Ford's Stock Will Survive the Phase-Out of Mercury

| About: Ford Motor (F)

According to an article in the Wall Street Journal, Ford (NYSE:F) is planning to kill its 71-year-old Mercury brand of vehicles. We estimate that Mercury contributes just 1.5% to the stock price of Ford and phasing out the Mercury brand will have limited impact on Ford’s stock.

Mercury’s Market Share Declines

Over the last 5 years, Mercury’s market share in the North American automobile market has declined from about 1% in 2005 to about 0.9% in 2009. We project Mercury to continue losing market share in North America over the Trefis forecast period and you can modify our forecast below to see its impact on Ford’s stock price.

Mercury’s market share is expected to decline primarily for two reasons:

(i) Increased competition from pure luxury brands such as Mercedes Benz, BMW (BAMXY.PK), Lexus, Cadillac and brands such as Toyota (NYSE:TM), Honda (NYSE:HMC) and Hyundai (OTC:HYMLF).

(ii) Mercury faces an identity crisis with most of its models simply modified versions of Ford models. Originally, Mercury was supposed to fill the gap between inexpensive Ford cars and its luxury marquee Lincoln. However, the Mercury brand seems to have lost its distinction according to Edmunds.com CEO Jeremy Anwyl.

Mercury Only 1.5% of Ford’s Stock

Based on our original forecast for declining market share, we estimate that Mercury is worth less than $1 billion for Ford which we estimate to be worth about $38 billion in total.

Disclosure: No positions