TOKYO (Reuters) – Japanese automakers Honda and Nissan have announced plans to join forces, forming the world’s third-largest automaker through sales, as the industry undergoes dramatic adjustments in its transition away from fossil fuels.
The two corporations announced that they had signed a memorandum of understanding on Monday and that Mitsubishi Motors, the smallest member of the Nissan alliance, had also agreed to enter into negotiations on integrating their businesses.
“We anticipate that if this integration comes to fruition, we will be able to deliver even greater value to a wider customer base,” Nissan’s CEO Makoto Uchida said in a statement.
Japanese automakers are lagging behind their biggest rivals in the electric car sector and are looking to cut prices and make up for lost time.
News of a potential merger emerged earlier this month, with unconfirmed reports claiming that talks of closer collaboration were partly due to Taiwanese iPhone maker Foxconn’s aspirations to partner with Nissan, which has an alliance with France’s Renault SA and Mitsubishi.
A merger could create a giant value of more than $50 billion in the market capitalization of the three automakers. Together, Honda and Nissan’s alliance with France’s Renault SA and small automaker Mitsubishi Motors Corp. would grow in length to compete with Toyota Motor Corp. . et Volkswagen AG. Germany’s Toyota has established generation partnerships with Japanese corporations Mazda Motor Corp. and Subaru Corp.
Even after a merger, Toyota, which sold 11. 5 million cars in 2023, would be the top Japanese automaker. If they joined together, the three small companies would make around 8 million cars. In 2023, Honda will have manufactured four million and Nissan 3. 4 million. Mitsubishi Motors earned just over a million.
Nissan, Honda and Mitsubishi announced in August that they would share electric vehicle parts, such as batteries and joint software for autonomous driving, to better adapt to drastic changes focused on electrification, following an initial agreement between Nissan and Honda in March.
Honda, Japan’s second-largest carmaker, is widely regarded as the only Japanese partner likely to save Nissan, which is suffering in the wake of a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on fraud charges. and fraud. Misuse of corporate assets, accusations he denies. He was eventually released on bail and fled to Lebanon.
Speaking Monday to reporters in Tokyo via a video link, Ghosn derided the planned merger as a “desperate move.”
From Nissan, Honda may just get giant body-on-frame SUVs such as the Armada and Infiniti QX80 that Honda does not have, with big towing capacities and smart off-road performance, Sam Fiorani, vice president of ‘AutoForecast Solutions, told the Associated Press.
Nissan also has years of experience in building batteries and electric cars, as well as gasoline-electric hybrid powertrains that could help Honda expand its own electric cars and the next generation of hybrids, he said. declared.
But the company announced 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 of dollars).
The company recently reshuffled its control and Makoto Uchida, its chief executive, took a 50 percent pay cut to take care of financial woes, saying Nissan needed to respond more effectively and better to market tastes, emerging prices and other global changes.
Fitch Ratings recently downgraded Nissan’s credit outlook to “negative,” citing worsening 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 that amounted to 1.44 trillion yen ($9.4 billion).
The value of Nissan’s inventory has also fallen to the point where it is a bargain.
On Monday, its Tokyo-traded shares gained 1. 6%. They jumped more than 20% after the announcement of a possible merger last week.
Honda shares rose 3. 8%. Honda’s profits fell almost 20% in the first part of the April-March monetary year from a year earlier as sales suffered in China.
Merging is an industry-wide consolidation trend.
At a regime briefing on Monday, Cabinet Secretary Yoshimasa Hayashi said he would not comment on the main points of the automakers’ plans, but said Japanese corporations will have to remain competitive in a market in conversion.
“As the business environment around the automotive industry adjusts significantly and competitiveness in the battery and software sector becomes more and more important, we hope that mandatory measures will be taken for overseas festivals,” Hayashi said.