Ford Shutting Down Mercury Is No Big Deal

As anticipated, there has been little to no reaction from investors regarding the retirement of the Mercury name plate by Ford Motor Company (F). Given the resounding lack of identity which has surrounded the Mercury brand, eliminating the line seems like a prudent and timely move. Market share for Mercury has dwindled to less than 1%, and estimates put Mercury's portion of Ford's share price at something less than 2%.

Analysts estimate Mercury's value to Ford is approximately $1 billion, while the company on the whole is estimated to be worth approximately $38 billion. When given the fact that Ford expects to transition it's Mercury dealers into the Lincoln brand line, the fundamental value impact on Ford shall be essentially nonexistent. The company has declared that this inter-company transition shall not result in any job loss.

Auto industry analysts tend to opine that Ford's Lincoln brand is not positioned to take on volume brands such as Lexus, BMW, and Mercedes. Those analysts expect that Lincoln shall be most effective simply continuing to slug it out with Buick, Cadillac, and Acura. Market share comparisons would tend to support this theory, but analysts may be underestimating Ford's future intent for the brand. With the company reshaping it's focus such that it shall no longer be pitting two of it's luxury lines against each other, the stage is set for a different, and more aggressive marketing approach for Lincoln.

Analyst consensus is rating Ford. as hold, yet target prices indicate an expectation that a sell off is likely. Overall, the picture provided by analysts indicates widely divergent opinions about where exactly the stock is headed.

If I held shares of Ford, I'd be completely comfortable in maintaining that position untouched. I'd only consider selling Ford shares right now if I had purchased those shares at $8 or less, and only if I needed the money to take advantage of a significant buying opportunity.

Gary Sattler does not knowingly hold positions in the companies he writes about.
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Last updated: February 10, 2012: 03:09 PM

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