AUTONEWS

Honda and Nissan saga comes to an end

Japanese automakers Honda and Nissan announced Thursday that they will abandon negotiations for a merger of the three companies.

After discussions, "the two groups concluded that, in order to prioritize the speed of decision-making and its execution in an increasingly volatile market environment (...), it would be more appropriate to end the negotiations and terminate the memorandum of understanding." The automakers said in a joint statement that they had agreed to cancel an agreement that allowed negotiations to be held on the structure of a possible joint venture.

After discussions, "the two groups concluded that, in order to prioritize the speed of decision-making and its execution in an increasingly volatile market environment (...), it would be more appropriate to end the negotiations and terminate the memorandum of understanding."

Honda Motor and Nissan Motor announced in late December that they would continue negotiations on a merger. Mitsubishi Motors later said it was considering joining the future group.

From the start, the effort has left analysts puzzled as to what the advantages would be for either company, given their overlapping model lines. Last week, the Nikkei business daily reported that Nissan had decided to withdraw from merger talks with Honda since late December over disagreements over the ownership structure of a joint venture. The main stumbling block was Honda’s proposal to turn Nissan into a wholly owned subsidiary within the joint structure, which the latter rejected outright. “Various options regarding the structure of the corporate integration were considered. Honda proposed changing the [planned] structure from a joint holding company (…) to a structure where Honda would be the parent company and Nissan the subsidiary through a share swap,” the joint statement released Thursday said. According to local media, Honda was also unhappy with the progress of Nissan’s restructuring plan to overcome the company’s financial difficulties, which includes a 20 percent reduction in global production and the cutting of 9,000 jobs.

After Toyota Motor, Honda is the second largest Japanese carmaker by sales volume and Nissan is the third.

The merger project, which was scheduled to be completed in 2026, would have created the third largest carmaker in the world.

Nissan-Honda $60 billion merger that fell apart because of Nissan’s hubris...Nissan was close to closing a multi-billion dollar deal with Honda by the end of 2024, but negotiations for a merger between the two Japanese automakers fell apart in just over a month.

The reason? A combination of hubris, slow decision-making and Nissan’s refusal to accept that its market position was weakening.

According to sources familiar with the matter, Nissan entered the negotiations demanding near-equal treatment with Honda, even though it was in a significantly weaker position.

In addition, the company resisted deeper cuts to its production capacity and workforce, a point that became a major impasse. Honda, in turn, pushed for a more aggressive restructuring, including plant closures, something Nissan refused to consider.

The final tipping point in the negotiations came when Honda changed the terms of the proposal and suggested that Nissan become a subsidiary, a move that was seen within Nissan as an insult.

The automaker, which was once Japan's second-largest behind only Toyota, was outraged at the idea of ​​losing its independence to a rival.

Nissan's crisis deepened after years of troubled management and falling sales, mainly due to underestimating demand for hybrids in the United States. In November 2024, the company surprised investors by reducing its profit forecast by 70%, blaming the slowdown in the Chinese and American markets.

In an attempt to regain momentum, it announced a restructuring plan that included cutting 9,000 jobs and reducing global capacity by 20%. For analysts, however, the measures were insufficient and late.

Another factor that weighed against the merger was Nissan's reluctance to close factories. The company feared that closing plants would lead to an accounting devaluation of its assets, impacting its financial results. Some plants, such as those in Smyrna (USA), Aguascalientes (Mexico) and Sunderland (UK), were considered untouchable by the automaker, as they are strategic for its transition to electric vehicles. Tensions escalated in January, when a senior Nissan executive went to Kyushu to announce the construction of a battery factory that would create 500 jobs. In his speech, he assured that Nissan would not reduce the production capacity of the existing unit in the region, contradicting Honda's position, which insisted on the need for cuts. 

One day after this announcement, Honda informed Nissan that any merger would only take place if the company agreed to become a subsidiary. The response within Nissan was one of total indignation. For Renault, the Japanese automaker's main shareholder, Honda's proposal was seen as a disguised acquisition without any financial compensation for shareholders. In a statement, Renault said it would “vigorously defend” its interests. Without the merger with Honda, Nissan is now looking for new partners. 

One possibility is Foxconn, a Taiwanese giant that makes iPhones and has already expressed interest in collaborating with the Japanese automaker. Unlike Honda, Foxconn is not interested in acquiring Nissan, but rather in using its brand to expand its presence in the automotive sector. It is still unclear what the future holds for Nissan. With the market becoming increasingly competitive and threats such as tariffs on imports from Mexico that could hurt its sales in the US, the automaker is facing a decisive moment. For experts, Nissan's biggest problem is not just the current crisis, but the lack of a realistic view of its position in the industry and what really needs to be done to ensure its survival.

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