Japanese automakers Honda and Nissan have announced plans to work toward a merger that would create the world’s third-largest automaker by sales, as the industry undergoes dramatic changes in its shift away from fossil fuels.
The two companies said they signed a memorandum of understanding on Monday, and that Mitsubishi Motors, the junior member of the Nissan alliance, also agreed to join talks on merging their businesses.
Japan’s automakers have lagged behind their big rivals in electric vehicles and are trying to cut costs and make up for lost time as new entrants such as China’s BYD and electric vehicle market leader Tesla eat up market share.
Honda and Nissan will try to consolidate their operations under a joint holding company, Honda President Toshihiro Mebe said. Honda will lead the new management, retaining each company’s principles and brands. He said they aim to reach a formal merger agreement by June and complete the deal and list the holding company on the Tokyo Stock Exchange by August 2026.
Meby said the dollar value had not been determined and that formal talks had only just begun.
He said that there are “points that need study and discussion.” “Frankly, the probability of this not being implemented is not zero.”
The merger could result in a giant company worth more than $50 billion based on the market capitalization of all three automakers. Together, Honda, Nissan and Mitsubishi will gain scale to compete with Toyota Motor Corp and Germany’s Volkswagen. Toyota has technology partnerships with Japan’s Mazda Motor Company and Subaru Corp.
News of a potential merger emerged earlier this month, with unconfirmed reports that Taiwanese iPhone maker Foxconn was seeking to tie up with Nissan by buying shares from the Japanese company’s other alliance partner, France’s Renault.
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Nissan CEO Makoto Uchida said Foxconn had not contacted his company directly. He also acknowledged that Nissan’s situation was “dangerous.”
Even after the merger, Toyota, which produced 11.5 million vehicles in 2023, will remain the leading Japanese automaker. If the three smaller companies join, they will produce about 8 million cars. In 2023, Honda produced 4 million and Nissan produced 3.4 million. Mitsubishi Motors made just over 1 million vehicles.
“We have come to the realization that for both parties to be leaders in this mobility transformation, bolder change than cooperation in specific areas is necessary,” said Meby.
Nissan, Honda and Mitsubishi previously agreed to share electric vehicle components such as batteries and conduct joint research on self-driving software to better adapt to electricity.
Nissan is facing difficulty in the wake of a scandal that began with the arrest of its former president, Carlos Ghosn, in late 2018 on charges of fraud and misuse of company assets, charges that Ghosn denies. He was eventually released on bail and fled to Lebanon.
Speaking to reporters in Tokyo on Monday via video link, Ghosn mocked the planned merger as a “desperate move.”
From Nissan, Honda can get large, truck-based SUVs like the Armada and Infiniti QX80 that Honda doesn’t have, with great towing capabilities and good off-road performance, Sam Fiorani, vice president of AutoForecast Solutions, told The Associated Press.
Nissan also has years of experience in manufacturing batteries, electric vehicles, and gas-electric hybrid powertrains that could help Honda develop its electric vehicles and next-generation hybrids, he said.
But the company said in November that it would cut 9,000 jobs, or about 6% of its global workforce, and reduce its global production capacity by 20% after reporting a quarterly loss of 9.3 billion yen ($61 million).
It recently shuffled its management, and Uchida, its chief executive, took a 50% pay cut while admitting responsibility for the financial problems, saying Nissan needs to become more efficient and respond better to market tastes, rising costs and other global changes.
“We expect that if this integration comes to fruition, we will be able to provide greater value to a broader customer base,” Uchida said.
Fitch Ratings recently lowered Nissan’s credit outlook to “negative,” citing deteriorating profitability, partly due to price cuts in the North American market. But it noted that it has a strong financial structure and solid cash reserves of 1.44 trillion yen ($9.4 billion).
Nissan’s stock price has also fallen to the point where it is considered a bargain. On Monday, its Tokyo-traded shares rose 1.6%. It jumped more than 20% after news of the potential merger emerged last week.
Honda shares rose 3.8%. Honda’s net profit fell nearly 20% in the first half of the fiscal year from April to March compared with the previous year, as its sales in China suffered.
The merger reflects an industry-wide trend toward consolidation.
At a routine news conference on Monday, Chief Cabinet Secretary Yoshimasa Hayashi said he would not comment on the details of the automakers’ plans, but said Japanese companies needed to remain competitive in the rapidly changing market.
“As the business environment surrounding the automotive industry changes significantly, with competitiveness in battery storage and software becoming increasingly important, we expect to take necessary measures to survive the international competition,” Hayashi said.
& Edition 2024 The Canadian Press
