After days of speculation around their deal going sour, Japanese legacy carmakers Honda and Nissan officially announced on Thursday that their $60 billion plan to merge was now off the table.
If their deal had succeeded, the two giants would have created the world’s fourth-biggest auto group by vehicle sales, giving the carmakers a fresh opportunity to better navigate the challenges posed by Chinese rivals.
Merger talks were complicated, however, by growing differences between Nissan and Honda, including over the balance of power in the tie-up.
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It was Honda’s proposal that Nissan become a subsidiary that ultimately sank the deal, sources told Reuters.
Honda CEO 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 called the failure of the discussions “disappointing” but also said Honda wanted to think about the possibility of tying up with companies other than Nissan and Mitsubishi Motors.
Mitsubishi, a junior partner in the alliance Nissan has with Renault, had been part of the merger discussions although sources had said it was unlikely to participate. It also bowed out of the talks on Thursday.
Honda and Nissan have said they would continue with an earlier agreement to cooperate on technology and other areas.
Nissan most at risk
Japanese carmakers face multiple headwinds at present, the biggest being increasing competition from Chinese carmakers like BYD, that are gobbling up market share with sleeker, cheaper and software-rich cars.
Automakers in the country also face the added threat of tariffs imposed by US President Donald Trump, considering many of them have export-oriented factories in Mexico.
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 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 Christopher Richter, Japan autos analyst at brokerage CLSA.
“They probably need to think about doing something different.”
Foxconn tie-up in consideration
Years of struggles have meant that Nissan’s market capitalisation is now nearly five times smaller than that of Honda, at about 7.5 trillion yen ($48.6 billion). A decade ago, both the carmakers were worth around 4.6 trillion yen each.
In a sign of the continuing troubles facing Nissan, the company cut its full-year forecast for the third time on Thursday.
It also reported another big drop in quarterly earnings, but said it would accelerate the turnaround programme it first unveiled last year.
The program includes reducing global capacity by 20% and cutting 9,000 jobs.
For now, Nissan said it was open to working with new partners.
Sources told Reuters that Foxconn will be one candidate considering a tie-up, with the Taiwanese electronic giant saying on Wednesday it would consider taking a stake in Nissan.
It added that cooperation was its main aim.
Experts have said collaboration would be crucial for the auto industry, given the threat posed by Chinese EV makers.
- Reuters, with additional editing by Vishakha Saxena
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