Nissan and Honda hold talks on merger of the two automakers

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Nissan and Honda are in exploratory talks about a merger of the two automakers that would create a $52 billion Japanese giant, according to people with knowledge of the matter.

The two companies are studying a way to combine that would help them compete better at a time when traditional automakers are grappling with fast-growing Chinese electric vehicle makers and slower-than-expected demand for electric vehicles. part of consumers.

Talks between Nissan and Honda are at an early stage and there are concerns about a possible political backlash in Japan because a merger of two of the country’s most historic car brands could result in major job cuts, one of the people with knowledge said. knowledge of the subject. said the discussions.

Nissan and Honda announced in March that they would partner to develop electric vehicles and have deepened their talks amid uncertainty about what the return of Donald Trump as US president will mean for the auto industry.

This year, shares in Nissan, which has a cross-shareholding structure with France’s Renault, have fallen 40 percent, giving it a market capitalization of $8.2 billion. Honda has a market capitalization of $44 billion.

Nissan unveiled an emergency recovery plan in November that included 9,000 job losses, saying it would reduce global production capacity by 20 percent. The company lowered its profit forecast for the second time this year after posting a loss in the July-September quarter.

Nissan has been looking for an anchor investor for several months, and the Financial Times reported last month that “all options” were being considered, including a merger with Honda.

Nikkei first reported on merger talks between Nissan and Honda. Nissan said late Tuesday: “The content of the (Nikkei) report is not something that has been announced by either company.”

He added: “As announced in March this year, Honda and Nissan are exploring various possibilities for future collaboration, building on each other’s strengths. If there is any update, we will inform our stakeholders at the appropriate time.”

Honda issued a similar statement, saying it and Nissan were “exploring various possibilities for future collaboration, building on each other’s strengths.”

Renault declined to comment.

In August, Honda and Nissan said they would launch an electric vehicle by the end of the decade as the two companies agreed to jointly develop software.

A merger between Nissan and Honda would give the expanded company a significant manufacturing footprint in the United States, helping both brands potentially minimize the impact of Trump’s proposed tariffs on imports from Mexico. Nissan has significant manufacturing operations in Mexico.

The auto industry also hopes that Trump, a longtime critic of electric vehicles, can slow their adoption in the United States, possibly by easing emissions standards.

Nissan’s deteriorating financial performance came after it failed to counter a slowdown in global electric vehicle sales with a strong hybrid offering – cars that combine battery power with a traditional combustion engine. Sales of these vehicles have helped Toyota.

Nissan has recently been targeted by activist investors, including Effissimo Capital Management, a Singapore-based hedge fund known for its high-profile campaigns against some of Japan’s biggest names, including Toshiba.

Nissan, which owns a stake in smaller rival Mitsubishi Motors, is planning a series of key product launches to try to regain momentum.

If talks about a merger between Nissan and Honda persist, the two companies would have to find a way to reconcile their starkly different corporate cultures.

The Financial Times reported last month that Renault would be willing to sell a portion of its shares in Nissan to Honda as part of a restructuring of their 25-year alliance.

A person close to Renault said a stronger relationship between Nissan and Honda “could only be positive” for the French group.

Renault reorganized its alliance with Nissan last year, with the French group reducing its stake in the Japanese company to just under 36 percent.

Nissan gained voting rights over its 15 percent stake in Renault. Nissan has a 15 percent voting stake in Renault.