Honda and Nissan have announced that they have merged to create the world’s third largest automaker.
Japanese automakers Honda and Nissan have announced plans to work toward a merger to become the world’s third-largest automaker by sales as the industry undergoes dramatic shifts away from fossil fuels.
The two companies said they signed a memorandum of understanding on Monday, and smaller Nissan alliance member Mitsubishi Motors also agreed to join talks on integrating their businesses.
Honda president Toshihiro Mibe said that Honda and Nissan will continue to integrate their operations under a joint holding company. Honda will initially lead the new management while maintaining the principles and brands of each company. The goal is to reach a formal merger agreement by June and complete the deal and list the holding on the Tokyo Stock Exchange by August 2026, he said.
Mibe said that the dollar value has not been given and official negotiations are just beginning.
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“There are points to be studied and discussed,” he said. Frankly, the probability of this not being implemented is not equal to zero.
Automakers in Japan are trying to cut costs and make up for lost time by outpacing their big rivals in electric cars.
The merger could result in a behemoth worth more than $50 billion based on the market capitalization of all three automakers.
Honda, Nissan and Mitsubishi together Toyota Motor Corp. and will gain scale to compete with Germany’s Volkswagen AG. Toyota Japan’s Mazda Motor Corp. and has a technology partnership with Subaru Corp.
Planned merger ‘a desperate move’
News of a possible merger surfaced earlier this month, and unconfirmed reports said talks of closer cooperation were partly driven by Taiwanese iPhone maker Foxconn’s desire to tie up with Nissan by buying shares from the Japanese company’s other alliance partner, France’s Renault SA. .
Nissan CEO Makoto Uchida said that his company had not received a direct approach from Foxconn. He also admitted that Nissan’s situation is “difficult”.
Even after the merger, Toyota will remain Japan’s leading automaker, producing 11.5 million vehicles in 2023. If they join, the three small companies will produce about eight million cars. In 2023, Honda produced four million and Nissan produced 3.4 million. Mitsubishi Motors won just over a million.
Nissan, Honda and Mitsubishi announced in August that they will share components for electric cars, such as batteries, and jointly research software for autonomous driving to better adapt to the dramatic changes in electrification, following an initial agreement between Nissan and Honda in March.
Nissan has struggled since the scandal that began in late 2018 with the arrest of former chairman Carlos Ghosn on charges of fraud and misappropriation of company assets. He was eventually released on bail and fled to Lebanon.
Speaking to reporters via video link in Tokyo on Monday, Ghosn derided the planned merger as a “desperate move.”
Nissan has years of experience in the production of batteries, electric vehicles
From Nissan, Honda could buy large truck-based SUVs like the non-Honda Armada and the Infiniti QX80, with big towing capacity and good off-road performance, Sam Fiorani, vice president of AutoForecast Solutions, reported the Associated Press. .
Nissan also has years of experience in producing batteries and 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 it was cutting global production capacity by 20 percent after reporting 9,000 job cuts, or about six percent of its global workforce, and a quarterly loss of 9.3 billion yen (about Cdn 85 million).
It recently reshuffled its leadership and CEO Makoto Uchida took a 50 percent pay cut to take responsibility for its financial woes, saying Nissan needed to be more efficient and better respond to market tastes, rising costs and other global changes.
“We expect that if this integration takes place, we will be able to provide even greater value to a broader customer base,” Uchida said.
Fitch Ratings recently downgraded Nissan’s credit outlook to “negative,” citing deteriorating profitability in part 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 (Cdn13 billion).
The price of “Nissan” shares has fallen to such an extent that it is considered a bargain.
The merger reflects a trend toward consolidation in the industry
Nissan shares rose 1.6 percent in Tokyo trading on Monday. They rose more than 20 percent last week after news of a possible merger broke.
Honda shares rose 3.8 percent. Honda’s net profit fell nearly 20 percent from a year ago in the first half of the April-March fiscal year due to lower sales in China.
The merger reflects a trend toward consolidation in the industry.
At a regular briefing on Monday, 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 a rapidly changing market.
“As the business environment surrounding the automotive industry changes greatly, and as competitiveness in battery cells and software become increasingly important, we expect the necessary measures to be taken to survive international competition,” Hayashi said.
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