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It is shocking that talks on a major reorganization in the automotive industry, which was hoped to lead the world, fell apart after only 1½ months. Are they prepared to tackle what has been described as a once-in-a-century time of transformation?
Honda Motor Co. and Nissan Motor Co. have decided to terminate talks on a management integration. Negotiations began in late December with a plan to place both companies under the umbrella of a newly established holding company. However, they could not bridge the gap over restructuring plans by Nissan, which has been struggling with poor business performance.
This is extremely regrettable because if the merger had been realized, the two companies would have been a leading coalition of automakers with global sales exceeding 7 million units.
As the automobile industry has many related business partners, its impact on the Japanese economy is significant. Not only shareholders, but employees and local communities will probably be greatly disappointed.
It is Nissan that is in a dire situation. In 2019, when Nissan President Makoto Uchida took the post, the automaker’s global sales reached about 5.2 million units. However, product competitiveness has declined in such markets as in the United States and China, and sales fell to about 3.3 million units in 2024.
Many have pointed out the need for Nissan to take bold restructuring measures, including plant closures.
Under such circumstances, a major Taiwan electronics company, Hon Hai Precision Industry Co., sought to invest in Nissan. This move is said to have prompted the automakers to hasten their merger talks to secure Nissan’s management autonomy.
Although the announcement of the two companies entering negotiations seemed to be made too soon, Honda’s position was that major restructuring plans by Nissan were essential for the merger to succeed. However, Honda, believing that the efforts on the Nissan side were not sufficient, sounded out Nissan about making it a subsidiary, in order to hold the initiative.
This was reportedly strongly opposed by the Nissan side, which had insisted on an equal partnership, triggering the breakup.
It must be said that Nissan’s management has optimistic views about its own challenges, but the Honda side should have made efforts to communicate more carefully with Nissan in advance. The two companies said they will continue to consider cooperating in the field of electric vehicles and other areas. However, it would be difficult to do so while a sense of distrust exists.
The two companies moving toward the realignment must have been motivated by a sense of urgency, with the arrival of the EV era in mind, that they would not be able to prevail in competition with younger companies, such as BYD Co. of China and Tesla Inc. of the United States, if they continued business as usual.
Such factors as self-driving technology, software and batteries are key to the competitiveness of EVs, and they require huge development costs. Chinese manufacturers, for example, have abundant financial resources. The reality is that the Japanese manufactures will not be able to compete unless they expand their corporate scale and increase the effectiveness of mass production.
The business environment is changing significantly, and a sense of speed is necessary. It will not be easy for Honda or Nissan to survive on their own. It is hoped that each of them will draw up their next strategies as soon as possible, including finding new business partners.
