Japanese automakers Honda and Nissan have announced 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.
The two companies said they had signed a memorandum of understanding on Monday and that Mitsubishi Motors Corp., a smaller member of the Nissan alliance, had also agreed to join talks to integrate their businesses.
Automakers in Japan have fallen behind their big EV rivals and are trying to cut costs and make up for lost time as newcomers such as China's BYD and EV market leader Tesla gobble up share. of market.
Honda President Toshihiro Mibe said Honda and Nissan will try to unify their operations under a joint holding company. Honda will lead the new direction, preserving the principles and brands of each company. It aims to have a formal merger agreement by June and to complete the deal and list the holding company on the Tokyo Stock Exchange by August 2026, it said.
No dollar value was provided and formal talks are just beginning, Mibe said.
There are “points that need to be studied and discussed,” he said. “Frankly speaking, the possibility of this not being implemented is not zero.”
A merger could result in a giant worth more than $50 billion based on the market capitalization of the three automakers. Together, Honda, Nissan and Mitsubishi would gain scale to compete with Toyota Motor Corp. and Germany's Volkswagen AG. Toyota has technology partnerships with Mazda Motor Corp. and Subaru Corp. of Japan.
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News of a possible merger emerged earlier this month, with unconfirmed reports saying that Taiwanese iPhone maker Foxconn was trying to partner with Nissan by purchasing shares of the Japanese company's other alliance partner, Renault SA. France.
Nissan CEO Makoto Uchida said Foxconn had not approached his company directly. He also acknowledged that Nissan's situation was “serious.”
Even after a merger, Toyota, which launched 11.5 million vehicles in 2023, would remain the top Japanese automaker. If they come together, the three smaller companies would make around 8 million vehicles. In 2023, Honda earned 4 million and Nissan produced 3.4 million. Mitsubishi Motors earned just over 1 million.
“We have realized that for both parties to be leaders in this mobility transformation, it is necessary to make a bolder change than a collaboration in specific areas,” Mibe said.
Nissan, Honda and Mitsubishi previously agreed to share electric vehicle components such as batteries and jointly research software for autonomous driving to better accommodate electrification.
Nissan has struggled following a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misappropriation of company assets, allegations he denies. He was eventually released on bail and fled to Lebanon.
Speaking to reporters in Tokyo via video link on Monday, Ghosn mocked the planned merger as a “desperate measure.”
From Nissan, Honda could get large, truck-based body-on-frame SUVs, like the Armada and Infiniti QX80, which Honda doesn't have, with big towing capacities and good off-road performance, Sam Fiorani, vice president of AutoForecast Solutions, told The Associated Press.
Nissan also has years of experience making batteries and electric vehicles, and gas-electric hybrid powertrains that could help Honda develop its own electric vehicles and the next generation of hybrids, he said.
But the company said in November it was cutting 9,000 jobs, or about 6% of its global workforce, and reducing its global production capacity by 20% after reporting a quarterly loss of 9.3 billion yen (61 million of dollars).
It recently reorganized its management and Uchida, its chief executive, took a 50% pay cut while acknowledging responsibility for financial problems, saying Nissan needed to become more efficient and better respond to market tastes, rising costs and others. global changes.
“We anticipate that if this integration comes to fruition, we will be able to deliver even greater value to a broader customer base,” Uchida said.
Fitch Ratings recently downgraded Nissan's credit outlook to “negative,” citing worsening profitability, in part due to price cuts in the North American market. But it noted that it has a sound financial structure and strong cash reserves that amounted to 1.44 trillion yen ($9.4 billion).
Nissan's share price had also fallen to the point where it was considered something of a bargain. On Monday, its Tokyo-traded shares gained 1.6%. They jumped more than 20% after news of the possible merger broke last week.
Honda shares rose 3.8%. Honda's net profit fell nearly 20% in the first half of the April-March fiscal year from a year earlier as its sales suffered in China.
The merger reflects a trend toward consolidation across the industry.
At a routine briefing on Monday, Cabinet Secretary Yoshimasa Hayashi said he would not comment on the details of automakers' plans, but said Japanese companies need to remain competitive in a rapidly changing market. .
“As the business environment surrounding the automotive industry changes greatly, and competitiveness in battery storage and software becomes increasingly important, we hope that the necessary measures will be taken to survive international competition,” he said Hayashi.
© 2024 The Canadian Press