What Happened to the Honda-Nissan Merger?" …Nissan Withdraws from Preliminary Agreement

The automotive giants' merger plan collapses after internal conflicts and strategic disagreements / AP

The long-anticipated merger between Honda and Nissan, two of Japan's major automakers, has effectively come to an end, following Nissan’s decision to retract from the preliminary agreement signed in December 2024. The breakdown stems from ongoing disagreements, with Nissan rejecting Honda’s proposal for restructuring Nissan into a subsidiary. This development signals the end of what was once seen as a promising partnership aimed at creating a dominant global automotive group.

In the latest update from February 5, 2025, Japan’s leading news outlets, including the Nihon Keizai Shimbun (Nikkei), reported that Nissan had decided to withdraw from the memorandum of understanding (MOU) concerning the formation of a holding company that would merge the two automakers. While Nissan's future actions remain uncertain, questions linger about whether the discussions on a potential merger will resume or be completely abandoned. Additionally, the future of the proposed collaboration in electric vehicles (EVs) and software development remains unclear.

Breakdown of the Merger Proposal and Key Developments

The original plan, announced in December 2024, outlined a merger in which Honda and Nissan would become subsidiaries under a shared holding company. This was seen as a strategic move to form the world’s third-largest car manufacturer, following Toyota and Volkswagen, with a combined annual sales volume of approximately 8.13 million vehicles. This would have pushed Hyundai Motor Group, with 7.3 million vehicles, out of the third spot in global rankings.

However, internal conflicts regarding Nissan's restructuring plans have delayed progress, leading to further complications. Initially, a decision on the merger was expected by late January 2025, but as Nissan struggled to finalize its restructuring plans, Honda proposed an alternative—restructuring Nissan as a subsidiary rather than forming an equal partnership. This suggestion sparked strong resistance within Nissan’s leadership, with executives strongly opposing any move that would reduce Nissan's autonomy.

The disagreement centers on the lack of progress in Nissan’s restructuring plans, which had already been delayed. Honda’s proposal to make Nissan a subsidiary would have effectively put Honda in the driver’s seat regarding restructuring, something that Nissan’s management found unacceptable. Honda, dissatisfied with Nissan's slow progress, has made it clear that it may reconsider the merger entirely if their proposal is not accepted.

Nissan's Struggles and Future Survival

One of the core issues at the heart of the stalled merger is Nissan’s deteriorating financial health. Over the past year, Nissan has been grappling with severe losses, prompting plans to cut 9,000 jobs and temporarily halt production in some of its factories. Despite these efforts, Nissan has failed to provide Honda with a clear and feasible plan for a successful recovery. This has raised doubts within Honda’s leadership about Nissan’s ability to navigate its restructuring successfully.

As the merger appears to fall apart, both companies face significant challenges. Nissan, in particular, finds itself in a precarious position. The company’s weakened financial state, compounded by a shaky corporate structure, leaves it vulnerable to outside intervention. Renault, the French automaker, holds a significant stake of 37.8% in Nissan, and its future decisions could play a crucial role in determining Nissan's fate.

Additionally, Taiwan’s Foxconn has reportedly shown interest in acquiring Nissan, which could potentially shift control of the company. There are also rumors that Tesla, the American electric vehicle giant, might explore opportunities to acquire Nissan, particularly in light of the upcoming US-Japan summit scheduled for February 7, 2025.

The Japanese government, which has been quietly involved in supporting the merger as a way to keep control of Japan's automotive industry, faces increasing difficulty in influencing the market’s direction. As global competitors grow stronger, Japan’s once dominant position in the automotive world is being challenged, and the potential loss of Nissan to foreign ownership poses a significant national concern.

What’s Next for Honda and Nissan?

Given the complexities of this situation, it remains unclear whether Honda will continue its pursuit of a merger with Nissan or shift focus to Mitsubishi, another Japanese automaker. Mitsubishi has strengths in plug-in hybrid (PHEV) technology and a strong presence in the pickup truck market in the US, which could complement Honda’s offerings. If Honda decides to prioritize Mitsubishi over Nissan, it could mark a significant shift in the Japanese automotive landscape, especially in the context of future vehicle technology.

In conclusion, while the merger between Honda and Nissan was once seen as a way to secure a dominant position in the future automotive market, the internal challenges and strategic disagreements have led to its unraveling. Both companies now face uncertain futures, with Nissan’s ability to survive independently coming into question. The next steps for both automakers will be closely watched, as they navigate a rapidly changing industry that increasingly revolves around electric vehicles, software, and global competition.