Nissan and Honda ditch $60 billion merger talks

Nissan and Honda ended talks to merge and create a $60 billion carmaker on Thursday, pitching Nissan into deeper uncertainty and underlining the difficulties faced by many auto manufacturers as Chinese rivals disrupt the industry.

Announced in late December, the discussions between Honda, Japan’s second-largest automaker, and Nissan, its third-largest, were soon complicated by growing differences, including over the balance of power in the tie-up. It was Honda’s proposal that Nissan become a subsidiary that ultimately sank the deal, sources have said.

The two had sought to join forces to better combat the challenges unleashed by fast-rising Chinese electric vehicle makers. They plan to continue to cooperate on technology and other areas.

Nissan is in many ways the most troubled of major legacy automakers, having never fully recovered from the years of crisis and management turmoil sparked by the 2018 arrest and ouster of former chairman Carlos Ghosn.

“Honda is pretty confident and has a lot in their favour, whereas Nissan is in a bad place. They don’t have a dance partner right now,” said Christopher Richter, Japan autos analyst at brokerage CLSA.

“They probably need to think about doing something different.”

The merger would have created the world’s fourth-biggest auto group by vehicle sales after Toyota, Volkswagen and Hyundai.

Honda CEO Toshihiro Mibe told a press conference that while merging the two companies would have meant “quick pain”, he ultimately became more worried about the fallout if the talks dragged on without progress.

He called the failure of the discussions “disappointing” but also said Honda wanted to think about the possibility of tying up with companies other than Nissan and Mitsubishi Motors.

Mitsubishi, a junior partner in the alliance Nissan has with Renault, had been part of the merger discussions although sources had said it was unlikely to participate. It also bowed out of the talks on Thursday.

RESTRUCTURING

In addition to the rapid rise of Chinese electric vehicle makers such as BYD, Japanese automakers are facing the prospect of tariffs in the United States, another major market.

Nissan is pushing ahead with a restructuring plan announced in November that includes cutting 9,000 jobs and reducing global capacity by 20%. It has yet to disclose details such as which locations will be affected.

Sources said in December that Nissan will need to further reduce its capacity in China, where it operates eight factories through its joint venture with Dongfeng Motor. It has already suspended production at its Changzhou plant as part of efforts to optimise operations.

Nissan is now open to working with new partners, with Taiwan’s Foxconn seen as one candidate, sources said last week.

Foxconn Chairman Young Liu said on Wednesday that his company would consider taking a stake in Nissan but that its main aim was cooperation.

Nissan shares soared more than 60% and Honda’s jumped around 26% in late December after the merger talks were first reported on Dec. 17. Those gains have since been pared to 21% for Nissan and 11% for Honda.

Nissan’s market capitalisation is now nearly five times smaller than that of Honda, which is about 7.5 trillion yen ($48.6 billion). A decade ago, the pair were both worth around 4.6 trillion yen.