Japan’s Nissan and Honda have taken their first steps toward merging and forming a new force in the global auto industry, at a time when intense competition from China is forcing traditional automakers to rethink their business models.
The two companies signed a basic agreement for merger talks today, according to a joint media briefing in Tokyo, and Honda said it would buy back up to 1.1 trillion yen ($7 billion) of its own shares, Bloomberg reported.
holding company
According to the agreement, a holding company will be established for the new entity, which will be listed on the stock exchange by August 2026, and Honda will have the right to nominate the directors of the new company.
Mitsubishi Motors, of which Nissan owns 24.5%, has also signed the memorandum of understanding and will be part of the group.
Such an alliance would lead to the emergence of the world’s third-largest automaker, making the trio a competitor to Toyota within Japan and to Chinese automakers including BYD and Geely Automobile Holding Co., Ltd. abroad.
Toyota has stakes in Subaru, Suzuki Motor and Mazda Motor, creating a strong brand backed by a high-level credit rating.
The three Japanese companies are in some way facing an existential threat resulting from the global auto industry’s frantic shift towards battery electric vehicles and hybrid transmissions away from combustion engine cars.
In China, the growing popularity of domestically manufactured electric cars has forced foreign brands to struggle for survival, and Japanese automakers are stuck there with too much manufacturing capacity. Both Honda and Nissan have been forced to reduce staff and production, while Mitsubishi Motors has succeeded in… Almost withdrawing from China, the world’s largest car market.
At the same time, a rebound in sales of gas-electric hybrids in North America has put Nissan on the defensive, while hybrid technology leader Toyota has received a boost in this regard. Nissan missed that opportunity due to its aging product lineup that lacked attractive options for hybrid vehicles. Hybrid or electric competition.
Great help
For Nissan, a merger with Honda could provide major help after weak sales in the United States and China caused a significant drop in revenue, forcing the struggling automaker to cut jobs, cut production capacity and cut its annual profit forecast by 70%.
French company Renault rescued Nissan from its last financial crisis more than two decades ago when it pumped in financing and sent Carlos Ghosn to manage the merger. Ghosn’s sudden arrest and dismissal in late 2018 paved the way for Makoto Uchida to take the helm.
