Tokyo – Japanese automakers Honda and Nissan have announced plans to work toward 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 signed a memorandum of understanding on Monday and announced that Mitsubishi Motors Corporation, a smaller member of the Nissan Alliance, also agreed to participate in business integration talks.
Japanese automakers are lagging behind bigger rivals in electric vehicles, looking to cut costs and make up for lost time as upstarts like China’s BYD and EV market leader Tesla eat into market share. It is said that
Honda President Toshihiro Mibe said that Honda and Nissan will integrate their businesses under a joint holding company. Honda will inherit the philosophy and brand of each company while leading a new management team. He said the two companies aim to conclude a formal merger agreement by June, complete the transaction and list the holding company on the Tokyo Stock Exchange by August 2026.
Mibe said no price has been given and formal negotiations have just begun.
“There are points that need to be studied and discussed,” he said. “Frankly, there’s a non-zero chance that it won’t happen.”
A merger could create a giant company worth more than $50 billion, based on the market capitalizations of all three automakers. If Honda, Nissan, and Mitsubishi join forces, they will be able to compete with Toyota Motor Corporation and Germany’s Volkswagen. Toyota has technical alliances with Japan’s Mazda Motor Corporation and Subaru Corporation.
News of a possible merger surfaced earlier this month, with Taiwanese iPhone maker Foxconn exploring a partnership with Nissan by buying a stake from France’s Renault SA, another alliance partner in Japan. There were unconfirmed reports.
Nissan CEO Makoto Uchida said Foxconn had not contacted the company directly. He also acknowledged that Nissan’s situation is “difficult.”
Even after the merger, Toyota will continue to be Japan’s leading automobile company, selling 11.5 million cars in 2023. If both companies participate, the three small and medium-sized enterprises will produce approximately 8 million vehicles. In 2023, Honda produced 4 million vehicles and Nissan produced 3.4 million vehicles. Mitsubishi Motors had just over 1 million.
“We came to the realization that in order for both sides to become leaders in this mobility transformation, we need to make bolder changes, rather than cooperation in specific areas,” Mibe said. .
Nissan, Honda and Mitsubishi previously agreed to share electric vehicle parts such as batteries and jointly research autonomous driving software to adapt to electrification.
Nissan has been struggling following scandals that began in late 2018 when former chairman Carlos Ghosn was arrested on charges of fraud and misusing company assets, charges that Ghosn denies. He was eventually released on bail and fled to Lebanon.
Speaking to reporters in Tokyo via videolink on Monday, Ghosn derided the planned merger as an “act of desperation.”
Sam Fiorani, vice president of AutoForecast Solutions, said Honda is looking to build truck-based, body-on-frame large vehicles with large towing capacities and superior off-road performance from Nissan, such as the Armada and Infiniti QX80, which Honda doesn’t have. He said there is a possibility of getting an SUV. he told the Associated Press.
Nissan also has years of experience making batteries, electric vehicles and gasoline-electric hybrid powertrains, which could help Honda develop its own EVs and next-generation hybrids, he said. .
But in November, the company announced it would cut 9,000 jobs, or about 6% of its global workforce, and cut global production capacity by 20%, after reporting a quarterly loss of 9.3 billion yen ($61 million).
The company recently revamped its management team, with Chief Executive Officer Uchida taking a 50% pay cut while accepting responsibility for the financial crisis, and Nissan seeking to improve efficiency and address market preferences, rising costs and other factors. He said we need to better respond to global changes.
“If this integration is realized, we expect to be able to provide even greater value to a broader customer base,” said Uchida.
Fitch Ratings recently downgraded Nissan’s credit outlook to negative, citing deteriorating profitability due to price cuts in the North American market. However, he noted that the company has a strong financial structure and solid cash reserves amounting to 1.44 trillion yen ($9.4 billion).
Nissan’s stock price has also fallen to a level where it is considered undervalued. The company’s shares rose 1.6% in Tokyo trading on Monday. Shares rose more than 20% after news of a possible merger was announced last week.
Honda’s stock price rose 3.8%. Honda’s net profit for the first half of the April-March period fell nearly 20% from the same period last year due to sluggish sales in China.
This merger reflects an industry-wide consolidation trend.
Chief Cabinet Secretary Yoshimasa Hayashi told a regular press conference on Monday that he would not comment on the details of automakers’ plans, but said Japanese companies needed to remain competitive in a rapidly changing market.
Mr. Hayashi said, “The business environment surrounding the automobile industry is changing significantly, and the competitiveness of storage batteries and software is becoming increasingly important.It is hoped that the necessary measures will be taken to survive international competition.” ” he said.
Yamaguchi and Kürtenbach write for The Associated Press. Mr. Kürtenbach reported from Bangkok.
