Broken Talks: Honda & Nissan / Nissan Took Umbrage at Honda’s Subsidiary Proposal; Nissan Executive Fumes about “Insane Decision”

The Yomiuri Shimbun

21:00 JST, February 14, 2025

Talks for a proposed “merger of the century” between Honda Motor Co. and Nissan Motor Co. have been broken off. What went on behind the discussions between Japan’s second and third largest automakers? And what lies ahead? This is the first article in a series examining the situation.

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At about 5 p.m. Thursday, Honda President Toshihiro Mibe appeared in an online press conference in Tokyo and explained why his company had adopted a hard-line approach that sought to make Nissan its subsidiary, rather than a business integration that would establish a joint holding company.

“I considered the possibility that the agreement could be withdrawn, but I was even more concerned that the merger would move at a snail’s pace and the situation could become even more dire,” Mibe said.

About one hour later, Nissan President Makoto Uchida touched on the subsidiary proposal while speaking at his company’s headquarters in Yokohama’s Minato Mirai district. “I wasn’t convinced that it would be able to maximize Nissan’s potential,” a stern-faced Uchida said.

On Dec. 23, Honda and Nissan signed a basic agreement on starting talks for integrating their businesses. Mibe and Uchida jointly held a press conference to mark the occasion. But barely seven weeks later, the two presidents separately announced at venues more than 20 kilometers apart that the plan had been called off.

The subsidiary plan would have given Honda complete control of Nissan’s management. This was a far cry from the initial plan that would have treated both sides as equals. “That was an insane decision,” one Nissan executive fumed. At his press conference, Uchida also revealed his displeasure at Honda’s change of tack. “Both companies have extremely long histories,” Uchida said.

“Other companies will forge ahead with their electric vehicles, and the times are changing quickly,” Mibe said calmly. “This isn’t the time to be devoting our energy to setting up a new company.”

Honda and Nissan will continue to consider the feasibility of a partnership in electric vehicles and other areas. Will these companies be able to mend the rift that has opened up between them? A senior executive at a major bank who closely watched the negotiations was skeptical the relationship could be patched up.

“I doubt there’s any chance now of a reconciliation,” the executive told The Yomiuri Shimbun.

Only 2 votes in favor

On Feb. 5, Nissan’s board of directors held a meeting at the company headquarters to discuss whether to accept Honda’s proposal to make Nissan a subsidiary. Only two of the 12 directors voted in favor of accepting that proposal.

Uchida was one of those who voted against the proposal, which he described as “crazy.” He said he had lost trust in Honda and added that the proposal “astonished” him.

The backlash stemmed from the plan that would strip Nissan of its ability to freely manage its own affairs. The ill feeling was compounded by Honda’s suggestion that a “stock swap” be used to make Nissan a subsidiary. Under this method, one Honda share would be exchanged for 10 Nissan shares, for instance.

When a takeover bid is launched to purchase a company, a premium of about 20% to 30% is typically added to the target company’s recent share price. French automaker Renault holds about 36% of Nissan’s shares and hopes to sell them at a high price. In a comment issued Thursday, Renault said Honda’s proposal did not include a premium on the stock price and therefore could not be accepted.

Main bank raised eyebrows

Nissan’s management also had been harboring suspicions about Mizuho Bank, the main bank providing financial support to the automaker.

Mizuho had been in contact with Honda behind the scenes and supported the subsidiary plan that Nissan opposed. Mizuho was worried that if Nissan’s independent attempts to restructure its business completely stalled, this could have an impact on the more than 10,000 companies in Japan that have business ties with the Nissan Group.

“It seemed that Nissan was neglecting its business clients,” the head of a major bank grumbled.

The morning after Nissan’s board meeting, Uchida visited the Honda head office in Tokyo. He was greeted by Mibe, Honda Executive Vice President Shinji Aoyama and other company officials, but soon got down to business.

“We can’t say ‘yes’” to the subsidiary proposal, Uchida declared.

“So that’s that, is it?” Mibe replied.

The curtain had come down on the merger discussions, just 1½ months after they started.

At Thursday’s press conference, Mibe touched on the intention behind the subsidiary proposal. The initially mooted holding company would have had “a complex configuration,” Mibe said. “Discussions would’ve taken more time, and decision-making would’ve taken longer,” he added.

Round 2

The breakdown in the Honda-Nissan talks will likely stimulate fresh realignment moves.

At Nissan’s board meeting on Feb. 5, the issue of a possible tie-up with Taiwan’s Hon Hai Precision Industry Co., better known as Foxconn, was also floated. Nissan also reportedly has been putting out feelers behind closed doors regarding a partnership with a major foreign automaker. The head of another major domestic carmaker also made eyes at Nissan and suggested a willingness to help if it found itself in a predicament.

Uchida said Thursday that his company would actively seek out a “new strategic partnership.” Mibe insisted that Honda “never thought about a takeover bid for Nissan,” but there is a growing possibility that third parties in Japan and abroad might reach out to Nissan.

“The bell for round 2 is already ringing,” a senior official at a major bank said.

After the events of the past few weeks, the bosses of Honda and Nissan will both need to consolidate their footing. The flurry of discussions on a possible merger spread confusion through both companies.

Discontent is mounting at Nissan, which has been forced to undertake a major restructuring amid its rapidly worsening business performance. “This is a self-inflicted disaster caused by inept management,” a senior executive griped.

At Honda, opponents of the merger reportedly outnumbered supporters, especially in the motorcycle business division, which has been performing well. A mid-career engineer said: “Many people have been jerked around by these events. The company’s leadership will inevitably lose some of its power to keep the company unified.”

Mibe and Uchida have repeatedly hinted that each company could face difficulties surviving on its own. For both leaders, quickly coming up with a fresh strategy is an urgent task.