Honda and Nissan end merger talks

Since Honda’s proposal to turn Nissan into a subsidiary was not accepted by Nissan, the gap between the two parties deepened and the merger plan was officially declared a failure. On February 13, Honda and Nissan held separate board meetings and decided to withdraw the memorandum of understanding signed by the two parties on December 23 last year and terminate the business merger negotiations.

On the same day, Honda, Nissan and Mitsubishi also issued a joint statement stating that in view of the withdrawal of the memorandum of understanding by Honda and Nissan, the memorandum of understanding signed last year to explore three-party cooperation was also terminated simultaneously.

In the final analysis, the main reason for the breakdown of the negotiations between Honda and Nissan was that the two parties had major differences on the merger method. Honda changed its original idea and tried to control Nissan, while Nissan, despite being in a relatively unfavorable position, sought almost equal treatment with Honda in the negotiations.

Looking back on December 23, 2024, Honda and Nissan announced that they had signed a memorandum of understanding on the launch of business merger negotiations. The two sides discussed the establishment of a new holding company, which would include both Honda and Nissan as wholly-owned subsidiaries. After that, the new holding company would be promoted to go public, at which time Honda and Nissan would be delisted.

If all goes well, this would be the largest merger in the global automotive industry after the merger of PSA and FCA to form the Stellantis Group in 2021, and the world’s third largest automaker would be born. In addition, considering that Honda’s market value is about four times that of Nissan, and Honda has a better business scale and financial condition, according to the agreement, Honda will occupy a dominant position in the new holding company, and the president of the new company will be selected from the directors nominated by Honda.
However, Honda does not seem to be satisfied with this. On February 4, rumors that Nissan had canceled its merger with Honda were rampant. The main reason was that Honda changed its original idea and did not intend to follow the above cooperation framework. Instead, it intended to acquire 100% of Nissan’s shares and make it a wholly-owned subsidiary, thereby mastering Nissan’s management rights, promoting business restructuring, and improving decision-making efficiency. Honda has criticized Nissan for its lack of sense of crisis, lack of courage, and slow decision-making by management.

Nissan strongly opposed Honda’s proposal. Moreover, Honda was strong during the negotiation between the two parties. Nissan believed that Honda “did not show respect for the other party”. The proposal of the subsidiary further deepened the gap between the two parties.

NHK analyzed at the time: “In Honda’s view, by taking control of Nissan’s management by making it a subsidiary, decisions including the revitalization of performance can be quickly promoted. However, Nissan has always emphasized equal relations in management integration, so there has been strong opposition within the company, and it is expected to be difficult to achieve.” The industry also seems to generally believe that the merger between the two parties will end in failure. Now, it is indeed true.

In fact, many people in the industry are not optimistic about the merger of Honda and Nissan. For example, Cui Dongshu, secretary general of the Passenger Car Market Information Joint Branch of the China Automobile Dealers Association, recently pointed out in an article: “There are obvious differences in culture and technology. Nissan focuses on technological innovation and global layout, and is committed to creating forward-looking products; Honda is good at engineering technology and product quality, and emphasizes the pursuit of excellence in automobile manufacturing processes. There are significant differences in corporate culture and management style between the two parties.”

In the industry’s view, the idea of ​​Honda and Nissan’s merger stems from their inability to fight alone against leading American and Chinese emerging manufacturers in the fields of electrification and software. This common sense of crisis has led to the business integration plan. However, as the negotiations progressed, the differences of opinion between the two companies and the opposition within the company became increasingly louder, and the mutual distrust became increasingly strong, which ultimately prevented this historic merger case between Japanese automakers from being realized.

Seiji Sugiura, a senior analyst at Tokai Tokyo Intelligence Lab Consulting, commented: “Both sides lack joint efforts to face the goal. In a once-in-a-century era of change, negotiations may be hasty and the results are regrettable. We feel the poor performance of the management of the two companies in business negotiations.”

Seiji Sugiura believes that investing in electrification, autonomous driving, IT and other fields alone requires huge expenses, which is difficult for Nissan, so finding new partners will be inevitable, and Honda’s low profitability in the automotive business is a problem. It is necessary to speed up cost reduction and re-examine investment.

In fact, Honda’s financial performance is relatively stable, but improving the profitability of the automotive sector has always been its long-term issue. Nissan, whose performance has deteriorated, faces problems such as business restructuring. The first is whether the specific plan to reduce global production capacity by 20% and lay off 9,000 people announced in November 2024 can be implemented. On this basis, it depends on whether it can build a good foundation to promote future investment.

In addition, Nissan also needs to find new partners. There have been rumors recently that Foxconn’s parent company Hon Hai Group has expressed interest in Renault’s stake in Nissan. Chairman Liu Yangwei said that the company has no intention of acquiring Nissan, but will consider acquiring shares if cooperation requires it.