Honda’s sudden alteration to the agreement’s terms was due to its growing frustration with Nissan over the speed of the talks.
Honda offered Nissan a lifeline last year in the form of a $60 billion partnership that would help both Japanese manufacturers compete against the Chinese companies that were upending the auto industry.
Nissan was a weaker force after years of declining sales and managerial issues, particularly after it misjudged the demand for hybrids in its largest market, the United States. However, the merger talks broke down in less than a month because Nissan was unconcerned about its predicament, and Honda suddenly decided to change the terms and suggest that Nissan become a subsidiary.
Nissan was the second-largest automaker in Japan after Toyota until 2020. According to three sources, it insisted on being treated equally in the negotiations.
Then, Honda put pressure on Nissan to reduce its workforce and production capacity, but Nissan refused to close politically sensitive factories. Honda got the impression that Nissan believed it could bounce back despite its growing problems.
According to one source, Nissan did not want to close factories because doing so would result in a write-down of their paper worth and reduce their earnings.
Additionally, they saw that Nissan had a slow decision-making process. So, it led to scuttling a deal that would have created one of the biggest automakers in the world.
Now, Nissan is facing an additional threat from US tariffs on Mexican-made vehicles, which cover over 25% of its US sales.
Nissan CEO Makoto Uchida visited Toshihiro Mibe to express his desire to end the talks after Honda’s proposal for a subsidiary.
Both automakers stated they would release an update this month.
In November, Nissan shocked its investors by reducing its profit prediction by 70% due to declining sales in the US and China. Its turnaround plan was to cut one-fifth of worldwide capacity and 9,000 jobs. Uchida stated that he was committed to making the company more robust and leaner and promised to let go of half of his salary.
After discussions that began in March 2024 when Nissan and Honda announced they were looking to collaborate on technologies, the two companies announced plans to join in December. However, the merger talks swiftly hit the wall when it came to figuring out the company’s shareholding ratio. Initially, the merger was supposed to be at the end of January, but later, the negotiations got pushed to mid-February.
Hideyuki Sakamoto, a Nissan official, travelled to the southwest island of Kyushu in late January to discuss plans for a battery electric vehicle plant that would generate 500 jobs.
Sakamoto stated that the carmaker would not cut capacity at its current Kyushu factory. He felt Kyushu is a geopolitically competitive foundation needed to achieve EV goals in the future.
According to one source, Honda’s Mibe informed Uchida the day after Sakamoto visited Kyushu that Nissan would have to become a Honda subsidiary, which was not mentioned in the initial merger memorandum that the two businesses signed late last year. It’s unclear if Nissan’s Kyushu declaration prompted Mibe’s action.
There were other plants that Nissan didn’t want to disturb besides Kyushu. According to one insider, the manufacturer didn’t want to close or cut its lines in Smyrna, Tennessee; Aguascalientes, Mexico; and Sunderland, Britain, because they were all considered essential to the company’s EV plan.
According to two people, Honda’s sudden alteration to the agreement’s terms was due to its growing frustration with Nissan over the speed of the talks. According to one source, Nissan viewed the plan as ridiculous and disrespectful.
Renault, Nissan’s largest shareholder, stated that the most recent intelligence indicated the deal would result in Honda acquiring Nissan without paying Nissan shareholders a premium for control. Renault claimed that the result was unacceptable and would forcefully protect its rights.
According to three of the persons, it is likely that they would go back to their initial agreement to collaborate on technology. According to their December memorandum of understanding, both companies would be responsible for a 100 billion yen ($650 million) break-up cost if they agreed to terminate the talks.
Nissan is open to collaborating with new companies, such as Foxconn, the Taiwanese contract manufacturer that produces Apple’s iPhones. Foxconn did not respond to a request for comment.
Young Liu, the chairman of Foxconn, stated on Wednesday that the company’s goal was to work with Nissan rather than buy it. Former Nissan executive Jun Seki, who was formerly seen as a potential candidate to become the CEO of the automaker, is now in charge of the Taiwanese company’s electric vehicle division.
Amir Anvarzadeh, a strategist with the Japanese equity advising firm Asymmetric Advisors, stated that Foxconn would probably be a more generous suitor than Honda because the automaker requires a brand name, and Nissan would be appealing.
The Japanese government has not made it clear how it views the breakdown in negotiations between Honda and Nissan or whether it would be amenable to Foxconn, the largest stakeholder in consumer electronics manufacturer Sharp Corp., purchasing Nissan. The companies lack a realistic perspective on the state of the automotive industry and what Nissan needs to achieve.
