6 vehicles for sale (MKZ, MKX, MKS, MKT, Navigator and Town Car), but the Town Car goes away completely after the 2011 model year. That leaves 5 mostly alphabet soup names and a giant SUV. For the dealers’ sake, I hope that the pipeline is full of new Lincolns and freshenings of existing models.

Even assuming that Ford can keep the dealers happy and profitable with just Lincoln, does Mercury really need to go the way of Plymouth, Saturn, Pontiac, et al? I have the same argument against pulling the Mercury plug as I did with Pontiac. Why pull it? Mercury could remain as a niche product, with maybe 2-3 vehicles. If Ford really does have a plan for Lincoln, the dealers wouldn’t be reliant on the Mercury volume, so there would be no need to have a full lineup of Mercurys. Engineering/R&D are only approved for programs that can pay back the investment anyway, so that wouldn’t be an issue. There is already a distribution network, so that’s OK too. Assembly plant capacity could be an issue, but if Ford can utilize existing platforms for Mercury (without relying on badge engineering), it should be able to use existing plant capacity as well. The only other consideration is advertising. In the auto industry, most advertising is for vehicles, not brands. There would only need to be advertising for the vehicles that you are offering, and everybody knows what a Mercury is already, so no cost to “launch” the brand.

1963 Mercury Marauder

1963 Mercury Marauder

I know this isn’t a strong argument for why Ford should keep Mercury, but an argument for why they shouldn’t feel the need to kill it. The Mercury brand has survived 70+ years. It would be a shame to allow it to die now for the wrong reasons.

That’s what I think – how about you? Please leave your comments below!

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In what has been an ongoing saga worthy of Charlton Heston epic, GM has finally decided that selling Saab for something is better than spending millions to shut it down. Apparently, the GM Board consulted with its economic advisors, who told them, “Getting money is better than spending it.” According to an insider, the board has formed a blue-ribbon committee to find out if this principle can be applied to other parts of the business.

The Swedish government has reviewed the transaction and the related request for guarantees of a Saab Automobile loan that has been requested from the European Investment Bank, and has apparently approved it.  Assuming quick action, the transaction is expected to close in mid-February, and previously announced wind down activities at Saab will be immediately suspended, pending the close of the transaction.

Saab's Upcoming 9-4x Crossover

Saab's Upcoming 9-4x

As part of the agreement, Spyker intends to form a new company, Saab Spyker Automobiles, which will carry the Saab brand forward.  The sale will be subject to customary closing conditions, including receipt of applicable regulatory, governmental and court approvals.  Other terms and conditions specific to the sale will be disclosed in due time.

As part of the deal, GM will get $74 million cash, $326 million of preferred stock, plus some other consideration that GM refused to identify. GM will also continue to provide powertrains, the upcoming 9-4x finished vehicles and engineering services on an ongoing basis. GM will continue to honor warranties until Saab Spyker sets up organizations in markets around the world. No word yet on whether the present plan to close down some of the Saab dealers will proceed under Saab Spyker.

That’s what I think – how about you? Please leave your comments below.

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Penske Cancels Plan to Buy Saturn

30th September 2009

GM CEO Fritz Henderson issued the following news release this afternoon:

“Today we learned that Penske Automotive Group (PAG) has decided to terminate discussions with General Motors to acquire Saturn. This is very disappointing news and comes after months of hard work by hundreds of dedicated employees and Saturn retailers who tried to make the new Saturn a reality. PAG’s announcement explained that their decision was not based on interactions with GM or Saturn retailers; rather it was because of the inability to source new products beyond what it had asked GM to build on contract.

As a result of PAG’s decision, we will be winding down the Saturn brand and dealership network, in accordance with the wind-down agreements that Saturn dealers recently signed with GM. Pursuant to the terms of those agreements, the wind down process will be determined and communicated shortly.

Saturn customers and owners will continue to be able to purchase and have their vehicles serviced at Saturn retailers during this process. Once the wind down is complete, Saturn owners will still be able to have their vehicles serviced at other GM dealerships. We will be communicating with our customers very soon to explain the next steps in this process.

Today’s disappointing news comes at a time when we’d hoped for a successful launch of the Saturn brand into a new chapter. We will be working closely with our dealers to ensure Saturn customers are cared for as we transition them to other GM dealers in the months ahead. I’d also like to thank every GM employee and Saturn retailer who worked so hard to try to make this new beginning happen for Saturn.”

To say this is a shocking announcement is an understatement.  Roger Penske, who some wanted to take over GM, was considered a white knight for Saturn dealers.  If anybody could have saved their butts as GM discarded them like day-old coffee, it was Penske.  Those dealers deserved so much better than the fate which will now be theirs.  Saturn consistently has ranked as one of the highest brands in dealer satisfaction, despite years of product neglect by the General.  That means they really worked their tails off to make the customers happy.  And what was their reward?  Selling out-of-date, less than adequate product for more than a decade.  Only recently was the lineup overhauled, making it one of the best around.  But it was too little; too late.  The damage was done.  Now there is only the task of shutting off the lights as the last employees of the once-proud dealers go home for the last time.  Like I said about Pontiac recently, RIP Saturn; you will be missed.

That’s what I think – how about you?

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GM Teams Up with eBay

11th August 2009

Citing the need to try new things, GM VP Mark LaNeve announced that GM will try an innovative approach to selling cars with eBay.  eBay?  Don’t they already sell cars, you know, through eBay MOTORS??  Yes, they do.  Mostly used cars, though some dealers list their new car inventory on the site.  This, however, is different, as it is the first time a manufacturer has listed “all” of the new vehicles for sale like this.  The new site,gm.ebay.com, will allow customers to browse by make, model, trim, transmission, color, model year and maximum price.  The program is just a test for now.  It only is in California and only for 1 month (11 August – 8 September) and does not include Cadillac.  GM says that as many as 20,000 vehicles will be available through the system, depending on dealer participation (presently 225 CA dealers).  LaNeve said the program would be expanded and/or extended if GM and the dealers decide it is working.  He defined “working” as not necessarily increased sales (though that is clearly a sign of success), but also increased showroom traffic or development of leads for the dealers.

