Honda/Nissan planned merger already under pressure

At the end of December, we informed you of a merger between Honda and Nissan, with Mitsubishi possibly joining in. Meanwhile, Mitsubishi hesitates, and now there seems to be a problem between the two main protagonists.

Sources familiar with the matter said Tuesday that Honda Motor Co. has sounded out Nissan Motor Co. about becoming its subsidiary, which would be a significant change to their current plan to merge under a holding company.

In December, the two carmakers said they had agreed to begin talks on merging under a holding company in 2026 while maintaining their respective brands.

The latest move comes as struggling Nissan has yet to convince Honda that it is on track for a successful business turnaround, a premise the two companies had agreed upon for the planned merger.

Autonomy in danger

Analysts said Honda’s proposal is expected to face vehement opposition from Nissan over concerns that its autonomy could be undermined. Nissan gained more flexibility in management after its long-time partner Renault SA agreed in 2023 to cut its stake in the Japanese automaker (from 43 to 15%).

Honda and Nissan said on Friday that they will postpone the announcement of their merger details to mid-February, delaying it from the initially planned end of January.

Nissan said in November it would cut 9,000 jobs worldwide and reduce its global production capacity by 20% after it reported a more than 90% drop in net profit from April to September.

Honda has asked Nissan to present specific measures for the plans. Nissan plans to offer employees early retirement programs at its three US plants and reduce its workforce in Thailand. However, according to several sources, Honda has been dissatisfied with Nissan’s measures and is demanding more effective overhaul measures.

At a joint press conference in December, Honda and Nissan said they would pursue a merger to cut costs and share an increasing financial burden for developing electric cars and vehicle software to compete with powerful overseas rivals such as Tesla Inc. and China’s BYD Co.

Future management control

Another sticking point seems to be management control under a joint setup. Under the initial deal, Honda and Nissan agreed that Honda would nominate most of the holding company’s internal and external directors. The president or CEO of the holding company would be picked from those directors nominated by Honda.

Honda’s leadership has been relatively stable under CEO Toshihiro Mibe, who took office in 2021. Mibe would likely stay in the wheelhouse only three years into the job.

His Nissan counterpart, Makoto Uchida, has been in office longer. He took the helm of an embattled Nissan in late 2019 in the wake of the arrest and ouster of longtime boss Carlos Ghosn. But Uchida’s attempted reboots have, until now, proceeded in fits and starts with little traction.

Mitsubishi is weighing on joining in

Mitsubishi is also considering a role in the new partnership. However, CEO Takao Kato said on February 4th that Mitsubishi is still weighing whether to join. Mitsubishi originally intended to decide by the end of January. With few new details about the merger forthcoming from Honda or Nissan, Kato said at its earnings announcement that Mitsubishi would wait until around mid-February.

“We are studying various possibilities at this stage and will inform you when the direction has been decided,” Kato said. “We do not fully grasp the details yet, so we will decide after hearing from them about the situation.”

World’s number three

Honda and Nissan aim to finalize an agreement by June this year and establish the holding company by August 2026. They plan to take the new entity public at special shareholder meetings in April 2026, pending investor approval. Honda and Nissan would be delisted from the Tokyo Stock Exchange and become subsidiaries of the new holding company.

Adding Mitsubishi to the mix would make the new company the world’s third-biggest car manufacturing group, behind Toyota and Volkswagen Group. In 2024, the combined sales of the three Japanese companies were 8.01 million vehicles, topping today’s N°3 Hyundai Motor Group.

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