Nissan and Honda announce merger talks: NPR

TOKYO — Japanese automakers Honda and Nissan announce plans to work toward a merger that would form the world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels. did.

The two companies signed a memorandum of understanding on Monday, announcing that Mitsubishi Motors, a smaller member of the Nissan Alliance, had also agreed to participate in business integration talks.

Honda President Toshihiro Mibe said that Honda and Nissan aim to integrate their businesses under a joint holding company. Initially, Honda will lead a new management team while inheriting each company’s philosophy and brand. The goal is to enter into a formal merger agreement by June and complete the transaction by August 2026, he said.

Mibe said no amount had been offered and formal negotiations had just begun.

There are “points that need to be studied and discussed,” he said. Frankly speaking, there’s a non-zero chance that it won’t happen.

Japanese automakers are lagging behind bigger rivals in electric vehicles and are trying to cut costs and make up for lost time.

News of a possible merger surfaced earlier this month, but unconfirmed reports suggest that talks about a closer collaboration are likely between Taiwanese iPhone maker Foxconn and Nissan, which is partnering with France’s Renault and Mitsubishi. It was said to be partially driven by a desire to partner with .

A merger could create a giant company worth more than $50 billion, based on the market capitalizations of all three automakers. A collaboration between Honda and the Nissan alliance with France’s Renault SA and smaller automaker Mitsubishi Motors would give it the scale to compete with Toyota Motor Corp. and Germany’s Volkswagen AG. Toyota has technical alliances with Japan’s Mazda Motor Corporation and Subaru Corporation.

Even after the merger, Toyota will continue to be Japan’s leading automobile company, selling 11.5 million cars in 2023. If both companies participate, the three small and medium-sized enterprises will produce approximately 8 million vehicles. In 2023, Honda produced 4 million vehicles and Nissan produced 3.4 million vehicles. Mitsubishi Motors had just over 1 million.

Following a preliminary agreement between Nissan and Honda in March, Nissan, Honda and Mitsubishi will share electric vehicle parts such as batteries and software for self-driving cars in order to adapt to dramatic changes centered around electrification. In August, they announced that they would be conducting joint research.

Honda, Japan’s second-largest automaker, is widely seen as the only Japanese partner who can bail out Nissan, which has been struggling with scandals that began with the arrest of former chairman Carlos Ghosn on fraud charges in late 2018. are. He is accused of misusing company assets, which he denies. He was eventually released on bail and fled to Lebanon.

Speaking to reporters in Tokyo via videolink on Monday, Ghosn derided the planned merger as an “act of desperation.”

Sam Fiorani, vice president of AutoForecast Solutions, said Honda is looking to build truck-based, body-on-frame large vehicles with large towing capacities and superior off-road performance from Nissan, such as the Armada and Infiniti QX80, which Honda doesn’t have. He said there is a possibility of getting an SUV. he told the Associated Press.

Nissan also has years of experience making batteries, electric vehicles and gasoline-electric hybrid powertrains, which could help Honda develop its own EVs and next-generation hybrids, he said. .

But in November, the company announced it would cut 9,000 jobs, or about 6% of its global workforce, and cut global production capacity by 20%, after reporting a quarterly loss of 9.3 billion yen ($61 million).

Nissan recently reshuffled its management team, with Chief Executive Officer Makoto Uchida taking a 50% pay cut to take responsibility for the company’s financial difficulties, but the company has continued to focus on improving efficiency, adapting to market preferences, rising costs, and other factors. He said there is a need to better respond to global changes in the world.

Mr. Uchida said, “If this integration is realized, we expect to be able to provide even greater value to a broader customer base.”

Fitch Ratings recently downgraded Nissan’s credit outlook to negative, citing deteriorating profitability due to price cuts in the North American market. However, he noted that the company has a strong financial structure and solid cash reserves amounting to 1.44 trillion yen ($9.4 billion).

Nissan’s stock price has also fallen to the point where it feels undervalued.

The company’s shares rose 1.6% in Tokyo trading on Monday. Shares rose more than 20% after news of a possible merger was announced last week.

Honda’s stock price rose 3.8%. Honda’s net profit for the first half of the April-March period fell nearly 20% from the same period last year due to sluggish sales in China.

This merger reflects an industry-wide consolidation trend.

Chief Cabinet Secretary Yoshimasa Hayashi told a regular press conference on Monday that he would not comment on the details of automakers’ plans, but said Japanese companies needed to remain competitive in a rapidly changing market.

Mr. Hayashi said, “The business environment surrounding the automobile industry is changing significantly, and the competitiveness of storage batteries and software is becoming increasingly important, and it is hoped that the necessary measures will be taken to survive international competition.” ” he said.