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Ford Motor Co. Sales Up in May But Can Not Save Mercury (F, HMC, TM, GELYF, TTM)


Ford Motor Co. (F) offered up a pair of interesting investment headlines today: First, Ford sales rose 22% in May over last year’s numbers, topping the forecast of +16% to mark. That makes it the third consecutive month where more than 11 million Ford cars and trucks were sold and sixth straight month of sales gains of Ford in excess of +20%.

Secondly, and perhaps far less happily for many longtime auto enthusiasts, Ford announced it will eliminate its Mercury brand. The Ford Motor Co. board of directors voted to phase out the 71-year old vehicle brand best known for its Cougar sports coupe and various reincarnations of Ford brands in slightly different packaging.

The two investment news headlines actually have a bit to do with each other. The May auto sales report showed that Mercury sales fell yet again after already steep declines, shedding -10.7% for May compared with the same month last year. That’s in sharp contrast to Ford’s overall growth and the trends reported throughout the industry.

Ford CEO Alan Mulally has done a good job restructuring the company and avoiding bankruptcy — a fate other Detroit automakers Chrysler and GM suffered in the wake of a slowdown in auto sales due to the financial crisis. And thanks to a resurgent Ford Focus brand with European styling and a push to establish the Ford Fusion as a fuel-efficient and stylish family sedan, Ford is on firm footing. The company made $2.7 billion in 2009 to mark its first annual profit in four years, and is now giving Japanese automakers Toyota (TM) and Honda (HMC) a run for their money.

Ford has divested a few brands in recent years, including selling Jaguar and Land Rover to Tata Motors (TTM), and pushing ahead to complete the sale of Volvo by year’s end. To Geely Automobile Holdings (GELYF). Mercury has always existed as a kind of upper-end Ford, giving F stock a midpriced version of its cars and SUVs that fit between inexpensive Fords and expensive Lincolns. But that plan has left the Mercury brand wandering in the wilderness with no clear identity in recent years. In all of 2009, Ford sold about 92,000 Mercury vehicles, down a stunning 75% from almost 360,000 in 2000.

Automakers have had to make some hard decisions as the industry has restructured, and Mercury goes on the scrapheap with other brands such as Pontiac and Saturn that were ditched by GM. But the good news for Ford investors is that the trouble seen by the Mercury brand hasn’t held back the stock, and after this restructuring F stock will be even more streamlined and ready for success going forward. 

As of this writing, Jeff Reeves did not own a position in any of the stocks mentioned here.

Article printed from InvestorPlace Media, http://investorplace.com/2010/06/ford-motor-co-may-auto-sales-f-stock-mercury-brand-toyota-tm-honda-mhc-geely-gelyf-tata-ttm/.

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