Nissan, Honda announce plans to merge, creating world’s No. 3 automaker

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TOKYO (AP) — Japanese automakers Honda and Nissan have announced plans to join forces to form the world’s third-largest automaker by sales as the industry undergoes dramatic changes in its shift away from fossil fuels.

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The two companies said they signed a memorandum of understanding on Monday, and that Mitsubishi Motors, the junior member of the Nissan alliance, also agreed to join talks on merging their businesses.

“We expect that if this integration comes to fruition, we will be able to deliver greater value to a broader customer base,” Nissan CEO Makoto Uchida said in a statement.

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Japanese automakers have lagged behind their major rivals in electric vehicles and are trying to cut costs and make up for lost time.

News of a potential merger emerged earlier this month, with unconfirmed reports that talks about a closer collaboration were partly driven by Taiwanese iPhone maker Foxconn’s aspirations to tie up with Nissan, which has an alliance with France’s Renault and Mitsubishi.

The merger could result in a giant company worth more than $50 billion based on the market capitalization of all three automakers. Together, Honda and Nissan’s alliance with France’s Renault and smaller automaker Mitsubishi Motors will gain scale to compete with Toyota Motor Corp. and Germany’s Volkswagen. Toyota has technology partnerships with Japan’s Mazda Motor Company and Subaru Corp.

Even after the merger, Toyota, which produced 11.5 million vehicles in 2023, will remain the leading Japanese automaker. If the three smaller companies join, they will produce about 8 million vehicles. In 2023, Honda produced 4 million and Nissan produced 3.4 million. Mitsubishi Motors made just over 1 million vehicles.

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Nissan, Honda and Mitsubishi announced in August that they would share electric vehicle components such as batteries and joint research programs for autonomous driving to better adapt to radical changes centered around electrification, following an initial agreement between Nissan and Honda set in March.

Honda, Japan’s second-largest automaker, is widely seen as the only potential Japanese partner capable of saving Nissan, which has struggled in the wake of a scandal that began with the arrest of its former boss Carlos Ghosn in late 2018 on fraud and fraud charges. Misuse of company assets, charges he denies. He was eventually released on bail and fled to Lebanon.

Speaking to reporters in Tokyo on Monday via video link, Ghosn mocked the planned merger as a “desperate move.”

From Nissan, Honda can get large, truck-based SUVs like the Armada and Infiniti QX80 that Honda doesn’t have, with great towing capabilities and good off-road performance, Sam Fiorani, vice president of AutoForecast Solutions, told The Associated Press.

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Nissan also has years of experience manufacturing batteries, electric vehicles and gas-electric hybrid drivetrains that could help Honda develop its electric vehicles and next-generation hybrids, he said.

But the company said in November that it would cut 9,000 jobs, or about 6% of its global workforce, and reduce its global production capacity by 20% after reporting a quarterly loss of 9.3 billion yen ($61 million).

It recently shuffled its management, and Makoto Uchida, its CEO, agreed to take a 50% pay cut to take responsibility for the financial problems, saying Nissan needs to become more efficient and respond better to market tastes, rising costs and other global changes.

Fitch Ratings recently lowered Nissan’s credit outlook to “negative,” citing deteriorating profitability, partly due to price cuts in the North American market. But it noted that it has a strong financial structure and solid cash reserves of 1.44 trillion yen ($9.4 billion).

Nissan’s stock price has also fallen to the point where it is considered a bargain.

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On Monday, its Tokyo-traded shares rose 1.6%. It jumped more than 20% after news of the potential merger emerged last week.

Honda shares rose 3.8%. Honda’s net profit fell nearly 20% in the first half of the fiscal year from April to March compared with the previous year, as sales in China suffered.

The merger reflects an industry-wide trend toward consolidation.

At a routine news conference on Monday, Chief Cabinet Secretary Yoshimasa Hayashi said he would not comment on the details of the automakers’ plans, but said Japanese companies needed to remain competitive in the rapidly changing market.

“As the business environment surrounding the automotive industry changes significantly, with competitiveness in battery storage and software becoming increasingly important, we expect to take necessary measures to survive the international competition,” Hayashi said.

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Kurtenbach reported from Bangkok.

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