Honda and Nissan, two of Japan’s biggest carmakers, have officially ended their merger talks. The companies had announced the merger in December, hoping to form the world’s third-largest automaker. However, they have now decided to go their separate ways.
In a joint statement, they said they “agreed to terminate the MOU (memorandum of understanding) signed on December 23 last year for consideration of a business integration between the two companies.”
Why the Merger Was Considered
The merger's idea was to help both companies stay competitive in the growing electric vehicle space, where companies like Tesla, VinFast and BYD are leading the way. However, the plan faced challenges.
Honda’s CEO had previously stated that this was not a rescue deal for Nissan, which has been struggling financially. Nissan had announced significant job cuts after reporting a 93% drop in first-half net profit.
Why the Talks Fell Apart
Reports suggest that Honda wanted to make Nissan a subsidiary instead of creating a new holding company as initially planned. The companies confirmed this in their statement, explaining that Honda had proposed “changing the structure from establishing a joint holding company … to a structure where Honda would be the parent company and Nissan the subsidiary through a share exchange.”
This change in strategy led to disagreements. Ultimately, both companies felt it was best to end discussions. The statement added that they wanted to focus on “speed of decision-making and execution of management measures in an increasingly volatile market environment heading into the era of electrification.”
Financial Impact and Future Plans
Honda and Nissan said this decision wouldn’t affect their earnings despite cancelling the merger. However, both companies have faced financial struggles.
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Honda reported a 7% decline in profits for April-December, bringing its total to $5 billion.
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Nissan expects an annual net loss of $518 million for the fiscal year ending in March, a significant drop from its $2.7 billion profit the previous year.
Mitsubishi Motors had also considered joining the merger. If all three had combined, based on their December market value, they would have formed a company worth over $50 billion.
Even though the merger is off, the companies still plan to collaborate on electric vehicles and smart car technology, including autonomous driving.
