Nissan-Honda merger off

Honda and Nissan have officially confirmed the merger between the two carmakers is officially off after weeks of talks.

“It’s very unfortunate that we couldn’t find the common ground to take a step toward the merger,” says Toshihiro Mibe, Honda’s president and chief executive officer.

The companies explored the deal, which would have created the world’s third-biggest vehicle producer as a way to reverse declining fortunes.

Nissan and Honda still intend to work together in areas including software and electric vehicle-related technologies.

Negotiations apparently hit a snag after Honda made a proposal for Nissan to become its wholly owned subsidiary. Nissan rejected the idea.

The original plan was to establish a joint holding company that would fully own both with Honda expected to pick a leader and most board members for it.

But Mibe indicated that it would be better for Honda to have more control to make speedy decisions under “one governance” structure, so it proposed to make Nissan its subsidiary.

He added: “We confirmed the merger of the two companies had great potential to bring significant effects in various areas ranging from platforms, purchasing, research and development and back-office operations.

“At the same time, we also came to realise that it was necessary to swiftly and decisively implement painful decisions to achieve this.”

Nissan thought the best form of the merger was to go with the original plan to establish the joint holding company, said its CEO Makoto Uchida.

Uchida, in a separate news conference on February 13, added: “Under the current situation, it is difficult to keep up with competition just by Nissan itself, so we had a serious discussion about the proposal by Honda.

“We were unable to have confidence in how much Nissan’s independence will be ensured and whether our potential will be fully brought out if Nissan becomes Honda’s wholly owned subsidiary.”

The two companies issued a statement in reference to their earlier memorandum of understanding. 

It said: “Both companies concluded that, to prioritise speed of decision-making and execution of management measures in an increasingly volatile market environment heading into the era of electrification, it would be most appropriate to cease discussions and terminate the MOU.”

Given that Nissan’s market capitalisation is about one-fifth of Honda’s, the merger was widely seen as a move by Honda to save Nissan, which has been struggling.

In the first half of this fiscal year, Nissan’s net profit tumbled by more than 90 per cent mainly due to sluggish sales in the US and China. Following the disappointing earnings report, the company announced 9,000 job cuts globally. 

Mitsubishi Motors, more than one-third of which is owned by Nissan, previously said that it wanted to wait and see how the merger talks went before deciding whether to join.

When the three carmakers held a news conference in December to announce the possibility of a merger, they said they were aiming to finalise a deal by June and establish a new holding company by the summer of 2026.

If Honda, Nissan and Mitsubishi had gone through with the merger plan, it would have left Japan with two automotive manufacturing groups. Toyota – the world's largest automaker – counts Daihatsu Motor and Hino Motors as subsidiaries, and also has capital ties with Isuzu Motors, Suzuki Motor, Mazda and Subaru.

At issue now is how Honda and Nissan will boost their competitive edge over other traditional and emerging rivals amid rapidly changing technology trends.

Some analysts have said that it will be tough for Honda and Nissan to survive on their own, arguing the latter should not have let its pride get in the way of the proposal by Honda to become its subsidiary, reports the Japan Times.

At the same time, some have expressed doubts about whether the two companies would have been able to smoothly merge anyway as their corporate cultures are quite different.

Reports indicate that Taiwan’s Hon Hai Precision Industry has expressed interest in making an investment in Nissan.

In 2019, Hon Hai, which manufactures iPhones and is better known by its Foxconn trade name, said it was making a foray into the EV market.

The company recruited Jun Seki, a former Nissan executive, in 2023 to head its EV business. Media reports have suggested Seki is leading the efforts to establish ties with Nissan.