Recently, insiders revealed that the board of directors at Nissan believes that the conditions proposed by Honda for the merger of the two automotive manufacturers are unacceptable, despite Nissan’s business currently being in a precarious state with declining stock prices.
In a statement, Nissan mentioned that no final decisions have been made yet. On the contrary, one of the options under discussion is to cancel the merger intention agreement reached with Honda back in December. Both automakers have stated that negotiations are still ongoing, with plans to announce the direction of their development by mid-February.
If the merger goes through, including Mitsubishi Motors (of which Nissan is the largest shareholder), the merger between Honda and Nissan would create the world’s third-largest automaker based on vehicle sales. Last year, Honda and Nissan collectively sold over 2.3 million vehicles in the United States, positioning both companies in the top tier of American automotive brands.
On December 23, the two Japanese automakers announced plans to merge under a framework where Honda and Nissan would become subsidiaries of a single holding company.
According to an insider, Honda recently proposed making Nissan a subsidiary of Honda instead of the initially planned equal structure. However, Nissan deemed this new proposal unacceptable and is planning to reject it.
On Wednesday, February 5, trading on the Tokyo Stock Exchange was temporarily halted, with Nissan’s stock price falling by 4.9%. After market close, trading resumed, with Honda’s stock price rising by 8.2%. The fluctuation in stock prices reflects investors’ belief that Nissan would benefit more from the merger if successful.
If the merger plan fails, Nissan will face greater pressure, needing to assure lenders, employees, and customers that it can survive and compete fiercely with the United States and China markets, where Nissan has been struggling.
In November, Nissan announced plans to cut 9,000 jobs and reduce factory capacity by 20% to reduce costs.
The initial merger plan raised some doubts, partly due to the differing corporate cultures of Honda and Nissan. Honda’s leadership typically comprises engineers, while Nissan leans towards graduates from the University of Tokyo, often with sales backgrounds holding top positions.
Both automakers heavily rely on American consumers, producing cars popular with Americans. They have mentioned cost savings through adopting General Motors designs and joint parts procurement but have not detailed how the merged company would streamline its operations in the United States.
During a press conference announcing the potential deal, Honda’s CEO was vague when asked about the attractiveness of Nissan as a partner, only mentioning Nissan’s longstanding history as an automaker.
Nissan’s issues have led to its market value being less than one-fifth of Honda’s. The combined market values of both companies stand at approximately $61 billion.
Chief Strategist Fumio Matsumoto from Okasan Securities expresses, “Nissan naively thought they could collaborate on equal terms. If you want to collaborate, it’s better to clarify who is the boss.”
Matsumoto suggests that given the high costs of developing AI-driven autonomous and electric vehicle technologies, Nissan may continue efforts to restructure its business and seek new partners. If negotiations with Honda ultimately fall through, Nissan might seek foreign partners as there are no obvious domestic candidates in Japan.
Analyst Vincent Sun from Morningstar notes that Nissan’s challenges stem from a lack of compelling electric vehicle products and a greater reliance on Mexico compared to other Japanese automakers. Like Honda, Nissan has factories in Mexico that produce cars exported to the United States, but they may face challenges if President Trump reintroduces tariffs on goods manufactured in Mexico.
Last year, the number of cars produced by Nissan in Mexico exceeded any other country, closely followed by China and Japan.
According to a report from Nikkei on January 29, because of sluggish sales, Nissan plans to cut 25% of its production capacity in the United States and has issued seniority buyouts notices to employees at three American factories.
Employees at Nissan’s car assembly plants in Smyrna, Tennessee, Canton, Mississippi, and engine plant in Decherd, Tennessee, have received these notices. The buyouts are set to begin in March and apply to hourly workers. These three factories currently employ a total of 12,400 workers. Nissan anticipates possibly cutting up to 1,500 jobs, but it is unclear how many employees will accept this voluntary separation scheme.
In a Bloomberg report from December 25 last year, sales data revealed that a potential merger between Honda and Nissan could provide the scale needed for both Japanese automakers to compete against Chinese contender BYD.
In the first 11 months of last year, Honda sold 3.43 million cars globally, slightly above Nissan’s sales of about 3 million cars. During the same period, Chinese competitor BYD sold 3.76 million cars. This suggests that a partnership between Nissan and Honda could potentially rival BYD.
It is challenging for Honda and Nissan to individually compete against Chinese domestic automakers. In November last year, Honda’s sales in China dropped by 28% compared to the same period in 2023, with production decreasing by 38%. Similarly, Nissan saw a 15.1% decrease in sales and a 26% production decline in China in November last year.
(This article references reporting from The Wall Street Journal)