Nissan-Honda merger unravelling: report

NISSAN is reportedly seeking a new alliance partner as it prepares to terminate negotiations to form a joint holding with Honda.

According to a report published by Reuters, Nissan chief executive officer Makoto Uchida met with his Honda counterpart on February 6 saying he wanted to end merger talks.

It is alleged the talks have been stymied by Honda’s desire to turn Nissan into a subsidiary of the 77-year-old company.

The report says Nissan will formalise its decision to withdraw from its MOU with Honda at a board meeting next week.

Japanese public broadcaster NHK reported that Honda will not accept any integrations unless Nissan agrees to become a subsidiary.

Abandoning the proposed tie-up with Honda is a gamble for Nissan, says NHK, adding “(Nissan’s) outdated product portfolio has forced it to discount heavily in many of its major markets, destroying its bottom line”.

Nissan reported a 94 per cent drop in net income in the first half of 2024 and said it will reduce staff numbers and one-fifth of its manufacturing capacity to reduce costs.

The Japanese firm’s precarious financial situation is unlikely to appeal to potential suitors, the unwinding of its 25-year alliance with Renault – which was upended by the arrest of former CEO Carlos Ghosn in 2018 – a further hurdle in future talks.

Sources told Automotive News that Nissan’s board is pushing Uchida-san and other senior managers to develop a more comprehensive restructuring plan in parallel to discussions with any potential new partner, adding that “the idea of being a subsidiary is unacceptable”, and that “Honda changed the nature of the agreement at the last minute”.

In countering the statement, a Honda spokesperson reportedly said, “the speed of decision making at Nissan was too slow”.

If the merger completely falls apart, some at Nissan are hopeful to revert to a broadly strategic technology-based agreement reached with Honda in March 2024. Such a move would see Honda and Nissan collaborate on areas including software-defined vehicles, shared platforms, and electrification.

A potential reset for Nissan would also allow it to form cooperations with other partners.

With Honda and Nissan each selling fewer than four million vehicles worldwide per annum, analysts say they are each too small to survive by themselves.

Last year, Honda’s sales fell 4.6 percent to 3.81 million, and Nissan’s 0.8 percent to 3.35 million.

Were Honda and Nissan to merge, the duo would match the likes of Hyundai in terms of total output, placing it in third place behind Toyota Motor Corporation and Volkswagen Group on the global stage.

Further updates on this developing situation are expected to be announced on February 13.