Japanese car maker Honda. And Nissan has announced plans to work toward a merger that would make it 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 Nissan is a smaller member of the alliance Mitsubishi Motors Corporation had also agreed to join the talks on integrating their businesses.
Automakers in Japan have lagged behind their big rivals in electric vehicles and are scrambling to make up for lost time and price cuts as China's BYD and EV market leader Tesla eat away at market share. are
Honda President Toshihiro Maibe said that Honda and Nissan will seek to consolidate their operations under a joint holding company. Honda will lead the new management while maintaining the principles and brands of each company. They aim to have a formal merger agreement by June and complete the deal and list the holding company on the Tokyo Stock Exchange by August 2026, he said.
No dollar value has been given and formal negotiations are just beginning, Maibe said.
He said that there are points that need to be studied and discussed. “Frankly, the chance of it not being implemented is not zero.”
The merger could result in a loss of more than $50 billion based on the market capitalization of the three automakers. Together, Honda, Nissan and Mitsubishi will gain mass to compete with Toyota Motor Corporation and Germany's Volkswagen AG. Toyota has technology partnerships with Japan's Mazda Motor Corporation and Subaru Corporation.
News of a potential merger surfaced earlier this month, with unconfirmed reports that Taiwanese iPhone maker Foxconn was looking to tie up a deal with Nissan by buying a stake from the Japanese company's other alliance partner, France's Renault SA.
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Nissan CEO Makoto Ichida said Foxconn had not contacted his company directly. He also acknowledged that Nissan's situation was “serious”.
Even after the merger of Toyota, which will produce 11.5 million vehicles in 2023, the Japanese carmaker will remain on top. If they join, the three smaller companies will make about 8 million vehicles. In 2023, Honda produced 4 million and Nissan 3.4 million. Mitsubishi Motors earned just over 1 million.
“We've come to realize that for both parties to be leaders in this movement of change, it's important to make bolder changes than cooperation in specific areas,” Maibe said.
Nissan, Honda and Mitsubishi have previously agreed to share components for electric vehicles such as batteries and jointly research software for autonomous driving to better adapt to electricity.
Nissan has been struggling after a scandal that began in late 2018 with the arrest of its former chairman Carlos Ghosn on charges of fraud and misappropriation of company assets, charges he denies. He was eventually released on bail and fled to Lebanon.
Speaking via video link to reporters in Tokyo on Monday, Ghosn derided the planned merger as a “desperate move”.
From Nissan, Honda can get truck-based body-on-frame large SUVs like the Armada and Infiniti QX80 that Honda doesn't have, with big towing capabilities and good off-road performance, said Sam Fiorani, vice president of AutoForex Solutions. , told the Associated Press.
Nissan also has years of experience building batteries and electric vehicles, and gas-electric hybrid powertrains that could help Honda develop its EVs and next-generation hybrids, he said.
But the company said in November it would cut 9,000 jobs, or about 6 percent of its global workforce, and cut its global productivity by 20 percent after reporting a quarterly loss of 9.3 billion yen ($61 million). has been
It recently reshuffled its management and Uchida, its chief executive, took a 50 percent pay cut, admitting responsibility for the financial woes, and said Nissan needed to become more efficient and market tastes, growing Need to better respond to cost and other global changes.
“We expect that if this integration comes to fruition, we will be able to provide greater value to a broader customer base,” Uchida said.
Fitch Ratings recently downgraded Nissan's credit outlook to “negative”, citing a profit fall due to price cuts in the North American market. But it noted that it has a strong financial structure and solid cash reserves of 1.44 trillion yen ($9.4 billion).
Nissan's share price also fell to the point where it is considered a bargain. On Monday, its Tokyo-traded shares rose 1.6 percent. They jumped more than 20% last week after news of a potential merger emerged.
Honda shares rose 3.8 percent. Honda's net profit fell nearly 20 percent in the April-March first half of the fiscal year from a year earlier, as its sales in China suffered.
The merger reflects an industry-wide trend toward consolidation.
At a routine briefing on Monday, Cabinet Secretary Yoshimasa Hayashi said he would not comment on the details of the automakers' plans. will, but said Japanese companies need to remain competitive in a rapidly changing market.
Hayashi said, “As the business environment around the automobile industry changes dramatically, with increased competition in storage batteries and software, we expect the necessary steps to be taken to avoid international competition. will.”
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