Honda, Nissan cancel proposed merger

Honda and Nissan, in a joint statement released yesterday, formally announced the termination of their proposed merger, which, if successful, would have created one of the world’s largest automakers with an estimated value of around $58 billion.

The merger was first announced last December as a strategy to counter increasing competition, particularly from emerging Chinese brands. It also included the option for Mitsubishi to join as a junior partner. On Thursday, Mitsubishi separately announced its formal exit from the deal.

However, the three automakers stated that they will continue collaborating on software and electrified vehicles as part of a smaller-scale partnership announced in early 2024.

In recent weeks, senior management teams from Honda and Nissan have been discussing how to integrate their operations. During these discussions, Honda proposed revising the original deal—initially structured as a joint holding company—to instead make Honda the parent company and Nissan the subsidiary through a share exchange.

Citing multiple sources, Japan’s Asahi Shimbun reported on Feb. 5 that Honda executives were frustrated with Nissan’s slow progress in the discussions, particularly regarding its restructuring plan. This frustration reportedly led Honda to propose changes to the original merger structure. Nissan’s weak financial performance has also been a factor, with its market capitalisation shrinking to just one-fifth of Honda’s.

Honda and Nissan stated that terminating the proposed merger was the best course of action, given current market volatility and the ongoing transition to electrification.

The merger was widely seen as a potential lifeline for Nissan, which has endured years of declining sales and internal turmoil involving top executives. Yesterday, Nissan provided an update on its restructuring plan, first announced last fall.

The automaker said it aims to reduce its global production capacity by approximately 20% by the end of fiscal year 2026, cutting it from five million to four million vehicles. Along with other measures, including a workforce reduction of around 6,500 employees, Nissan expects to achieve cost savings of approximately 400 billion yen (about $2.6 billion) by the same deadline. Affected plants in the U.S. include those in Smyrna, Tennessee, and Canton, Mississippi.

Nissan also said it will conduct a strategic review to actively explore new partnerships. Taiwanese contract manufacturer Foxconn announced on Feb. 12 that it is in talks with Nissan and is willing to acquire shares in Nissan as part of any collaboration.

In addition to Foxconn, Nissan is thought to be in talks with a tech company about a potential collaboration. This mirrors Honda’s strategy with Sony, which led to the creation of their joint EV brand, Afeela.