The Wheels Are Already Coming Off The Honda-Nissan Merger Plan – CleanTechnica

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Last Updated on: 6th February 2025, 01:26 pm

A month ago, when Honda CEO Toshihiro Mibe was asked what the strategic benefits of a merger involving his company and Nissan were, he replied, “That’s a difficult one.” Hardly a ringing endorsement! Here we are four weeks later and it looks as though the merger is in deep doodoo. Bloomberg Hyperdrive reports disagreements over the power imbalance between the two legacy automobile brands have led to a deadlock.

Citing a report by Japanese media company Asahi, on January 30, 2025, Nissan CEO Makoto Uchida told Mibe-san that he intends to end the merger talks. The companies are discussing all options, including the possibility of withdrawing from talks, both said in statements Wednesday after the Nikkei reported that Nissan was pulling out of further talks. Both reiterated this week that they plan to announce an update on the direction they will go in later this month. The size of the investment Honda is prepared to make in Nissan is also a point of contention, with Nissan shareholders feeling Honda has not valued the worth of its Japanese rival correctly.

Tensions rose between the two companies earlier this week after reports in the Japanese press said Honda had floated the idea of acquiring Nissan and making it a wholly owned subsidiary. That proposal was a departure from the plans made public on December 23, 2024, when the idea of establishing a joint holding company was first announced and was met with strong opposition from within Nissan.

Nissan Is In Dire Straits

It is not clear how Nissan plans to overcome the deep financial troubles that inspired the merger idea in the first place. While Honda isn’t immune to growing competition in the global auto industry and has been slow out of the gate with competitive electric cars, Bloomberg is openly skeptical about whether Nissan can survive without help from some outside source. Right now, Honda is the only company offering Nissan a lifeline. Failure to combine with Honda could leave Nissan out in the cold, Bloomberg suggests. Its global standing has been falling for decades due to unpopular products (sending its CEO to prison didn’t help matters either), cratering profits, and listless leadership. At ¥7.6 trillion ($50 billion), Honda’s market value is more than five times greater than that of Nissan.

In a separate report, Bloomberg said Nissan is looking for a new partner as it prepares to end negotiations to form a joint holding company with Honda, according to people who claim to have insider knowledge. The new ally would ideally be from the technology sector and be based in the US, the people said. Although its sales are slowing globally, North America remains Nissan’s most important market and the wider shift toward electrification and automation is pushing all carmakers to seek alliances with partners in the computer and technology industries. A Nissan spokesperson declined to comment, adding that any details concerning talks with Honda would be announced as planned in mid-February.

Walking away from the merger with Honda is a huge gamble for Nissan, Bloomberg says. Its outdated product lineup has forced it to discount heavily, which in turn has seriously affected its profitability. Honda had also made the restructuring of Nissan’s operations a prerequisite for any transaction, but apart from cutting some jobs and trimming output, Nissan hasn’t done a whole lot. It isn’t planning on closing any factories, which may have irritated Honda considering it was looking for wholesale changes to be made if a merger is to take place.

Nissan has recorded a 94% drop in net income for the first half of this fiscal year and has said it will need to dismiss 9,000 workers and cut a fifth of its manufacturing capacity. Its precarious financial situation isn’t likely to appeal to many would-be suitors, Bloomberg says. If Nissan doesn’t find a partner to help put it back on a stronger footing after the partial unwinding of its complex strategic partnership with Renault, it may need a rescue similar to the one that brought it together with Renault 25 years ago.

Ending the exclusive discussions with Honda would let both companies walk away without having to pay the cancellation fee of ¥100 billion ($657 million) that was part of the memorandum of understanding they signed at the end of last year. Nissan’s board of directors is said to be pushing CEO Makoto Uchida and other senior managers to develop a more comprehensive restructuring plan as part of discussions with any potential new partners.  The goal is to come up with a much deeper restructuring of the company’s operations before February 13, 2025 when Nissan is scheduled to report its quarterly results. That is also when the board of directors will meet to formalize its decision about whether to move forward with a potential merger with Honda, which will also report its latest  quarterly earnings on that date.

Bloomberg is particularly scathing in its remarks about how Nissan has struggled to regain its footing since the 2018 arrest and purge of former CEO Carlos Ghosn on charges of under-reporting compensation. That upended Nissan’s alliance with Renault and the subsequent desire to settle scores by the management of both companies led to an exodus of top management and distracting Nissan from its core mission — selling cars. The scope of Nissan’s financial crisis became obvious to the broader public in November when it slashed its annual profit guidance by 70%. “Further earnings deterioration is possible at Nissan,” Citigroup analyst Arifumi Yoshida said. “Additional restructuring measures are vital.”

Brand Equity

Despite its troubles, Nissan still has vast manufacturing operations and its brand name is still a valuable resource. Foxconn is known to have approached Nissan about acquiring a stake in the company in December, but ultimately put its interest on hold when it became clear the company was in negotiations with Honda about a merger. Foxconn is biding its time, people familiar with the matter told Bloomberg. If the talks between Honda and Nissan end, Foxconn could be waiting in the wings with a proposal of its own.

Mitsubishi is a tiny company compared to either Honda or Nissan. 24% of its shares are owned by Nissan. It was potentially going to be part of the merger, but Japanese newspaper Yomiuri reported last week that Mitsubishi has decided to opt out of the merger. According to the report, Mitsubishi has decided to face the future alone. That may seem like a bad decision, given that Mitsubishi has very little presence in the electric car space save for a plug-in hybrid or two. Perhaps it might be a candidate for the new electric car platform developed by CATL.

The tug of war between Honda and Nissan puts a spotlight on the Japanese auto industry in general. Once a global powerhouse, today it is mostly resting on its laurels and hoping the EV revolution never arrives. But hoping is not a plan and those who fail to plan have a plan to fail. Around the fondue pot in the CleanTechnica employee lounge, there is a spirited debate taking place about which companies might be interested in acquiring Nissan. The list of candidates is remarkably short. In all likelihood, if a suitor is to be found, it might be a company with three initials that is based in the country that calls Japan “the land of the rising sun.” We leave those of you who are students of Asian history to ponder the cultural and political implications of that.