Ford's global head of marketing, Jim Farley, has consulted a number of U.S. dealers about dropping Mercury and a formal announcement could come at a dealer meeting later this summer, said this source.
A wind-down of Mercury, coupled with Ford's planned sale of its Volvo car unit to China's Geely <0175.HK>, would sharpen the automaker's focus on its Ford brand globally and its luxury Lincoln brand in North America.
The person familiar with Ford's plans asked not to be named because the plans have not been made public.
Ford, which expects to be solidly profitable in 2010, has been selling off the members of its former premier auto group to focus on its Ford, Mercury and Lincoln brands. It expects to complete the sale of Sweden's Volvo in the third quarter.
Like any good business, we constantly assess our portfolio, Ford spokesman Mark Truby said in response to whether Ford would eliminate Mercury. If things change, we will let you know.
Mercury was created in the 1930s under Edsel Ford's vision for a vehicle line to fill the price gap between the mass market Ford and luxury Lincoln brands.
The automaker sold more than 621,000 Mercury vehicles in 1978, but last year sold only 92,299 in the United States and product development plans have leaned toward fewer niche vehicles for the brand.
Shutting down Mercury eliminates a distraction, said Jeremy Anwyl, chief executive of Edmunds, the industry tracking website. Mercury is a brand that has lost its meaning in the American automotive marketplace and it isn't worth trying to change that.
Jim Ziegler, an Atlanta-based dealer consultant, said dealers have talked about the eventual elimination of Mercury for some time and the brand has no stand-alone dealerships.
Nobody is going to get hurt, Ziegler said. It's not like there is a lot of heritage walking away with Mercury.
Lincoln dealers are ready and would expect to get a Lincoln version of the Mercury Grand Marquis and possibly a small SUV to take the place of the Mariner, Ziegler said.
Ford has renewed investment in its Lincoln lineup, but does not plan a broad expansion of that luxury brand internationally, executives have said.
We have no change in our position about Ford, Lincoln, Mercury, Ford Chief Executive Alan Mulally told reporters in Washington on Thursday after updating Michigan lawmakers on the industry and the company.
Bloomberg news reported earlier on Thursday that executives could ask Ford's board of directors as early as July to approve the elimination of Mercury.
Ford Executive Chairman Bill Ford Jr. and other members of the family that holds voting control over the automaker support the decision to eliminate Mercury, Bloomberg reported, citing two people familiar with the plan.
(Reporting by David Bailey and Kevin Krolicki, additional reporting by John Crawley in Washington; Editing by Gary Hill and Tim Dobbyn)