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OAN Staff James Meyers
10:00 AM – Monday, December 23, 2024
A massive move in the auto industry has taken place as Honda and Nissan have announced plans to merge, forming the world’s third-largest automaker by sales.
The Japanese automakers said they signed a memorandum of understanding on Monday 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 CEO Makoto Uchida said in a statement.
Automakers in Japan have been struggling behind big rivals in electric vehicles production and have been trying to cut costs and make up for lost time.
The announcement comes after news of a possible merger came to light earlier this month. The merger was driven by aspirations of Taiwan iPhone maker Foxconn to tie up with Nissan, which has an alliance with Renault SA of France and Mitsubishi.
Meanwhile, a merger could result in a deal worth over $50 million based on the market capitalization of all three automakers.
Despite the merger, Toyota, which produced 11.5 million vehicles in 2023, would stay as the leading Japanese automaker.
In 2023, Honda made four million and Nissan produced 3.4 million. Mitsubishi Motors made more than 1 million in the same year.
Nissan, Honda, and Mitsubishi announced in August that they would share components for electric vehicles like 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 is viewed as the only likely Japanese partner able to rescue Nissan, which has faced turmoil after 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 eventually was released on bail and fled to Lebanon.
Nissan is known for having years of experience building batteries and electric vehicles, and gas-electric hybrid powertrains that could help Honda in developing its own EVs and next generation of hybrids, Ghosn said in a Monday press conference speaking to reporters.
However, in November, the company said it was cutting 9,000 jobs, or about 6% of its global workforce, and was reducing its global production capacity by 20% after reporting a quarterly loss of $61 million.
Meanwhile, Fitch Ratings marked 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 $9.4 billion.
Nissan’s shares jumped more than 20% after news of the possible merger broke last week.
Honda’s shares surged 3.8%. Honda’s net profit slipped nearly 20% in the first half of the April-March fiscal year from a year earlier, as sales suffered in China.
At a briefing on Monday, Cabinet Secretary Yoshimasa Hayashi said Japanese companies need to stay competitive in the fast changing market.
“As the business environment surrounding the automobile industry largely changes, with competitiveness in storage batteries and software is increasingly important, we expect measures needed to survive international competition will be taken,” Hayashi said.
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