Honda, Hitachi to merge four car parts makers

Honda Motor Co and Hitachi Ltd have agreed to merge four of their car parts businesses to create a components supplier with almost NZ$26.6 billion in sales, joining a wave of partnerships sweeping the automotive industry.

Honda, Japan’s second-biggest carmaker, and Hitachi, one of the country’s biggest industrial conglomerates, will combine Hitachi Automotive Systems and Honda affiliates Keihin Corp, Showa Corp and Nissin Kogyo Co, Bloomberg reported.

With an increasing push toward electric vehicles and autonomous driving, carmakers and suppliers are increasingly looking to pool resources and knowledge. Fiat Chrysler and French carmaker PSA Group are in merger talks, and last month Toyota Motor Corp agreed to boost its stake in Subaru Corp.

“The car and motorcycle industry is facing a once-in-a-century major shift, with pressure to reduce environmental impact, cut accidents and improve comfort,” Honda and Hitachi say in a statement. “There’s intensifying competition in electrification, autonomous driving and connected cars.”

Hitachi Automotive Systems makes autonomous driving electronic control units and also supplies conventional parts such as power steering pumps, brake pads and ignition coils to carmakers.

The deal between the firms is expected to take place in two steps. First, Honda will make a tender offer for all shares of Nissin Kogyo, Keihin and Showa and Hitachi will make Hitachi Automotive Systems a subsidiary. Then, the four suppliers will merge, with Hitachi owning about 67 per cent and Honda the remaining third. A timetable for the process has yet to be decided.

“There might be more mergers among auto component makers seeking scale,” said Koji Endo, an analyst at SBI Securities. “Small auto part makers could merge together, or big manufacturers could actively buy small ones. Clearly we will see such moves in Japan and elsewhere in the world.”