Honda and Nissan Have Officially Begun Merger Talks: What You Need to Know
Rumors have swirled about the potential merger between Honda and Nissan over the last week, but on Monday (December 23), the two Japanese carmakers announced that discussions have officially commenced to integrate the two businesses. If successful, the new company will become the world’s third largest automobile company by sales. The first two are Germany’s Volkswagen and Japan’s Toyota.
During a press conference livestreamed over YouTube, the chief executives of both Honda and Nissan, as well as of Mitsubishi, announced that a memorandum of understanding had been signed to officially begin discussions on business integration. Based on the preliminary talks, the plan is to form a new holding company under which Nissan and Honda would operate. This new holding company will be listed on the Tokyo Stock Exchange, after which both Honda and Nissan will then be delisted.
Both companies are targeting June 2025 to sign a definitive agreement on the merger.
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According to Toshiro Mibe, President and CEO of Honda, the new company could potentially bring in revenues of up to 30 trillion yen (about P191.5 billion or P11 trillion) and profits of up to 3 trillion yen ($19.6 billion or P1.1 trillion).
Toshiro Mibe, President and CEO of Honda
“What is important is to make sure that both Nissan and Honda continue driving its operations and build a strong business foundation of its own, rather than just establishing a holding company while maintaining the status quo. This is imperative,” Mibe said. “The aim is to integrate the business of the two strong companies that can stand on its own feet to enable us to pursue further growth through innovations.”
Honda, which is the larger of the two companies, said it would nominate the majority of the board members of the new holding company, as well president and representative director, or president and representative executive officer of the holding company, which are expected to be selected from among the directors nominated by Honda.
“However, as we run the business, following the business integration, we will select the right people for the purpose of the integration, regardless of their background. Honda will take the lead in the initiation,” he said.
Mibe said a decision about the integration is expected to come at the end of January 2025.
As for Mitsubishi, Mibe said that, should the third automotive company decide to engage with the other two in the talks, a new MOU is expected to be signed. Nissan has a significant stake in Mitsubishi.
“The business environment continues to change significantly and faster than expected,” Makoto Uchida, Nissan President and CEO, said. “In these circumstances, any company, irrespective of its size, that sticks to preconceived ideas and is late in making decisions or is afraid of change will not be able to unlock the future. This is what we share with Honda, which has a bigger business than Nissan, as a common ground. This was a reason for starting the feasibility study on strategic partnership between the two companies back in March.
“Electrification and vehicle intelligence require tremendous amounts of investments,” he added. “Competitive landscape is changing rapidly as new players make inroads into our markets. Economies of Scale is increasingly important in the current context. By bringing together the two teams, we expect to enjoy great synergies in various markets. Simply pursuing sales volume and market share growth will not make us a winner in the industry that undergoes a once in a century transformation.”
Is Honda saving Nissan?
The potential merger between Nissan and Honda, two of the biggest automobile manufacturer not just in Japan but in the world, was widely seen by analysts as a way to bail out Nissan, which has been struggling financially over the past year. According to its most recent quarterly financial report, Nissan was looking to cut as many as 9,000 jobs globally and cut global production by a fifth.
Mibe addressed these speculations head on.
Makoto Uchida, President and CEO of Nissan
“Some journalists wrote that this is about the Honda trying to save Nissan, to bail out Nissan, which is wrong,” he said. “This is not about saving Nissan.” Mibe said that an absolute condition of the merger is the turnaround of Nissan, which has publicly announced the number to be 400 billion yen (about $2.55 billion or P150 billion).
“Whether 400 billion yen has been achieved or not is not our criteria,” Mibe said. “It's not just about the turnaround, but we would like to look at the reform outcome at Nissan.
Meanwhile, Nissan said it was on track to deliver on its turnaround plan.
“One of the important jobs of Nissan is to implement the ongoing turnaround actions effectively and deliver results as soon as possible,” Uchida said. “We will provide an update on the progress of the turnaround actions in due course, such as on the occasion of earnings announcement. I am pleased to report that we are on track, and many concrete actions are underway.
“Given the long history of each company, we expect to see challenges in the process of business integration talks between the two organizations with technological excellence,” he added. “However, I am certain that we can build one strong team, as long as we share a common goal and work together to overcome every challenge by bringing together the strength of Honda and Nissan to initiate a series of chemical reaction, we can definitely deliver a new pleasure on mobility and value to all the owners and supporters of our brands.”
Despite the bombshell announcement, the merger deal between the two companies isn’t expected to be consummated at least until the end of the decade. According to Mibe, if things go smoothly and the talks move forward, the joint holding company won’t be formed before August 2026.
“Even if we start at that period, it will only be slightly before 2030 that progress will become visible, and it will only be after 2030 that harvest will begin,” Mibe said. “So it's a mid to long-term project, and we are at an advanced stage. So we think that we will have to observe the situation before we make a judgment on whether it's possible or not. There are many ways to make a judgment, but from various dimensions, we will observe the situation and make a judgment in January.”
