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Nissan and Honda ended merger talks to forge a $60 billion car company on Thursday, pitching Nissan deeper into uncertainty and highlighting the pressure on legacy automakers from Chinese rivals upending the industry.
The talks between Honda, Japan’s second-largest automaker, and Nissan, its third, were announced in December but were soon strained by disagreements, including over the balance of power. The deal was ultimately sunk by Honda’s proposal to make Nissan a subsidiary, sources have said.
The car companies said they would continue with an earlier agreement, which also includes Mitsubishi Motors, to cooperate on technology and other areas, Reuters reported.
Analysts said such collaboration was crucial for established carmakers as BYD and other Chinese EV makers gobble up market share with sleeker, more software-rich cars.
Japan’s carmakers also face the added threat of tariffs in the United States on vehicles they import into the US from Mexico, an important manufacturing hub, the Reuters report said.
Nissan is in many ways the most troubled of major legacy automakers, having never fully recovered from the years of crisis and management turmoil sparked by the 2018 arrest and ouster of former chairman Carlos Ghosn.
“Honda is pretty confident and has a lot in their favour, whereas Nissan is in a bad place. They don’t have a dance partner right now,” said Japan autos analyst at brokerage CLSA, said Christopher Richter. “They probably need to think about doing something different,” Richter added.
The merger would have created the world’s fourth-biggest auto group by vehicle sales after Toyota, Volkswagen and Hyundai.
Honda Chief Executive, Toshihiro Mibe, told a press conference that while joining the two companies would have meant “quick pain”, he ultimately became more worried about the fallout if the talks dragged on without progress.
He said that Honda had no plan to launch a hostile takeover bid for Nissan. The failure of the discussions was “disappointing”, he said.
French automaker Renault, Nissan’s top shareholder, said the terms of the proposed merger, including the lack of any premium, were unacceptable.
Meanwhile, Nissan on Thursday cut its full-year forecast for the third time and reported another big drop in third-quarter earnings. It said it would accelerate the turnaround programme it first unveiled last year.
The company now aims to close a plant in Thailand by June and two more plants, which it did not name, after that. It has previously said it would cut 9,000 jobs and reduce global capacity by 20 per cent.
Nissan CEO, Makoto Uchida, told a press conference that ending the malaise was the most pressing issue, after which he would be willing to bow out.
“If I can see the direction in which this will take shape,” he said, referring to the turnaround. “I will naturally be ready to pass the baton to the next person,” he said.
Nissan said it would seek new partnerships as part of the review, and would give an update about the turnaround within a month.
Sources said in December that Nissan would need to further reduce its capacity in China, where it operates eight factories through its joint venture with Dongfeng Motor. It has already suspended production at its Changzhou plant as part of efforts to optimise operations.
Reuters quoted sources as saying last week that Nissan was open to working with new partners, with Taiwan’s Foxconn seen as one candidate. Uchida said Nissan and Foxconn had not held talks at management level.
Foxconn Chairman Young Liu said on Wednesday that his company would consider taking a stake in Nissan but that its main aim was cooperation.
Nissan shares soared more than 60 per cent and Honda’s jumped around 26 per cent in late December after the merger talks were first reported on December 17. Those gains have since been pared to 21 per cent for Nissan and 11 per cent for Honda.
Nissan’s market capitalisation is now nearly five times smaller than that of Honda, which is about 7.5 trillion yen ($48.6 billion). A decade ago, the pair were both worth around 4.6 trillion yen, according to the report.
Emmanuel Addeh
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