Honda-Nissan merger plans scrapped

THE PROPOSED mega-merger between Honda and Nissan, that would have formed the planet’s third largest car-making enterprise, has fallen over after the main protagonists could not agree on terms.

Had it come to fruition, the new entity may have provided protection for Honda and Nissan (and possibly Mitsubishi) in the face of a Chinese onslaught of software-packed BEVs.

Honda made its MOU withdrawal announcement succinctly in a two-paragraph statement while Nissan issued a larger statement that went into more detail as to its decision (see more below).

Essentially, the stumbling block was Honda’s all-or-nothing proposal to “take full control of Nissan to speed management decisions for quicker integration” which was a bridge too far for Nissan.

“We anticipated that our proposal of share exchanges would be quite a difficult decision for Nissan, and we considered that a possibility that the agreement might be withdrawn,” said Honda CEO Toshihiro Mibe.

“However, the far greater concern could be that the integration would progress so slowly that we would fall into a more serious situation in the future.”

Nissan counterpart Makoto Uchida said later – at a different venue – that his board of directors did not see how the proposal to make Nissan a subsidiary created a stronger company.

“We were not confident that our autonomy would be preserved or that Nissan’s potential would truly be maximised,” he said.

“I had doubts whether it would be successful.”

Some light at the end of the tunnel emerged after the collapse of full merger negotiations, the automakers saying they will continue to work together in strategic partnerships.

“Going forward, the three companies will collaborate within the framework of a strategic partnership aimed at the era of intelligence and electrified vehicles,” the companies said in a joint statement.

The collapse of the proposal that involved Japan’s number two and three automakers, Honda and Nissan respectively, comes only months after the pair announced plans to merge under a holding company in December last year.

According to publication Automotive News, they aimed to finalise an agreement by June and establish the new company by August 2026, after both delisted.

Mitsubishi said at the time it would also consider joining.

The goal of the proposed deal was for the new entity to become a “world-class mobility company” with revenue exceeding ¥30 trillion ($A300 billion) and operating profit topping ¥3 trillion ($A30 billion).

“The attempt to create a new Japanese juggernaut came amid a wider sense of urgency across a domestic auto sector feeling unprecedented pressure from China,” said Automotive News of the proposal.

“BYD, that country’s electric vehicle upstart, triggered soul-searching in Japan when it booked a 41 per cent surge in global sales last year to eclipse both Honda and Nissan with volume of 4.27 million vehicles.”

In related news, it is reported that financially troubled Nissan will shutter three factories and cut US production shifts in a bit to address “consecutive quarterly losses” and that Taiwanese smartphone manufacturer Foxconn may be interested “cooperating” with Nissan.

Young Liu, chairman of Taiwan-based Hon Hai Precision Industry Co. – the parent company of Foxconn – said this week that his company is not interested in taking a stake in Nissan or buying out the automaker.

“Our goal is cooperation,” he said.

Automotive News reported that Mr Liu said Foxconn didn’t want to float its own brand of EVs as previously reported. Instead, it wanted to commission its designs and manufacturing services.

Mr Liu added that Foxconn had “lined up a Japanese customer for EV contract manufacturing and would announce details in the first quarter”.

In relation to Nissan’s factory closures, it appears the company is desperately trying to dig out from back-to-back quarterly net losses with plans to shutter three factories in the next two years, cut shifts at US plants, slash executive staff by 20 per cent and look for new partners in a bid to keep going.

Nissan CEO Makoto Uchida outlined those and other steps before the MOU announcement on February 13 as he updated the turnaround plan he unveiled in November, and announced tumbling profits in the latest financial quarter.

The first plant to go offline will be Nissan’s Thailand plant in Q1 of the new fiscal year starting April 1.

Another (undisclosed) will be closed in the October-December time frame and the third (also undisclosed) will be shuttered in the Japanese fiscal year ending March 31, 2027.

The moves will, according to Nissan pull back sales, make operating profit plunge by 79 per cent to ¥120.0 billion ($A 1.2 billion) that will be reflected in a full fiscal year net loss of ¥80.0 billion ($A804 million).

Nissan Australia issues a statement

Nissan Australia has issued a formal statement on the termination of its proposed MOU with Honda, as follows:

Nissan Motor Co., Ltd. (“Nissan”) and Honda Motor Co., Ltd. (“Honda”), today agreed to terminate the MOU signed on December 23 last year for consideration of a business integration between the two companies.

Since signing the MOU, the management teams of both companies, including the chief executive officers, have discussed and considered the surrounding market environment, the objectives of the business integration, and the management strategies and structures post-integration.

Additionally, taking into account the importance of a business integration, both companies have carefully consulted with various stakeholders.

During the discussions between the two companies, various options were considered regarding the structure of the business integration.

Honda proposed changing the structure from establishing a joint holding company, where Honda would appoint the majority of directors and the chief executive officer based on a joint share transfer as initially outlined in the MOU, to a structure where Honda would be the parent company and Nissan the subsidiary through a share exchange.

As a result of these discussions, both companies concluded that, to prioritise speed of decision-making and execution of management measures in an increasingly volatile market environment heading into the era of electrification, it would be most appropriate to cease discussions and terminate the MOU.

Going forward, Nissan and Honda will collaborate within the framework of a strategic partnership aimed at the era of intelligence and electrified vehicles, striving to create new value and maximise the corporate value of both companies.