Consumers will be able to browse hundreds of California dealer online showrooms, ask questions, negotiate prices, and arrange financing and payment to purchase a new 2008, 2009 or select 2010 car, crossover or truck online.  Vehicles will be offered through eBay Motors’ traditional formats such as “Buy It Now” (where shoppers agree to pay the advertised price) and eBay’s innovative “Best Offer” option (where buyers indicate the price they are willing to pay and can negotiate online with the dealer for the vehicle).

The site also incorporates features that will allow consumers to compare pricing across models or participating dealerships, get tips and advice with a Buyer Checklist, and determine the value of their trade-in or whether their current vehicle may also qualify for government funded ‘Cash For Clunkers’ incentives.

“With 12 million individual car shoppers visiting our site every month, eBay Motors has unique insight into how people prefer to buy their cars,” said Rob Chesney, vice president, eBay Motors. “Through this program, we are helping GM dealers to extend their physical showroom while at the same time delivering to our buyers the great deals and broad selection they expect from eBay.”

While very limited in scope and duration, this program shows that maybe – just maybe – GM can indeed be the nimble operation that it needs to be to survive.  This program should increase awareness of, and generate interest in, GM’s brands and models.  That can only be a good thing for GM, and you the taxpayer/shareholder.

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Penske to Buy Saturn

5th June 2009

General Motors Corp. and Penske Automotive Group today confirmed details of a proposed transaction under which Penske would acquire the Saturn brand. If completed, the deal would save more than 350 dealerships and 13,000 jobs at Saturn and its retailers in the United States, and would preserve the customer-focused Saturn brand.

The proposed transaction is part of GM’s rebuilding efforts outlined in the viability plan that was submitted to the U.S. government earlier this year. Under the terms in the memorandum of understanding, Penske would obtain the rights to the brand as well as certain other Saturn assets, including the Saturn parts inventory. GM would continue production, on a contract basis, of the Saturn Aura, Vue and Outlook for an interim period.

“This is the combination of two iconic teams: Saturn and Penske,” said Saturn general manager Jill Lajdziak. “GM had the vision to create Saturn and has the desire to see it succeed in the future.”

“Saturn has a passionate customer base and outstanding dealer network,” said Roger Penske, chairman of Penske Automotive Group. “For nearly 20 years Saturn has focused on treating the customer right. We share that philosophy, and we want to build on those strengths.”

Saturn began selling cars in 1990 and has sold more than 4 million vehicles. More than 80 percent of those vehicles are still in operation, according to data from R.L. Polk. Saturn has regularly scored among the industry leaders for non-luxury brands in customer satisfaction surveys.

The transaction is expected to close in the third quarter of this year and is subject to customary closing conditions and regulatory approvals. Financial terms of the agreement will not be disclosed at this time.

This is the first arrangement of this kind in the auto industry, where there is a separate distribution company with its own brand, free to contract with any manufacturer to sell their product.  This is true retailing in the Sears or Best Buy model, as opposed to the traditional franchise arrangement in the industry.  Will it work?  My guess is yes, due in no small part to the well-deserved reputation of the Saturn retail network.  The Saturn brand can stand on its own, and it may be better off without being associated with General Motors. Because Saturn was launched as “A Different Kind of Car Company” back in 1990, and was never really included in General Motors from a customer standpoint, it should be easy to separate it from the negative baggage that goes with GM these days.

The other factor that will help Saturn succeed in this new frontier is Roger Penske, who has a track record of business and other successes, including Hertz Truck rental, Detroit Diesel and United Auto Group (now Penske Auto Group, the second largest auto dealer in the US) and Super Bowl XL, whose host committee Penske chaired.

Who knows – this may turn out to be the start of a new era of automotive retailing, where retail networks are free to sell whichever cars and trucks they choose. It would certainly make the manufacturers a little more eager to keep their retailers happy.  Under the present model, they are both captives to the other, and the only way to break that relationship is in court.


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Chrysler today filed papers with the U.S. Bankruptcy Court to eliminate the franchise agreements of 789 (about 25%) of its dealers.  In a conference call today, Jim Press, Chrysler President and Steven Landry, Executive VP, NA Sales and Marketing/Global Service and Parts outlined the transition.  They said that the “rejected” dealers will be dealt with exactly the same through the end of their franchises, which will be June 9.  Chrysler will assist with the redistribution of the 44,000 new vehicles on the lots to other dealers in the areas affected.  They will also assist with the parts, if the dealers wish.  The dealers will no longer be able to sell new Chrysler vehicles, but they will still be able to service vehicles.  They will not be eligible for warranty work, though, as that work is reserved for franchised dealers.

There is no appeal process for dealers; however, the bankruptcy court has to approve the action.

Landry stated that the problem “is not too many dealers, it is too little industry.”  Press reiterated this point, calling the dealers Chrysler’s partners and said this has been a very difficult decision.

The number of jobs lost as a result of this action is not known, because many of the affected dealers are dualed with competitive brands or will be combined with other Chrysler LLC dealers.  Many also sell fewer than 100 units per year.

Every state except Alaska is affected by this action.  Pennsylvania (53) and Texas (50) have the most and several others have over 30 each.  23 states have 10 or fewer dealers losing their franchises.

Chrysler says that while they are rejecting 25% of their franchises, those 789 only represent 14% of sales.

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