Which Car Brand Closes Next?

Pontiac is gone now. So is Saturn, and in effect Hummer. Ford Motor (NYSE: F) announced that it would fad out Mercury, a brand created by Henry Ford’s son Edsel.

Car makers are deciding that the cost of maintaining brands, particularly the expenses of marketing and product development, are too high for units that only sell a few thousand vehicles a year. Mercury and Ford brand cars could be built on similar platforms for many years, but that synergy is no longer enough. And car companies, at least those based in the US, do not have the balance sheets and to carry underperforming brands.

Now that the industry has decided that killing brands is acceptable, the question is which brands go next.

The first may be Acura, the luxury brand of Honda (NYSE: HMC) It competes against BMW, Mercedes, and Lexus. Acura sold only 11,766  units in May. The Honda division sold 105,407 units last month. Acura sales are growing, but it has a challenge competing against established brands. Honda’s best-selling Accord could probably be upgraded so that it had a near-luxury level version.

Kia is another brand at risk. The brand is part of the Hyundai-Kia Automotive Group. In May, Kia sold 31,431 units in the US. But Hyundai sales rose to 49,045. Its Sonata and Tuscon brands did particularly well. Hyundai gets better quality scores in the carefully followed JD Power surveys, and its entry-level nameplates could replace Kia products.

Car sales in the US will pick up this year, perhaps by as much as 20%. That puts annual units sold at close to 12 million. That is nowhere near the 16 million sold five years ago. The market is still too crowded to support all the brands jockeying for a piece of a modest sized pie.

Douglas A. McIntyre