Japanese automakers Honda and Nissan have announced plans to establish a cooperative partnership to become the world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels.
The two companies said they had signed a memorandum of understanding on Monday, December 23, and that smaller Nissan alliance member Mitsubishi Motors also had agreed to join the talks on integrating their businesses.
“We anticipate that if this integration comes to fruition, we will be able to deliver even greater value to a wider customer base,” Nissan’s Chief Executive Officer Makoto Uchida, said in a statement.
Automakers in Japan have lagged behind their big rivals in electric vehicles and are trying to cut costs and make up for lost time.
News of a possible merger surfaced earlier this month, with unconfirmed reports saying that the talks on closer collaboration partly were driven by aspirations of Taiwan iPhone maker Foxconn to tie up with Nissan, which has an alliance with Renault SA of France and Mitsubishi.
A merger could result in a behemoth worth more than $50 billion based on the market capitalization of all three automakers.
Together, Honda and the Nissan alliance with Renault SA of France and smaller automaker Mitsubishi Motors Corp. would gain scale to compete with Toyota Motor Corp and with Germany’s Volkswagen AG. Toyota has technology partnerships with Japan’s Mazda Motor Corp. and Subaru Corp.
Even after a merger Toyota, which rolled out 11.5 million vehicles in 2023, would remain the leading Japanese automaker. If they join, the three smaller companies would make about 8 million vehicles.
In 2023, Honda made 4 million and Nissan produced 3.4 million. Mitsubishi Motors made just over 1 million.
Nissan, Honda and Mitsubishi announced in August that they would share components for electric vehicles such as batteries and jointly research software for autonomous driving to adapt better to dramatic changes centered around electrification, following a preliminary agreement between Nissan and Honda set in March.
Honda, Japan’s second-largest automaker, is widely viewed as the only likely Japanese partner able to effect a rescue of Nissan, which has struggled following a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misuse of company assets, allegations that he denies. He was eventually released on bail and fled to Lebanon.
Speaking to reporters in Tokyo via a video link Monday, December 23, Ghosn mocked the proposed merger as a desperate move.
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From Nissan, Honda could get truck-based body-on-frame large SUVs such as the Armada and Infiniti QX80 that Honda does not have, with large towing capacities and good off-road performance, Sam Fiorani, vice president of AutoForecast Solutions, told The Associated Press.
Nissan also boasts years of experience building batteries and electric vehicles, and gas-electric hybird powertrains that could help Honda in developing its own EVs and next generation of hybrids, he said.
But the company said in November that it would slash 9,000 jobs, or about 6 percent of its global work force, and reduce its global production capacity by 20 percent after reporting a quarterly loss of 9.3 billion yen ($61 million).
It recently reshuffled its management and Makoto Uchida, its chief executive, took a 50 percent pay cut to take responsibility for the financial woes. He said Nissan needed to become more efficient and respond better to market tastes, rising costs and other global changes.
This comes after New York-based credit ratings agency, Fitch ratings, recently downgraded Nissan’s credit outlook to “negative,” citing worsening profitability, partly due to price cuts in the North American market. But it noted that it has a strong financial structure and solid cash reserves that amounted to 1.44 trillion yen ($9.4 billion).
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