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Closing of Mercury Will Cost Ford $500 Million

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On: Mon, Jul 26, 2010 at 4:22PM | By: Sherry Christiansen

Closing of Mercury Will Cost Ford $500 Million

Closing Mercury will cost Ford nearly $500 million, Ford CFO says.  A June auto news reported that Ford Motor Company plans to stop the production of the 71 year old brand, Mercury in the fall of 2010, and then sell the remaining Mercury inventory by the end of the year, a decision that according to a recent GM Inside News Report, could cost Ford nearly $500 million as stated by Ford CFO Lewis Booth.

Booth told Automotive News that “Ford took special charges of $247 million in the first half of 2010 to cover the cost of ongoing dealer reductions and shuttering the Mercury brand. He estimates the total cost to close the brand will be twice that amount.”

Booth also stated that 700 of the total 1,700 Mercury Franchises have already signed an agreement to close up shop after being offered cash compensation which accounts for the lion’s share of the expense that Ford will incur to close Mercury down.  When the original announcement was made back in June, Ford announced that it would be presenting a termination agreement with a buyout that included approximately $200,000 per dealership.

 “The plan is in place and we're having very fruitful discussions with our dealers,”

Unlike GM and Chrysler dealership closings, so far Ford has reported that there have not yet been any lawsuits related to the franchise closings, according to Booth, most likely related to the compensation that Mercury dealers were offered.

Mercury has become known as a brand that was under-funded, but now it seems the however, that the entry level luxury car will get to see some of the riches that it never realized when it was initially introduced by Edsel Ford, the son of founder Henry Ford. According to Automotive News, Ford CFO Lewis Booth claims that shutting down Mercury before the end of this year will cost the company roughly $500 million..

Experts feel that Mercury’s sales were down to such an extent that it would not have made any sense to invest the half a billion in trying to resurrect the dying company, rather Ford has made a vitally important decision to focus on investing in the latest in technology, as well as vehicles that are on the cutting edge in fuel economy and dependability.


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