By Bernie Woodall

DETROIT (Reuters) - Ford Motor Co issummoning Lincoln dealers to a meeting in October to discussplans to breathe new life into a brand that has long trailedthe likes of Cadillac and Mercedes.

"It will be a Lincoln update ... giving dealers a look athow Ford will now work with Lincoln as an exclusive, luxurybrand," Ford spokesman Christian Bokich said.

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

Ford is preparing to phase out its Mercury brand and isnegotiating with dealers on compensation for dropping thebrand. Mercury was created in 1939 by Edsel Ford, son of Ford'sfounder, Henry. It was intended to be a stepping stone betweenthe Ford brand and Lincoln, a strategy modeled after GeneralMotors Co's "brand ladder" between Chevy and Cadillac.

Among the brand's notable launches was the Mercury Cougar,a 1960s entry that led to the Mercury slogan, "The sign of thecat."

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

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

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

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

Ford will end production of Mercury vehicles within thenext 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 luxuryportfolio that had also included the Jaguar, Aston Martin andVolvo brands.

Bokich said the number of Lincoln dealers selling only thatbrand would be known after the Oct. 4 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 NewYork, Los Angeles, and Miami, Bokich said.

He said that while the luxury market was concentrated inlarge cities, dealers in those places would not be givenpreference over dealers in smaller markets.

Dealers will "decide if they find these updated parametersin line with their priorities for their markets," Bokich said.

Ford has been restructuring since 2006 based on a strategyof shedding niche brands and focusing on improvements for itsmass-market Ford vehicles.

Lincoln has failed to catch fire with younger consumers.Its U.S. market share slipped in 2010 while General Motors Co's Cadillac and Daimler AG's Mercedes gainedground.

Toyota Motor Corp's Lexus is the U.S. luxurymarket leader. Lexus dealers sold over 145,000 vehicles throughAugust 2010 compared with nearly 56,000 sales of Lincolns.

Lexus sales were up 11 percent over the first eight monthsof the year versus 5 percent for Lincoln. (Reporting by Bernie Woodall; Additional reporting by KevinKrolicki; Editing by Toni Reinhold)