By Maki Shiraki
TOKYO (Reuters) – The Nissan CEO, Makoto Uchida, recently met with his Honda counterpart, Toshihiro Mibe, on Thursday to communicate his decision to terminate their merger discussions. This came after the larger automaker proposed making Nissan a subsidiary, as per a source familiar with the situation. The Japanese automotive giants had signed a memorandum of understanding in December to explore integration under a holding company, aiming to establish the world’s third-largest automaker and enhance competitiveness in the industry’s challenging landscape.
However, the ongoing talks have become increasingly complex due to significant disparities, according to several individuals briefed on the matter by Reuters. The negotiation process hit a roadblock when Honda expressed its intention to transform Nissan into a subsidiary, a proposal that Nissan found unacceptable, leading to a mutual agreement to discontinue the discussions as detailed by the knowledgeable source who preferred to remain anonymous due to the confidentiality of the information.
Nissan is expected to formalize its decision to withdraw from the memorandum of understanding during an upcoming board meeting before the company’s third-quarter earnings announcement next week, the source added. On the other hand, reports from Japanese public broadcaster NHK indicated that Honda has insisted on Nissan’s acceptance of subsidiary status as a prerequisite for any potential integration. Honda currently ranks as Japan’s second-largest carmaker following Toyota, with Nissan holding the position of the third-largest.
Spokespeople from Nissan and Honda declined to provide specific comments regarding the status of their negotiations, reiterating earlier statements that they aimed to reach a conclusive decision on their future direction by mid-February. The breakdown of these discussions raises concerns about how Nissan, already amidst a turnaround strategy, will navigate its latest challenges without external aid. Nissan had previously announced plans to reduce its workforce by 9,000 employees and global capacity by 20%.
On Thursday afternoon, Nissan’s shares surged by 7.6%, while Honda’s shares experienced a decline of 3.5%, reversing the trend observed in the previous trading session. (Reporting by Maki Shiraki; Additional reporting by Kaori Kaneko; Writing by Chang-Ran Kim; Editing by Jamie Freed)
