1 week Ago By Emmanuel Addeh
•Successor company has potential for $191bn revenue Emmanuel Addeh in Abuja Japanese automakers, Nissan and Honda, yesterday announced that they had entered into official talks to merge and create the world’s third-largest automaker by sales, with a potential for $191.4 billion in revenue if the deal succeeds. In a press conference to make the news public, Honda Chief Executive, Toshihiro Mibe, said the companies needed greater scale to compete in the development of new technologies in electric vehicles and intelligent driving.
A business integration would give the companies an “edge that will not be possible under the current collaboration framework,” Mibe said, with the talks expected to continue over the next six months. The business collaboration will give the automakers, whose products are hugely patronised in Nigeria, will make more resources available to the companies to compete, especially with a growing threat from Chinese carmakers. A third, smaller Japanese automaker, Mitsubishi, which is already in an alliance with Nissan, will also participate in the talks.
The combined company, should it be created, would trail only Toyota and Volkswagen in global sales. Aside sharing intelligence and resources and delivering eeconomies of scale and synergies, a holding company is expected to be formed as the parent company of both Honda and Nissan, listed on the Tokyo Stock Exchange. The larger company, Honda, will nominate most of the integrated entity’s board members.
Recall that Honda reported 1.382 trillion yen in operating profit in the full-year to March 2024, versus Nissan’s 568.7 billion yen.
The companies would have a combined value of nearly $54 billion, with Honda’s market capitalisation contributing the greater $43 billion share. According to the Honda’s CEO, Mibe, if approved, the integration would be a mid to long-term project that is currently not expected to show visible progress until 2030 and beyond. Currently, the companies are grappling with intense global competition in the EV market from the likes of Tesla and China’s BYD.
The high cost of the EV transition for legacy companies has long been expected to drive industry consolidation. Japan’s Toyota is the world’s biggest automaker by sales, followed by Germany’s Volkswagen. A Nissan-Honda tie-up would see the group overtake South Korea’s Hyundai.
Mibe said some of the company’s shareholders may feel that the deal would represent Honda supporting Nissan, but noted the merger was “based on the assumption that Nissan completes its turnaround action.” “If Nissan and Honda fail to stand on their own feet, the business integration talks will not come to fruition,” he said. For his part, Nissan’s CEO, Makoto Uchida, pointed out that the discussion of integration did “not mean we have given up on a turnaround” and was instead about ensuring the company’s competitiveness for the future.
“After doing this turnaround action for future development, future growth, we need to look at ultimate size and growth. This growth will be through partnerships,” he added. Mergers in the auto industry are nothing new, CNN said, recalling that they have taken place since the acquisition of various brands formed General Motors (GM) in the first decade of the 20th century.
But they sometimes have trouble succeeding bringing together different partners. German automaker Daimler-Benz agreed to buy Chrysler Corp. in 1998 only for the combined group to be split up a decade later.
The newly independent Chrysler went bankrupt and required a federal bailout within two years. Chrysler’s latest merger, with Europe’s PSA Group in 2001 to form Stellantis, has had its own problems in the last year, with falling sales and profits. And Nissan’s alliance with Renault, while not a formal merger, ended up collapsing following the arrest of Nissan’s CEO Carlos Ghosn in Japan over charges of “significant” financial misconduct.
He fled the country before a trial could take place. But with the cost and challenges of the industry’s efforts to shift from petrol-powered cars and trucks to electric vehicles and with rising competition from Chinese automakers, which have moved past most Western automakers in those efforts, Honda and Nissan needed to combine resources in order to remain competitive. “Today marks a pivotal moment,” Nissan’s Uchida said.
“Together, we can create a unique way for (customers) to enjoy cars that neither company could achieve alone,” he added. Nissan has struggled since the collapse of its alliance with Renault, facing severe financial problems that put it in desperate need of a larger merger partner. Profits in six months ending in September plunged 94 per cent compared with the same period in 2023, as the company lost money on auto operations and reported only a narrow profit due to its financing business.
In response, Nissan announced it would cut its manufacturing output by 20 per cent, laying off 9,000 workers as a result. It also slashed its forecast for full-year operating profit by 70 per cent. Some analysts had speculated Nissan could face bankruptcy as soon as 2026 when it has a huge amount of debt coming due.
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