Money. They weren't making enough off the Contour and Mystique.
I have to agree. I read from several sources that Contours were relatively expensive to build. In the US, smallish compact sedans were expected to have smallish prices. Thus, lower profit margins. Ford did a poor job early on of marketing its attributes as a sports sedan (the only domestic sports sedan) and concentrated on trying to cut costs by decontenting and lax QC which further hurts if you are going to market as a sports sedan, which was the (too late) SVT effort. I think the die was cast already. NEVER played up the fact that it was a German engineered, Jackie Stewart tuned, Porsche engined sedan that ran lap for lap with BMW & Audi.
The lessons learned were applied to Focus. Engineered to be cheap to build, market niche identified and agressively pushed (more advertisement/press on SVT Focus BEFORE IT CAME OUT than CSVT had during 4 years of life!)
