The dream of a merger between Honda and Nissan, touted as a potential formation of the world's third-largest automotive group, has ended abruptly, 52 days after the signing of a memorandum of understanding on December 23, 2024. On February 13, both companies held board meetings where they decided to withdraw from negotiations and to terminate any plans for operational integration.

This merger was seen as a self-rescue effort for Japanese automakers amid rising competition from electric vehicle giants like BYD and TeslaTheir initial decision to unite came at a time when both faced a crisis marked by declining market shares and profitsHowever, skepticism surrounded the collaboration from the outsetCarlos Ghosn, the former CEO of Renault, characterized the merger as a desperate gamble rather than a practical business engagement.

Signals of discord emerged early in the negotiationsHonda made its stance clear: the success of any merger hinged primarily on Nissan's ability to return to profitabilityUnfortunately, Nissan was grappling with significant financial troubles, predicting a net loss of 80 billion yen for the fiscal year 2024. As reported by Reuters, Honda viewed Nissan less as an equal partner and more as a company in need of support, leading to friction over strategic direction and control.

The CEO of Honda, Toshihiro Mibe, acknowledged the disappointment caused by the negotiations' collapse but indicated a desire for continued collaboration in other areasConversely, Nissan’s CEO, Makoto Uchida, expressed concern over the company’s future without a strong partner, emphasizing the critical need for optimism amid growing industry challenges.

The initial memorandum of understanding proposed establishing a joint holding company, with Honda slated to have a majority stake and control over more than half of the board membersSuch a proposal was met with notable resistance from Nissan’s leadership, who felt it did not align with their vision for potential growth and innovation

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As a result, the discussion remained fraught with tension, ultimately leading to the termination of talks.

If the merger had materialized, it could have provided Nissan with much-needed leverage, especially given its weakened performance in recent marketsFor instance, Nissan reported a combined operating profit of just 31.1 billion yen for the third quarter of the fiscal year 2024, significantly below market expectations and indicative of deeper issuesIn contrast, Honda managed a healthy operating profit of 113.99 billion yen, demonstrating their contrasting operational health and strategy.

Both automakers remain fiercely independent and proud of their respective heritages—Honda's robust reputation in engineering and Nissan's technological capabilities have led to a hesitance from either side to concede or compromise during this merger processAnalysts highlighted how both corporations overestimated their market positions and capabilities to overcome their financial hurdles, with some attributing the negotiation failures to a lack of mutual understanding and respect for business operations across the board.

In the wake of the unsuccessful negotiations, Nissan's situation has only become more precariousThey are now facing a daunting restructuring pathway, intending to cut around 9,000 jobs globally while reducing production capacity by 20% in a bid to return to profitabilityWith a projected net loss exacerbated by excessive restructuring costs, Nissan's priorities now shift to survival rather than expansion or innovation.

Moreover, the struggles of these two auto manufacturers are echoed in their performance in key marketsFor example, in China, Nissan's sales have plummeted, with a 12.2% decline marking significant losses for a company that once thrived in that territorySimilarly, in the U.S., sales growth was only marginal, underscoring the urgent need for revised strategies in the face of rising competition from electric vehicles

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