Nissan Motor and Honda Motor are discussing a merger that could create the world’s No. 3 carmaker and leave Japan with just two auto-manufacturing groups.
A combination of some sort has been under consideration for some time as the companies work to stay competitive in the face of overcapacity and the need for huge investments related to electric-vehicle and self-driving technologies.
Discussions have become more urgent in recent months.
It has become clear that Nissan is in trouble and that something akin to a bailout is needed, rather than simply cooperation, joint production or any of the other similar measures considered for the companies to work together, short of merging.
At a news conference Monday, they announced that talks on the historic deal have commenced.
“To lead the mobility transformation, we’ve come to think that we need something bolder than just cooperation in some specific fields,” said Honda CEO Toshihiro Mibe. “We have reconfirmed that a merger would create synergies in all kinds of fields.”
Mitsubishi Motors, which is more than a third owned by Nissan, said it may join the talks and will decide by January. The three automakers aim to finalize the merger talks by June next year and establish a new holding company by the summer 2026.
The merged entity would produce about 8 million vehicles a year. Only Toyota, and its related companies, and the Volkswagen Group would be bigger in terms of volume.
Toyota’s total includes the output of Daihatsu Motor and Hino Motors, both subsidiaries. It also has capital ties with Isuzu Motors, Suzuki Motor, Mazda and Subaru.
Competition in the auto industry is intensifying with nontraditional players, such as Tesla, expanding into the business in response to the rise of new technologies, including connected vehicles and autonomous vehicles, as well as the ongoing process of electrification.
Overcapacity in China is also a concern.
Negotiations have accelerated since Taiwan’s Hon Hai Precision Industry expressed interest in making an investment in Nissan, according to press reports.
Taiwan’s Central News Agency wrote last week that Hon Hai is negotiating with Renault, which owns about 36% of Nissan, to acquire its shares. It also reported that Hon Hai directly proposed an investment in Nissan but was rejected.
In 2019, Hon Hai, which makes iPhones and is better known by its Foxconn trade name, said it was making a foray into the EV market. Last year, the company recruited Jun Seki, a former Nissan executive, to head its EV business. Media reports say that Seki is leading the efforts to obtain Nissan’s shares.
In the first half of this fiscal year, Nissan’s net profit fell about 90% mainly due to sluggish sales in the United States and China. Following the disappointing earnings report, the company announced it would cut 9,000 jobs globally.
Honda and Nissan have been in talks since March about combining resources to develop technology related to emissions, self-driving vehicles and advanced automotive software.
In August, they announced they will be working together on developing vehicle operating systems and other EV-related technologies to save on costs and better compete in markets.
“For me, it doesn’t look very good,” said Carlos Ghosn, former chairman and CEO of Nissan. “If this merger takes place, I don’t think it’s going to be successful.”
Ghosn was speaking on Monday from Beirut to journalists in Tokyo via video link. He was arrested in Japan in 2018 on fraud charges and fled the country the following year.
“I was a little bit surprised,” he added in discussing the Nissan-Honda deal. “They are strong in the same fields. They are weak in the same fields.”
Some analysts argue that huge differences in corporate cultures will likely make it tough for the companies to merge.
Jusuke Ikegami, a professor at Waseda Business School, disagrees, saying data suggests the success rates for mergers between companies with similar cultures and different cultures are actually not that different.
He adds that Nissan’s experience with Renault might be a significant plus.
“A company usually doesn’t know how it should work together when it merges with another company for the first time,” Ikegami said. “Nissan has spent a long time and learned how to collaborate with companies that have different cultures.”
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