Nissan appears set to step back from merger negotiations with rival Honda, casting doubt on a proposed $60 billion deal to create the world’s third-largest automaker. The decision, reported by two sources on Wednesday, raises concerns about Nissan’s ability to execute its turnaround plan without external support.
According to multiple individuals familiar with the matter, discussions between the two Japanese automakers have become increasingly complicated due to growing strategic differences. Reuters earlier reported that Nissan might abandon the talks after Honda suggested making it a subsidiary—a shift from the initial proposal of a merger between equals. Nissan reportedly opposed the idea, viewing it as a departure from the original vision.While the future of the merger remains uncertain, the sources indicated that discussions could potentially resume at a later stage.
Market Reactions and Investor Sentiment
The news had an immediate impact on the stock market. Nissan’s shares fell more than 4% on the Tokyo Stock Exchange, prompting a temporary suspension of trading following a report by the Nikkei business daily that Nissan would pull out of negotiations. In contrast, Honda’s shares surged more than 8%, suggesting investor relief over the potential collapse of the merger.
In response, both Nissan and Honda released separate statements clarifying that the Nikkei report was not based on official company announcements. They reiterated their commitment to finalizing a decision by mid-February.
Renault’s Stake and Concerns
Nissan’s longtime partner, French automaker Renault, which holds a 36% stake in the company (including 18.7% through a French trust), has signaled that it would be open to the merger. A Renault spokesperson stated that the company would “vigorously” protect the interests of its stakeholders but noted that no official decision had been made regarding the merger’s fate.
The uncertainty surrounding the deal raises concerns about Nissan’s financial stability. The automaker, already struggling with the shift to electric vehicles (EVs) and the aftermath of former chairman Carlos Ghosn’s scandal, is in the midst of a turnaround strategy involving the reduction of 9,000 jobs and a 20% cut in global production capacity.
Strategic and Industry Implications
Honda, Japan’s second-largest automaker after Toyota, has reportedly grown increasingly skeptical about Nissan’s turnaround progress. The merger was initially seen as a move to consolidate strength against emerging EV competitors like China’s BYD and other industry disruptors.Analysts also note that Nissan has greater exposure to potential US-Mexico tariffs compared to Honda and Toyota, raising additional risks amid geopolitical uncertainties.
“The fact that Nissan rejected the idea of becoming a Honda subsidiary suggests control was a major sticking point,” said Christopher Richter, Japan autos analyst at CLSA.With the automotive industry undergoing rapid transformation and facing mounting challenges, Nissan’s decision on whether to continue merger talks with Honda will have significant implications for its future strategy and market position.
