Japanese carmakers Honda and Nissan have revealed plans to work towards a merger, creating the world's third-largest car retailer by selling as the business goes through major changes in the transition away from fossil fuels.
The two companies said they had signed a memorandum of understanding on Monday and that a smaller member of the Nissan alliance, Mitsubishi Motors, had also agreed to enter into talks on merging their businesses.
Honda president Toshihiro Mibe said that Honda and Nissan will continue to combine their operations under a joint ownership company. Honda will initially lead the new direction, keeping the principles and logos of each company. The goal is to have a formal merger agreement by June and complete the deal and list the holding company on the Tokyo Stock Exchange by August 2026, he said.
No dollar value has been given and formal negotiations are just beginning, Mibe said.
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There are “points that need to be studied and discussed,” he said. “Frankly, the possibility of this being implemented is zero.”
Japanese automakers have fallen behind their big rivals in electric vehicles and are trying to cut costs and make up for lost time.
A merger could lead to a behemoth worth more than $50 billion US based on the market capitalization of the three automakers.
Together, Honda, Nissan and Mitsubishi would gain scale to compete with Toyota Motor Corp. and by Volkswagen AG in Germany. Toyota has technology partnerships with Mazda Motor Corp. Japan and Subaru Corp.
Planned merger 'desperate move'
News of a potential merger emerged earlier this month, with unconfirmed reports saying the talks about closer cooperation were partly driven by the desire of Taiwanese iPhone maker Foxconn tie up with Nissan by buying shares from the Japanese company's other alliance partner, France's Renault SA. .
Nissan CEO Makoto Uchida said Foxconn had no direct access to his company. He also admitted that Nissan's situation was “serious”.
Even after the merger, Toyota, which shipped 11.5 million vehicles in 2023, would remain the top Japanese automaker. If combined, the three smaller companies would make about eight million vehicles. In 2023, Honda produced four million and Nissan produced 3.4 million. Mitsubishi Motors made just over a million.
Nissan, Honda and Mitsubishi announced in August that they would share components for electric vehicles, such as batteries, and are both researching software for autonomous driving to better adapt to major changes based on on electrification, following an initial agreement between Nissan and Honda established in March.
Nissan has been struggling after a scandal that began when its former chairman Carlos Ghosn was arrested in late 2018 on charges of fraud and misappropriation of company assets, charges he denies. to deny He was eventually released on bail and fled to Lebanon.
Speaking to reporters in Tokyo on Monday via video link, Ghosn derided the proposed merger as a “desperate move.” “
Nissan has years of experience building batteries, EVs
From Nissan, Honda would get big truck-based body-on-frame SUVs like the Armada and Infiniti QX80 that Honda doesn't have, with big towing capabilities and good off-road performance, Sam Fiorani, vice president of AutoForecast Solutions, said The Associated Press.
Nissan also has years of experience building batteries and electric vehicles, and hybrid gas powertrains that could help Honda develop its own EVs and the next generation of hybrids, he said.
But the company said in November it was cutting 9,000 jobs, or about six percent of its global workforce, and reducing its global production capacity by 20 percent after reporting a quarterly loss of 9.3 billion yen (about $85 million Cdn).
It recently reshuffled its management and Makoto Uchida, its chief executive, took a 50 percent pay cut to take responsibility for the financial problems, saying Nissan must be more efficient and deal more better to market tastes, rising costs and other global changes.
“We expect that if this merger becomes a reality, 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 worsening profitability, partly due to price cuts in the North American market. But he noted that it has a strong financial structure and hard cash reserves that amounted to 1.44 trillion yen ($13 billion Cdn).
Nissan's share price has also fallen to the point where it is considered a bargain.
A merger indicates an industry-wide movement towards consolidation
On Monday, Nissan shares traded in Tokyo gained 1.6 percent. They jumped more than 20 percent after news of the possible merger last week.
Honda shares rose 3.8 percent. Honda's net profit slipped nearly 20 percent in the first half of the April-March fiscal year from a year earlier, as sales in China suffered.
The merger reflects an industry-wide trend towards consolidation.
At a routine briefing on Monday, Cabinet Secretary Yoshimasa Hayashi said he would not comment on details of the automakers' plans, but said Japanese companies must remain competitive in the rapidly changing market.
“As the business environment around the automotive industry changes dramatically, with competition in storage batteries and software becoming increasingly important, we expect the steps needed to survive to take an international competition,” said Hayashi.
