Japanese automakers Nissan and Honda have called off discussions to create a US$60 billion automotive group. The deal, which was announced in December, collapsed due to disagreements over the structure of the merger, with Honda seeking to make Nissan a subsidiary. Despite the failed talks, both companies pledged to continue collaborating on electric vehicles and other technologies.
Japan's Nissan and Honda ended talks to create a US$60 billion auto group on Thursday, February 13, pitching Nissan into greater uncertainty although the automakers promised to continue to collaborate on electric vehicles. Announced in late December, the discussions between Honda, Japan's second-largest automaker, and Nissan, its third-largest, were soon complicated by growing differences, including over the balance of power in the tie-up.
It was Honda's proposal that Nissan become a subsidiary that ultimately sank the deal, sources have said. \The two companies had sought to join forces to better combat the challenges unleashed by the fast-rising Chinese electric vehicle market. Despite the failed merger talks, Honda and Nissan said in a joint statement that the companies will collaborate to thrive in 'the era of intelligence and electrified vehicles, striving to create new value and maximize the corporate value of both companies'.\Nissan, Japan's third-largest automaker, is in many ways the most troubled of legacy carmakers, having never fully recovered from the years of crisis and management turmoil sparked by the 2018 arrest and ouster of its former chairman, Carlos Ghosn. 'Honda is pretty confident and has a lot in their favor, whereas Nissan is in a bad place. They don't have a dance partner right now,' said Christopher Richter, Japan autos analyst at brokerage CLSA. The merger would have created the world's fourth-biggest by vehicle sales after Toyota, Volkswagen and Hyundai. Honda CEO Toshihiro Mibe told a press conference that while merging the two companies would have meant 'quick pain', he ultimately became more worried about the fallout if the talks dragged on without progress. He called the failure of the discussions 'disappointing' but also said Honda wanted to think about the possibility of tying up with companies other than Nissan and Mitsubishi Motors. Mitsubishi, a junior partner in the alliance Nissan has with Renault, had been part of the merger discussions although sources had said it was unlikely to participate. It also bowed out of the talks on Thursday. \In addition to the rapid rise of Chinese electric vehicle makers such as BYD, Japanese automakers are also facing the prospect of tariffs in the United States, another major market. Nissan is pushing ahead with a restructuring plan announced in November that includes cutting 9,000 jobs and reducing global capacity by 20 percent. It has yet to disclose details such as which locations will be affected. Sources said in December that Nissan will need to further reduce its capacity in China, where it operates eight factories through its joint venture with Dongfeng Motor. It has already suspended production at its Changzhou plant as part of efforts to optimize operations. Before announcing the merger discussions in December, Nissan and Honda had been holding separate talks on a technology collaboration, which they could outline the scope of on Thursday. Nissan is now open to working with new partners, with Taiwan's Foxconn seen as one candidate, sources told Reuters last week. Foxconn Chairman Young Liu said on Wednesday that it would consider taking a stake in Nissan but that its main aim was cooperation. Nissan shares soared more than 60 percent and Honda's jumped around 26 percent in late December after the merger talks were first reported on December 17. Those gains have since been pared to 21 percent for Nissan and 11 percent for Honda. Nissan's market capitalisation is now nearly five times smaller than that of Honda, which is about 7.5 trillion yen (US$48.6 billion). A decade ago, the pair were both worth around 4.6 trillion yen.
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