Nissan Motor Co. is in advanced talks with Honda Motor Co. about a potential merger, a move that could reshape the global automotive landscape by creating the third-largest car manufacturer. The merger discussions come as Nissan grapples with mounting financial challenges, including slashed profit forecasts and a significant workforce reduction, and would help the company weather the industry’s ongoing disruptions.
The talks have intensified following Foxconn’s interest in acquiring a stake in Nissan, according to sources familiar with the matter. The Taiwan-based tech giant, known for manufacturing Apple’s iPhones, has been heavily investing in electric vehicle (EV) production, making its interest in Nissan’s electrification efforts particularly noteworthy. As Foxconn positions itself to become a major player in the EV space, its potential involvement could signal a significant shift for Nissan, which is struggling to regain momentum in a competitive global market.
Nissan’s recent troubles became apparent in early November when the company drastically lowered its profit forecast and announced plans to cut 9,000 jobs globally. The Japanese automaker also slashed its global output by 20%, as demand for its models dwindled. These financial strains have caught the attention of various stakeholders, including activist investors, who have been increasing their positions in the company.
Despite Honda’s larger market value, which is more than four times that of Nissan, the two automakers have been exploring the possibility of merging to combine resources, strengthen their position, and improve global competitiveness. The potential merger would allow Honda and Nissan to better compete against larger rivals, particularly Toyota, which has already cemented its dominance in the automotive sector.
Renault, which holds a 36% stake in Nissan, would also play a crucial role in any deal. The French automaker, a long-time partner in the Renault-Nissan-Mitsubishi alliance, has expressed openness to new partnerships that could strengthen the alliance.
Reports suggest that the merger could lead to the creation of a new holding company under which both Honda and Nissan’s operations would be combined. Mitsubishi Motors, which has capital ties to Nissan, could also be included in the deal. According to sources, Honda and Nissan may soon sign a memorandum of understanding to discuss shared equity stakes in this new entity, with an announcement potentially slated for December 23.
The involvement of Foxconn, which has shown interest in taking a stake in Nissan, reflects concerns that the Japanese carmaker might be vulnerable to a takeover. As Foxconn intensifies its efforts to expand its footprint in the automotive sector, some insiders believe that its bid to acquire a stake in Nissan accelerated the merger talks with Honda.
The potential merger between Honda and Nissan would consolidate Japan’s auto industry into two dominant groups: one led by Honda, Nissan, and Mitsubishi, and the other by Toyota. The deal would also enable the combined entity to better compete against local Chinese automakers, such as BYD Co., and international electric vehicle leaders like Tesla Inc.
Combining forces would allow Honda and Nissan to pool their resources and better compete with Toyota’s extensive lineup of brands, including Subaru, Suzuki, and Mazda. With Toyota’s top-tier credit rating and its ability to attract investment, the merger could help Nissan and Honda close the competitive gap.
However, the merger talks are not without challenges. The Japanese automakers must navigate delicate issues, such as potential layoffs and the complex dynamics of the Renault-Nissan alliance. Furthermore, the shift toward EVs and the disruption of traditional manufacturing models will require both companies to adapt quickly to new business environments.
Analysts like Hiroki Ihara from Tachibana Securities Co. argue that consolidating the Japanese auto industry through mergers is essential for competitiveness on the global stage. However, there are still significant hurdles to clear before any merger or investment deal can materialize.
Foxconn has experience in taking controlling stakes in major companies, having acquired a two-thirds stake in Sharp Corporation in 2016. While Foxconn has since reduced its interest in Sharp, it remains the largest shareholder. This history of strategic acquisitions underscores its ambitions to further diversify into the automotive sector, especially as the global shift toward electric vehicles intensifies.
For Nissan, a partnership or merger could provide much-needed support as the company faces dwindling profits, a stagnant revenue base, and a rising debt load. Speculation around Nissan’s credit rating and its long-term viability underscores the urgency of finding a financial lifeline to restore stability.
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