Japanese automakers 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 changes in its transition away from fossil fuels.
The two companies said they signed a memorandum of understanding on Monday and that the smaller member of the Nissan alliance Mitsubishi Motors Corp. had also agreed to join negotiations on the integration of their companies.
Japanese automakers are lagging behind their big rivals in electric vehicles and trying to cut costs and make up for lost time as new entrants like China’s BYD and electric vehicle market leader Tesla devour market share.
Honda President Toshihiro Mibe said Honda and Nissan would attempt to unify their operations under a joint holding company. Honda will lead the new management, retaining the principles and brands of each company. They aim to reach a formal merger agreement by June and finalize the deal and list the holding company on the Tokyo Stock Exchange by August 2026, it said.
No monetary value has been given and formal negotiations are just beginning, Mibe said.
There are “points that need to be studied and discussed,” he said. “Frankly, the possibility of this not being implemented is not zero.”
A merger could create a giant worth more than $50 billion, based on the market capitalization of the three automakers. Together, Honda, Nissan and Mitsubishi would gain size to compete with Toyota Motor Corp. and the German Volkswagen AG. Toyota has established technological partnerships with Japanese companies Mazda Motor Corp. and Subaru Corp.
News of a possible merger surfaced earlier this month, with unconfirmed reports that Taiwanese iPhone maker Foxconn was seeking to partner with Nissan by purchasing shares of the company’s other partner. alliance of the Japanese company, the French Renault SA.
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Nissan CEO Makoto Uchida said Foxconn had not contacted his company directly. He also acknowledged that Nissan’s situation was “serious”.
Even after a merger, Toyota, which sold 11.5 million vehicles in 2023, would remain the leading Japanese automaker. If they join, the three small companies would manufacture around 8 million vehicles. In 2023, Honda made 4 million and Nissan produced 3.4 million. Mitsubishi Motors made just over a million.
“We realized that for both parties to be leaders in this mobility transformation, there is a need for bolder change than collaboration in specific areas,” Mibe said.
Nissan, Honda and Mitsubishi earlier agreed to share electric vehicle components, such as batteries, and jointly research autonomous driving software to better adapt to electrification.
Nissan is in trouble following a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misuse of company assets, allegations he denies. He was eventually released on bail and fled to Lebanon.
Speaking to reporters in Tokyo via video link on Monday, Ghosn called the proposed merger a “desperate decision.”
From Nissan, Honda could get large body-on-frame SUVs such as the Armada and Infiniti QX80 that Honda doesn’t have, with big towing capacities and good off-road performance, Sam Fiorani, vice president of ‘AutoForecast Solutions, told the Associated Press.
Nissan also has years of experience building batteries and electric vehicles, as well as gas-electric hybrid powertrains that could help Honda develop its own electric vehicles and the next generation of hybrids, he said. declared.
But the company announced in November that it was cutting 9,000 jobs, or about 6% of its global workforce, and reducing its global production capacity by 20%, after reporting a quarterly loss of 9.3 billion yen ($61 million).
The group recently reshuffled its management and Uchida, its chief executive, accepted a 50% pay cut, while acknowledging responsibility for the financial woes, saying Nissan needed to become more efficient and better respond to market tastes, rising costs and other global changes.
“We anticipate that if this integration comes to fruition, we will be able to offer even greater value to a broader customer base,” Uchida said.
Fitch Ratings recently lowered Nissan’s credit outlook to ‘negative’, citing deteriorating profitability, partly due to price declines in the North American market. But he stressed that it had a strong financial structure and strong cash reserves that amounted to 1.44 trillion yen ($9.4 billion).
Nissan’s stock price has also fallen to the point where it is considered a bargain. On Monday, its Tokyo-traded shares gained 1.6%. They jumped more than 20% after news of a possible merger last week.
Shares of Honda jumped 3.8%. Honda’s net profit fell nearly 20% in the first half of the April-March fiscal year from a year earlier, due to lower sales in China.
The merger reflects an industry-wide consolidation trend.
At a routine news briefing on Monday, Cabinet Secretary Yoshimasa Hayashi said he would not comment on details of automakers’ plans, but said Japanese companies must remain competitive in a market in decline. rapid evolution.
“As the business environment around the automotive industry changes significantly, and competitiveness in battery storage and software becomes increasingly important, we expect the necessary measures to survive international competition be taken,” Hayashi said.
© 2024 The Canadian Press
