The proposed $60 billion merger between Japanese auto giants Nissan and Honda appears to be on the brink of collapse, leaving Nissan to navigate its ongoing turnaround efforts alone. Initial reports suggested that Honda proposed a structure where Nissan would operate as a subsidiary, a significant departure from the initially envisioned “merger of equals.” This proposition reportedly led to Nissan balking at the deal.
Table Content:
Growing Differences Complicate Negotiations
Multiple sources familiar with the matter have cited growing discrepancies as the primary reason for the stalled negotiations. Honda, with a market capitalization five times larger than Nissan’s, expressed concerns about Nissan’s progress on its existing turnaround plan. This plan includes cutting 9,000 employees and 20% of global capacity. The stark difference in market value, coupled with anxieties over Nissan’s recovery trajectory, contributed significantly to the impasse.
The Nikkei business daily first reported Nissan’s potential withdrawal from the talks, sending Nissan shares tumbling over 4% on the Tokyo Stock Exchange, triggering a temporary trading halt. Conversely, Honda shares surged more than 8%, suggesting investor relief at the potential collapse of the deal.
Official Statements and Uncertain Future
Both Nissan and Honda released statements asserting that the Nikkei report was not based on official announcements. They maintained their commitment to finalizing a decision regarding the merger by mid-February, leaving a sliver of possibility for the deal’s resurrection. However, comments from insiders suggest that significant hurdles remain.
Renault, Nissan’s long-term French alliance partner and a 36% stakeholder, affirmed its commitment to protecting the interests of the Renault-Nissan-Mitsubishi Alliance. A spokesperson for the group acknowledged the press reports but emphasized that no final decision had been made. Renault had previously expressed openness to the merger in principle.
Implications for Nissan’s Turnaround
The potential failure of the merger raises serious questions about Nissan’s ability to execute its ambitious turnaround plan without external support. The company has been struggling to recover from the 2018 arrest and subsequent removal of former chairman Carlos Ghosn, compounded by the industry-wide shift towards electric vehicles (EVs).
/cloudfront-us-east-2.images.arcpublishing.com/reuters/LOM63O5XAJNDZLW76M6V5Z3L2U.jpg)
The merger, initially proposed in December, aimed to create the world’s third-largest automaker by sales, positioning the combined entity to compete more effectively with emerging EV giants like China’s BYD. The collapse of the deal leaves both companies to grapple independently with the challenges of a rapidly evolving automotive landscape.
Control a Key Sticking Point
Analysts suggest that the issue of control played a pivotal role in the breakdown of negotiations. “The news that Nissan did not want to be a Honda subsidiary appears to highlight that control was a contentious issue,” said Christopher Richter, Japan autos analyst at brokerage CLSA. “Without being able to have control, Honda appears to be walking away.” This sentiment underscores the complexities of mergers between established companies, particularly when significant disparities in size and performance exist.
/cloudfront-us-east-2.images.arcpublishing.com/reuters/V3LZY3F5TZL5PGEB2B7VOML22I.jpg)
Looking Ahead
The future of the Nissan-Honda merger remains uncertain. While both companies have not officially declared the end of negotiations, the significant disagreements and reported breakdown in talks paint a bleak picture. The coming weeks will be crucial for Nissan as it determines its next steps in navigating its turnaround and confronting the challenges of the global automotive industry. The failed merger attempt underscores the complexities and challenges inherent in large-scale corporate consolidation, especially in a dynamic and competitive sector like the automotive industry.
