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Nissan is reportedly set to withdraw from merger negotiations with competitor Honda, according to sources on Wednesday. This decision casts doubt on the proposed $60 billion deal, which aimed to create the world’s third-largest automaker. If the merger fails, Nissan may have to manage its turnaround efforts independently.
Discussions between the two Japanese car giants became increasingly difficult due to growing differences, unnamed sources revealed. Honda initially approached Nissan with the possibility of making it a subsidiary, but Nissan hesitated, as the deal was originally presented as a merger of equals.
After Honda approached Nissan regarding the possibility of becoming a subsidiary, Reuters stated that Nissan may decide to end the talks. One source stated that Nissan was hesitant because the deal had been portrayed as a merger of equals from the beginning.
The future of the merger remained uncertain, as the remarks made by the two parties seemed to suggest that a fresh start could be considered.
Honda’s Concerns and Market Disparity
According to another source, Honda was becoming more concerned about the development of its smaller competitor, Nissan’s turnaround plan. Honda’s market value is approximately 7.92 trillion yen ($51.90 billion), which is more than five times Nissan’s 1.44 trillion yen. The Nikkei Business Daily reported that Nissan will withdraw from talks, which caused the Tokyo Stock Exchange to temporarily halt trading in the stock, causing Nissan shares to fall more than 4%. Honda stock jumped over 8% as investors seemed to breathe a sigh of relief.
Both Nissan and Honda issued separate statements denying that the Nikkei story was based on any public announcements from either company and stating their intention to confirm their future directions by the middle of February.
Renault, a long-term alliance partner of Nissan, has promised to “vigorously” protect the group’s and its stakeholders’ interests, according to a group spokeswoman. The spokesperson also noted that contrary to recent news reports, no decision has been made about the potential termination of the discussions.
According to prior statements, Renault is in favor of the combination in theory. Renault now holds 36% of Nissan, with 18.7% coming from a French trust.
If the merger fails, it makes us wonder how Nissan, which is currently trying to improve its situation and plans to cut 9,000 jobs and reduce global production by 20%, will manage this new crisis without outside support.
Uncertain Future for Nissan-Honda Relations
Among Japanese automakers, Honda ranks second, just behind Toyota, and Nissan takes third. In December, the two announced their intention to merge, creating the third-largest automaker in the world by sales. This would give them an opportunity to compete against the likes of BYD of China and other newcomers to the electric vehicle market.
Potential tariffs imposed by US President Donald Trump have also disrupted the discussions.
Investors should be worried about Nissan’s future plans and turnaround, according to Morningstar analyst Vincent Sun. Sun also mentioned that Nissan is more vulnerable to US-Mexico tariffs compared to Honda and Toyota. Because the company never completely recovered from the years of chaos caused by the arrest and dismissal of former chairman Carlos Ghosn in 2018, Nissan has been hurt harder than some competitors by the shift to EVs.
“The news saying that Nissan did not want to be a Honda subsidiary appears to highlight that control was a contentious issue,” commented Christopher Richter, Japan cars analyst at Broking CLSA concerning the recent news. “Without being able to have control, Honda appears to be walking away.”
After saying they would decide on the integration’s course by the end of January, Nissan and Honda eventually postponed the deadline to mid-February.
Reuters was informed last month by sources that Mitsubishi Motors, a smaller alliance partner of Nissan’s, may opt out of participating in the merger.
