Just months ago, we were reporting that Mercury would finally get a new model, likely a C-segment car based on the Ford Focus. If a new report today is to be believed, that plan and indeed the Mercury brand as a whole are in danger of being canceled outright.

Citing anonymous sources in Dearborn, Bloomberg reports today that Ford is planning to kill the Mercury brand. According to these unnamed sources, a proposal is already in the works to be presented to the bigwigs in July, with the brand to be phased out in the next four years. The revelation comes on the heels of the final sale of Ford’s Premier Auto Group brands to other companies with Volvo finally departing for China’s Geely.

“Our plans regarding Mercury have not changed,” Mark Truby, a Ford spokesman, told Bloomberg. “Like any good business, we constantly asses our business portfolio. If things change, we will let you know.”

Assessing Mercury’s portfolio shouldn’t take long, as it consists of four vehicles that are all rebadged Ford products and two of them will be gone in the next year as the Mercury Grand Marquis fades away and the Ford Explorer is replaced without its Mercury twin, the Mountaineer. That will leave just the Milan and the Mariner, clones of the Ford Fusion and Escape. Thanks to heavy fleet sales, the Grand Marquis is actually Mercury’s second-best selling model after the Milan and accounts for a full third of the brand’s sales. The Mountaineer, by contrast, is barely a blip on the radar.

Mercury’s biggest problem, of course, is its sales. 2009 sales were down 75 percent from ten years ago to just 92,299, an even farther cry from the brand’s best year in 1978 when it moved 579,498 cars. Through April 2010, Mercury sales are actually up 20 percent, but barely on par to match 2009’s performance. The anonymous insiders blame a lack of unique product and little attention from Ford corporate for Mercury’s faltering status.

Cut and dried though it may sound, this isn’t the whole story. True, Mercury may have been starved of unique product for most of the past thirty years, but it was both a blessing and a curse. Today, Mercurys are nothing more than Fords with fancier trim and new badges and grilles. This means they’re incredibly cheap to produce with a substantial return on a very small investment. Paying for new grilles doesn’t take long at all, so every Mercury sold makes profit for Ford, and 92,000 is a significant number of sales to throw away. On the other hand, that equation will take a nosedive next year when sales drop to the 60,000 range with the loss of half its models.

There’s also the matter of Mercury dealers and customers. Closing the brand would require convincing the dealers to close or give up their volume brand and merge with Ford dealers. Remember, Mercury and Lincoln are sold in combined dealerships and despite Mercury’s struggles it outsold Lincoln by 10,000 units in 2009. More importantly, Mercury buyers are mostly loyal to Mercury, not Ford. Research has shown that many Mercury owners would not consider the Ford equivalent of their vehicle, despite the fact that they’re the same underneath. If Ford does shutter the brand, it will undoubtedly lose sales in the long run.

What’s Ford to do, then? The last official word we’ve heard on the matter was that Mercury would be getting some new vehicles in the future, but Ford hasn’t said anything new on the subject in some time. While Mercury isn’t a shining star in the “One Ford” program, there isn’t much business case for throwing away 1 percent of the U.S. market and 1.9 percent of Ford’s global sales when the investment is so small. Compared to the costs of shuttering the brand and realigning Ford and Lincoln dealers, Mercury makes perfect sense.

While we’re waiting for an official decision from Ford, tell us what you think should or will happen to Mercury in the comments below.

Source: Bloomberg