Global Automotive Updates
Nissan-Honda merger talks failed, and Nissan now seeks a new partner
The failure of the Nissan-Honda merger talks has significant implications for the automotive industry. Nissan now seeks a new partner to navigate the changing market dynamics in the Auto world.
Large corporate mergers and acquisitions can be a complex and intriguing business when both sides have intricate agendas on the table. Look at the latest high-profile business case that had the potential on course to create the world’s fourth-biggest automotive conglomerate with annual production of nearly 7 million vehicles, just behind Toyota Motor Corporation at a global level.
What went wrong between Nissan and Honda – two global auto majors from Japan?
The scales were tilted in favor of Honda because Nissan has been burning rather than generating cash since the financial year that ended in March 2024 due to heavy capital spending and shrinking profit. Then, competition in EVs from China began to impact the markets where these brands had a stronghold in IEC or hybrids.
Cash-rich Honda was interested in acquiring Nissan and making it one of its subsidiaries. This idea met stiff opposition within the Nissan camp, which expected it to be a merger of equals. Neither corporation was willing to compromise in that respect.
That is not all; the proposed investment was also a sore point. Honda had offered $60 billion as a lifeline for the tie-up. However, the sore point came when Honda surprised Nissan by revising the terms and proposing that the latter become its subsidiary. This would mean that Honda, with its clout, could restructure Nissan’s operations, enforce job cuts, and control production.
The newswire Reuters noted that Nissan’s plans now do not entail plant closures. Nissan, it is known, was reluctant to consider politically sensitive factory closures despite its mounting difficulties, and many seniors within the company felt the crisis was manageable without external interference.
Interestingly, Renault, Nissan’s top shareholder in the alliance set-up, said it would “vigorously defend” Nissan’s interests despite not being privy to the discussions.
After Honda exited the deal, Nissan reopened the chapter with an open mind and was willing to talk with non-auto players. Foxconn, a Taiwanese contract manufacturer that makes Apple’s iPhones, is making rounds in the industry circuit regarding the possibility of a new partnership.
Under the leadership of former Nissan executive Jun Seki, Foxconn’s involvement in the EV business adds another layer of intrigue. Jun Seki’s potential as a future CEO of Nissan shows his deep knowledge of the company, and his shift to Foxconn to oversee its EV ventures indicates a strong interest in shaping the future of the electric vehicle business. Traditionally, a tech giant, Foxconn, famous for its manufacturing of Apple products and its expansion into the EV space, positions itself as a powerful potential player in the automotive world, raising eyebrows about future trends in the global auto business.
Although the (MoU) signed between Nissan and Honda did not lead to a deal, it allowed both parties to walk away without incurring a cancellation fee of $657 million. It underscores the financial aspect of the high stakes involved in such negotiations.
Meanwhile, Nissan’s board is pushing Chief Executive Officer Makoto Uchida to work on a comprehensive restructuring plan parallel with any talks with potential new partners. As reported, the company is expected to share more details soon.
#MergersAndAcquisitions * #Business #Foxconn #ElectricVehicles #Nissan #AutomotiveNews
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About the author:
British-Indian Chandan Basu Mallik has been an automotive petrol head and journalist/editor for over thirty years. He has worked in the UK and the Middle East and is currently in India. You can learn more about his work on his LinkedIn profile: https://www.linkedin.com/in/chandan-mallik-34aa47320/. You can write to Chandan at theprimeavenuekol@gmail.com