Honda, Nissan scrap $60b merger plan

Honda and Nissan motors announced on Thursday that they have called off talks to merge and form an auto group worth $60 billion.

Nevertheless, they confirmed that their collaboration would continue within the framework of the strategic partnership established in August 2024, which is focused on the future of vehicle intelligence and electrification.

Following the announcement, Nissan shares fell 0.34 percent to 415 yen ($2.7) while Honda shares rose 2.14 percent to 1,434 yen.

During a news conference on Thursday, Honda President Toshihiro Mibe said, "After much consideration by both companies, we have officially decided to terminate the basic agreement and end the negotiations. Likewise, we have also decided to terminate the memorandum of understanding among the three companies, including Mitsubishi Motors, with formal approval from the boards of directors of all three companies."

In December 2024, Honda and Nissan announced that they would begin merger talks, aiming for a final agreement by June 2025.

Initially, the two automakers were discussing integration under a holding company structure, but as discussions progressed after the MOU signing, it became clear that the process would require a significant amount of time and effort.

Seeking a faster decision-making process, Honda proposed making Nissan a subsidiary. "Instead of establishing a joint holding company, we proposed a management integration through a stock swap. Our top priority was to quickly establish a unified governance structure," said Mibe.

He explained that Honda was concerned the merger between the two companies would progress too slowly, eventually resulting in a more serious situation in the future.

However, Nissan strongly opposed the proposed change to the integration structure, which differed from the basic agreement. After thorough internal discussions, the company ultimately concluded that it could not accept the proposal.

Nissan President Makoto Uchida explained at another news conference on Thursday, "The purpose of the management integration was for both companies to join forces and become a stronger entity to compete globally. However, under the proposed structure, where Nissan would become a wholly owned subsidiary of Honda, we were uncertain about how much autonomy we could maintain and whether Nissan’s full potential could truly be realized."

Despite ending their merger talks, Uchida said there remains considerable potential for collaboration, and their partnership will continue. Mibe also emphasized that the two automakers will work to maximize synergy within the framework of their strategic partnership.

Meanwhile, Foxconn Chairman Young Liu told reporters on Wednesday the Taiwan electronics giant would consider taking a stake in Nissan for cooperation, Reuters reported.

Regarding such media reports, Uchida said, "We have not discussed this at the management level." However, he added, "Moving forward, we are open to discussing proposals from various parties that contribute to our growth."

Nissan reported a significant decline in third-quarter profit on Thursday, attributing the drop to lower unit sales, higher sales incentives, and inflation. The automaker also revised downward its full-year outlook for fiscal year 2024 for the third time.

Acknowledging his role in the company’s poor performance, Uchida said he took full responsibility for the current downturn and the concerns it has caused among stakeholders.

"I want to fulfill my duties as quickly as possible and hand over the leadership to my successor as soon as circumstances allow," he said.

Uchida outlined Nissan’s turnaround plan for the future, emphasizing the need to transform its cost structure in line with its sales plan to maintain a healthy level of cash flow and improve profitability.

"To achieve an operating profit margin of 4 percent in fiscal 2026, we need to reduce variable costs by 100 billion yen and fixed costs by more than 300 billion yen," he said.

The company will also streamline the organization and reduce positions. By curtailing hiring and expanding early retirement programs, it aims to cut 2,500 positions in indirect departments globally.

Additionally, Nissan will close three plants, including one in Thailand. The plant in Thailand will be shut down in the first quarter of fiscal 2025, Uchida said.

Furthermore, Nissan will abolish its current executive officer structure, cutting the number of executives by 20 percent. The company will also promote younger talent to develop the next generation of leaders, he added.