Japan’s Honda and Nissan scrap merger talks

TOKYO: Japanese auto giants Honda and Nissan confirmed on Thursday they had scrapped merger talks that would have created the world’s third-largest automaker by unit sales. The bid to join forces had been seen as an effort to catch up with US titan Tesla and Chinese firms in the electric vehicle market, as well as providing a lifeline to struggling Nissan.

The firms said in a joint statement that they “agreed to terminate the MOU (memorandum of understanding) signed on December 23 last year for consideration of a business integration between the two companies”.

“That the both companies were not able to reach an agreement is very regrettable,” Honda’s CEO and president Toshihiro Mibe told reporters. Mibe insisted in December that any merger would not be a bailout for Nissan, which announced last year thousands of job cuts after reporting a 93 per cent plunge in first-half net profit.

Further illustrating its problems, Nissan said on Thursday that it was now expecting an annual loss of $518 million owing to slumping sales. Japanese media reports have said the discussions unravelled after Honda proposed making its struggling rival a subsidiary instead of the plan, announced in December, to integrate under a new holding company.

The automakers confirmed in the joint statement that Honda “proposed changing the structure from establishing a joint holding company... to a structure where Honda would be the parent company and Nissan the subsidiary through a share exchange”.

Under a joint board, “the decision-making speed may slow when a tough decision is required,” Mibe said. Nissan’s CEO Makoto Uchida said “given the performance of the company, there is a difficulty to stand alone” and Honda’s proposal was “carefully discussed”. But, he said, “We could not accept this proposal as we were not sure how much our autonomy would be kept and if Nissan’s potential would be maximised” under the proposal.

Partnership

The automakers, however, will continue to seek “synergy effects” through a strategic partnership announced in August last year that also includes Nissan’s junior partner Mitsubishi Motors, Mibe said.

Within the partnership agreement, the companies will collaborate to thrive in “the era of intelligence and electrified vehicles, striving to create new value and maximise the corporate value of both companies”, the joint statement said. The cancellation of the merger talks would have no impact on the earnings of both automakers, it said.