Ford Motor Co has invited Lincoln dealers to a meeting in October to discuss its plans to breathe new life into the lagging luxury brand at a critical time for many of its U.S. retailers.

The meeting is scheduled for October 4 at Ford's Dearborn, Michigan, headquarters.

It will mark the first gathering of Lincoln dealers since Ford, Lincoln and Mercury dealers all met in April 2008, just as the No. 2 U.S. automaker was beginning to win back market share under Chief Executive Alan Mulally.

The dealer meeting comes as Ford prepares to phase out its Mercury brand and negotiates with dealers on compensation for dropping the brand.

It will be a Lincoln update ... giving dealers a look at how Ford will now work with Lincoln as an exclusive, luxury brand, Ford spokesman Christian Bokich said.

Ford's discussions with dealers are expected to include investment to enhance dealerships to lure the luxury buyer.

Bokich would not say whether investments to upgrade showrooms would be part of the new plan for selling Lincolns.

Bokich said it is important that Lincoln dealers show that the customer experience is better.

Mercury was created in 1939 by Edsel Ford, son of Ford's founder, Henry. It was intended to be a stepping stone between the Ford brand and Lincoln, a strategy modeled after General Motors Co's GM.UL brand ladder between Chevy and Cadillac.

Of roughly 1,700 Mercury dealerships, most are paired with Ford or Ford and Lincoln. There were 264 Lincoln-Mercury dealerships at the end of July.

Many of those dealers have depended on Mercury for the bulk of their sales and some see an uncertain future when they are reliant only on Lincoln.

Some Mercury dealers have been offered payouts of $300,000 to $400,000 each by Ford in a bid to avoid a protracted legal battle, a source familiar with the discussions has said.

Bokich declined to comment on compensation being offered to Mercury franchise holders because negotiations were ongoing.

Ford will end production of Mercury vehicles within the next two months, Bokich said.

LOOKING TO WOW LUXURY MARKETS

Lincoln was founded in 1917, and acquired by Ford in 1922. In the late 1990s, it became the centerpiece of Ford's luxury portfolio which had also included the Jaguar, Aston Martin and Volvo brands.

Under Mulally, Ford has sold Jaguar, Aston Martin and Volvo. In June, the automaker announced that it would drop Mercury, a storied brand associated with vehicles like the Mercury Cougar.

That car -- launched in the 1960s -- led to the brand's advertising slogan, The sign of the cat.

Bokich said the number of stand-alone Lincoln dealers would be known after the October 4 dealer meeting.

Ford will use the meeting to discuss upcoming products, including versions of the MKX crossover and a hybrid MKZ sedan, and plans to build Lincoln's image in luxury markets like New York, Los Angeles, and Miami, Bokich said.

Ford has been restructuring since 2006 based on a strategy of shedding niche brands and focusing on improvements for its mass-market Ford vehicles under the Blue Oval logo.

Despite Ford's progress, Lincoln has failed to catch fire with younger consumers. Its U.S. market share slipped in 2010 while GM's Cadillac and Daimler AG's (DAIGn.DE) Mercedes gained ground.

Last year, Ford also showed off a concept car for Lincoln based on its small-car platform for the Focus which could represent part of a bid to build the brand's image with younger drivers.

Toyota Motor Corp's (7203.T) (TM.N) Lexus is the U.S. luxury market leader. Lexus dealers sold more than 145,000 vehicles from January through August 2010 compared with nearly 56,000 sales of Lincolns.

Lexus sales were up 11 percent over the first eight months of the year versus 5 percent for Lincoln.

(Reporting by Bernie Woodall; Additional reporting by Kevin Krolicki, editing by Toni Reinhold and Matthew Lewis)

Michigan Ford Motor Company