Mercury's ride through the 1970s was not gentle, but it fared better than some. Shifting from performance cars such as the S-55, Marauder, and the Mustang-based Cougar, Mercury reverted to its historical role of selling badge-engineered Ford vehicles. Partially as a result of the first gas crisis, the "near luxury" segment was the bread and butter for 1970s American car manufacturers. However, the segment eventually became saturated. Only Mercury's niche products, like the Cougar XR-7, seemed to find real success with buyers. Much of this might really have had to do with Ford's topsy-turvy financial situation in the seventies. Lincoln-Mercury dealers had plenty of good selling cars, they just were not the right cars.
In 1978, Mercury sales peaked at an all-time high of 580,000. The Cougar and Lincoln Mk V shattered sales records, but the staples of Mercury's business, the mid-size and full-size sedans and wagons, moved out of showrooms at a snail's pace. In 1977, the Cougar became the sole mid-size Mercury, replacing the Montego; previously a personal luxury coupe, the Cougar was available in sedan and station wagon bodystyles. The small Bobcat did not lure economy minded buyers, instead bringing only bad press from its close ties to the ill-fated Ford Pinto.
Although the Bobcat trickled out of showrooms, Mercury introduced the Monarch as a replacement for the aging Comet compact. Although still mechanically based on the original 1960 Ford Falcon, the Monarch was intended as a compact near-luxury car; high-trim versions were popular choices as personal cars among Ford executives. In 1978, the Monarch's replacement, the Zephyr was introduced on the Fox platform. An all-new rear-wheel drive platform, it would be used by all late 1970s-early 1980s Mercurys except the Bobcat, Lynx/LN7/Topaz, and the Grand Marquis/Colony Park