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Japanese car manufacturers Honda and Nissan have announced plans to work on a merger that would form the world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels.
The two companies said they signed a memorandum of understanding on Monday and that the smaller is a member of the Nissan alliance Mitsubishi Motors Corp. also agreed to join negotiations to integrate its businesses.
Automakers in Japan are lagging behind their big EV rivals and trying to cut costs and make up for lost time as newcomers like China’s market leader BYD and EV Tesla gobble up market share.
Honda’s president, Toshihiro Mibe, said that Honda and Nissan will try to unify their operations under a joint holding company. Honda will lead the new management, maintaining the principles and brands of each company. They aim to have an official merger agreement by June and to complete the deal and list the holding company on the Tokyo Stock Exchange by August 2026, he said.
No dollar value was given and official talks are just beginning, Mibe said.
There are “points that need to be studied and discussed,” he said. “Frankly, the possibility of this not being implemented is not zero.”
The merger could result in a behemoth worth more than $50 billion based on the market capitalization of all three automakers. Together, Honda, Nissan and Mitsubishi would gain the scale to compete with Toyota Motor Corp. and the German Volkswagen AG. Toyota has technology partnerships with Japan’s Mazda Motor Corp. and Subaru Corp.
News of the possible merger emerged earlier this month, with unconfirmed reports that Taiwanese iPhone maker Foxconn was looking to tie up with Nissan by buying a stake in the Japanese company’s other alliance partner, Renault SA of France.
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Nissan CEO Makoto Uchida said Foxconn had not contacted his company directly. He also admitted that Nissan’s situation is “difficult”.
Even after the merger, Toyota, which produced 11.5 million vehicles in 2023, would remain Japan’s leading automaker. If combined, the three smaller companies would produce around 8 million vehicles. In 2023, Honda produced 4 million and Nissan 3.4 million. Mitsubishi Motors made just over a million.
“We have come to the realization that in order for both parties to be leaders in this mobility transformation, a bolder shift than cooperation in certain areas is needed,” said Mibe.
Nissan, Honda and Mitsubishi previously agreed to share electric vehicle components such as batteries and jointly research autonomous driving software to better adapt to electrification.
Nissan has struggled since a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misappropriation of company assets, charges he denies. He was eventually released on bail and fled to Lebanon.
Speaking to reporters in Tokyo via video link on Monday, Ghosn derided the planned merger as a “desperate move”.
From Nissan, Honda could get large truck-based, body-on-frame SUVs like the Armada and Infiniti QX80 that Honda doesn’t have, with large towing capacities and good off-road performance, Sam Fiorani, vice president of AutoForecast Solutions, told Associated Press.
Nissan also has years of experience building batteries and electric vehicles and gas-electric hybrid powertrains that could help Honda develop its own electric vehicles and next-generation hybrids, he said.
But the company said in November it was cutting 9,000 jobs, or about 6% of its global workforce, and reducing its global production capacity by 20% after reporting a quarterly loss of 9.3 billion yen ($61 million).
It recently reshuffled its board, and Uchida, its chief executive, took a 50% pay cut while admitting responsibility for the financial woes, saying Nissan needed to become more efficient and better respond to market tastes, rising costs and other global changes.
“We anticipate that if this integration comes to fruition, we will be able to deliver even greater value to a broader customer base,” Uchida said.
Fitch Ratings recently downgraded Nissan’s credit outlook to “negative,” citing deteriorating profitability, partly due to price cuts in the North American market. But it is said to have a strong financial structure and solid cash reserves of ¥1.44 trillion ($9.4 billion).
Nissan’s share price has also fallen to the point where it is considered a bargain. Its Tokyo-traded shares rose 1.6% on Monday. They jumped more than 20% after news of a possible merger broke last week.
Honda shares jumped 3.8 percent. Honda’s net profit fell nearly 20% in the first half of the April-March fiscal year from a year earlier, as sales in China fell.
The merger reflects an industry-wide trend of consolidation.
At a routine briefing on Monday, Cabinet Secretary Yoshimasa Hayashi said he would not comment on the details of the automaker’s plans, but said Japanese companies must remain competitive in a rapidly changing market.
“As the business environment surrounding the automotive industry changes greatly, and competition in batteries and software becomes more important, we expect the measures necessary to survive international competition will be taken,” Hayashi said.
© 2024 The Canadian Press
