Honda-Nissan Merger Talks Set to Fail Over Equality Demand; Nissan Rejects Proposal to Become Honda Subsidiary

By Taku Mukoyama and Daisuke Narahashi / Yomiuri Shimbun Staff Writers

15:10 JST, February 6, 2025

Barely a month after they started, merger talks between automakers Honda Motor Co. and Nissan Motor Co. have hit a brick wall.

The envisioned merger would have created the world’s third-largest carmaker, at a time when the auto industry is facing a “once in a century” storm due to the emergence of new star players from the United States and China. The demise of the plan will sting for both Honda and Nissan, which is going through a business restructuring.

Honda’s proposal that Nissan become a subsidiary was one trigger for the discussions calling off.

“There’s absolutely no way we can accept that as a condition [for the merger],” a Nissan executive said emphatically Tuesday. “That’s the bottom line.”

Merger talks between Honda and Nissan got into full swing in December. However, it did not take long before Honda grew exasperated with the slow pace of Nissan’s restructuring measures.

Honda President Toshihiro Mibe had labeled the implementation of such plans as “absolute requirements” for the merger. After January rolled around, Honda pressed Nissan to accelerate the process. “This isn’t the time for discussions. It’s time to take action” was the thrust of Honda’s approach.

Nissan had been drawing up a cost-cutting plan that centered on cutting production in the United States and Thailand. However, the reductions that had been decided on provoked a backlash from executives and others in the affected areas, and precise figures for the planned cuts went back to being “pending.”

Skepticism abounds

Its patience running thin, Honda by last weekend had sounded out the possibility of making Nissan a subsidiary through a stock acquisition. Honda aimed to take control of Nissan’s management and push through restructuring plans as the parent company, but this proposal sparked fierce pushback from Nissan.

“They put forward the subsidiary proposal, which we could never accept, so they could pin the blame on Nissan for the talks breaking down,” a skeptical Nissan executive told The Yomiuri Shimbun.

Honda also reportedly demanded that Nissan halt development of its own hybrid vehicles, and instead follow the designs of Honda’s hybrids. The discord that emerged between the two automakers could not be patched up, and this culminated in Nissan deciding at a board meeting Wednesday to call off the merger talks.

Pride prevented concessions

The merger talks strongly implied that Honda was bailing out Nissan, which has fallen into financial trouble. Despite this, the initial plan was for both automakers to come under the umbrella of a joint holding company they would establish, and it was insisted that both parties in the merger would be on an equal footing.

Honda’s aggregate market value as of Wednesday was ¥7.9 trillion, more than five times that of Nissan’s ¥1.4 trillion. According to one analyst, the markets felt that creating a “merger of equals” would be “impossible.”

“I think Nissan’s pride as an automaker with a longer history than Honda got in the way, and that’s why the talks fell apart,” the analyst said.

Nissan’s future prospects will grow murkier should the merger talks with Honda break down.

In its consolidated midterm earnings report in September, Nissan reported a net profit that was down about 90% from a year earlier. Operating profit for its automobile business excluding the financial and other divisions plunged to a loss of more than ¥100 billion. The company’s failure to put new hybrid vehicles in the North America market, where such vehicles are popular, had a major impact on these results.

Nissan has not ruled out the possibility of continuing the partnership on electric vehicles with Honda that was announced in August. However, as things stand, it remains unclear whether both automakers will be able to bridge their differences.

French automaker Renault, which is Nissan’s largest shareholder and has gradually been selling its shares, had hoped the merger with Honda would bump up Nissan’s stock price. However, if Renault decides that Nissan’s efforts to rebuild itself face a bumpy road, it might consider a partial sale of its shares. Should that occur, Taiwan’s Hon Hai Precision Industry Co., better known as Foxconn and which reportedly had been interested in acquiring a stake in Nissan, likely will again step up its efforts to grab a slice of Nissan.