Nissan and Honda agree to merge until 2026 – National
Japanese car manufacturers Honda and Nissan announced plans to work on a merger that would create 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 that the smaller Nissan is a member of the alliance. Mitsubishi Motors Corp. also agreed to join the negotiations on the integration of their businesses.
Automakers in Japan have lagged behind their big rivals in electric vehicles, and newcomers like China’s BYD and EV market leader Tesla are scrambling to cut costs and make up for lost time as they eat up market share.
Honda president Toshihiro Mibe said that Honda and Nissan will seek to consolidate their operations under a joint holding company. Honda will lead the new management while maintaining the principles and brands of each company. They aim to reach a formal merger agreement by June and to 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.
“There are points to be studied and discussed,” he said. “Frankly, the probability that it will not be implemented is not equal to zero.”
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.
News of a possible merger emerged earlier this month, with unconfirmed reports that Taiwanese iPhone maker Foxconn was trying to tie up with Nissan by buying a stake in another Japanese alliance partner, France’s Renault SA.
Get the latest National news
Sign up for breaking news alerts delivered directly to you as they happen, for news affecting Canada and around the world.
Nissan CEO Makoto Uchida said that Foxconn did not approach his company directly. He also admitted that Nissan’s situation is “difficult”.
With 11.5 million vehicles produced in 2023, Toyota will remain Japan’s leading carmaker even after the merger. If they join, the three smaller companies will produce about 8 million cars. In 2023, Honda produced 4 million and Nissan 3.4 million. Mitsubishi Motors earned just over 1 million.
“We realized that for both sides to be leaders in this mobility transformation, bolder change than cooperation in specific areas was needed,” Mibe said.
Nissan, Honda and Mitsubishi have previously agreed to share components for electric cars, such as batteries, and to jointly research software for autonomous driving to better adapt to electrification.
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”.
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% after reporting 9,000 job cuts, or about 6% of its global workforce, and a quarterly loss of 9.3 billion yen ($61 million).
It recently reshuffled its leadership, and CEO Uchida took a 50% pay cut, admitting responsibility for the 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. However, it noted that it has a strong financial structure and solid cash reserves of ¥1.44 trillion ($9.4 billion).
Nissan’s stock price has also fallen to the point where it is considered a bargain. Its shares traded up 1.6% in Tokyo on Monday. They rose more than 20% last week after news of a possible merger broke.
Honda shares rose 3.8%. Honda’s net profit fell nearly 20% in the first half of the April-March fiscal year from a year earlier as sales suffered 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.
© 2024 The Canadian Press
English