Honda-Nissan Merger Deal Broken Up

Two major carmakers in Japan seem to have failed in organizing a dream team. Nissan Motor Co. notified Honda Motor Co. that it would break off their negotiation for merger, which was initiated in last December. Concerning insufficiency in restructuring plan of Nissan, Honda offered an idea of holding Nissan as a subsidiary. Nissan, however, refused it. It is possible that Nissan will change its partner from Honda to a Taiwanese technology group, Hon Hai.

Nissan and Honda announced in December, 2024, that they would embark on the negotiation for their merger. Honda was ranked at the seventh position in the ranking of carmakers of the world, based on the sales, while Nissan followed Honda at the eighth. Mitsubishi Motors was supposed to join the talk, though it was dismissed later. It was expected that their merger would make the third largest car manufacturing group in the world.

 

However, their negotiation did not go smooth. The biggest obstruction was a difference between their recognitions on the situation of Nissan’s business. Honda required Nissan to show its restructuring plan by the end of January. Although Nissan decided to reduce production in the United States by 25 percent, Honda did not evaluate the plan as sufficient. Honda changed the course from establishing a holding company to holding Nissan as Honda’s subsidiary.

 

That idea incurred Nissan’s displeasure. Nissan regarded the merger as making an equal partnership. However, it was obvious that the deal would help Nissan’s management much more than Honda. Market capitalization of Honda is five times greater than Nissan’s. It was supposed that over a half of board members of new group would be occupied by the personnel from Honda.

 

Honda tried to accelerate their business reform to catch up the world trend of car manufacturing. It is apparent that carmakers in the world are focusing on development of electric vehicles and technological improvement for computerization. They are competing each other for advanced communication system and automatic cruise control. Carmakers are transformed into tech companies dealing with car manufacturing.

 

Nissan’s interim financial results at September 2024 showed ninety percent of decline in operating profit. While it is urgent for Nissan to improve its business, it lost possible key partner for rebuilding its management.

 

When the discussion for merger was revealed last December, it was revealed that Hon Hai had been interested in cooperation with Nissan. Hon Hai’s acquisition of Nissan can be revitalized by the failure of merger talk between Nissan and Honda. Nissan also has an option to seek a loose cooperation with Honda and Mitsubishi. It is important for Nissan, anyway, to take necessary measures for improving its business in a timely manner.