Honda and Nissan may soon be the world’s third-largest automaker after announcing plans to potentially merge companies.Both Japanese automakers signed a memorandum of understanding, which included the possibility for Mitsubishi Motors, an alliance member of Nissan, to potentially join in the merger as well.
“Today marks a pivotal moment as we begin discussions on business integration that has the potential to shape our future,” said Nissan President and CEO Makoto Uchida in a statement released on Monday.
“If realized, I believe that by uniting the strengths of both companies, we can deliver unparalleled value to customers worldwide who appreciate our respective brands. Together, we can create a unique way for them to enjoy cars that neither company could achieve alone.”
According to Honda president Toshihiro Mibe, the two companies would continue their operations under a joint holding company, with Honda leading the new management.
However, the long term goal is to have a formal merger agreement by June and to have everything completed and up on the Tokyo Stock Exchange by August 2026.
Should the merger be successful, their consolidation could be worth over USD $50 billion and may help the Japanese auto industry catch up in the electric vehicle sector against counterparts in China and competitors like Tesla.
The Japanese government first warned that China posed a serious threat to its auto industry in 2019 and it has pushed for Honda and Nissan to consolidate as a means to remain competitive
The Trudeau government and Ontario jointly gave Honda $5 billion in taxpayer funding to build four new manufacturing plants in Ontario to put towards the company’s $15 billion investment earlier this year.
“Creation of new mobility value by bringing together the resources including knowledge, talents, and technologies that Honda and Nissan have been developing over the long years is essential to overcome challenging environmental shifts that the auto industry is facing,” said Mibe.
Nissan, Honda and Mitsubishi began sharing EV components such as batteries in August, as well as sharing research software for autonomous driving after the two major companies entered into a preliminary agreement in March.
Additionally, Honda can now acquire truck-based and SUV body frames from Nissan and other advanced EV technologies that have been spear-headed under the former company.
“Honda and Nissan are two companies with distinctive strengths. We are still at the stage of starting our review, and we have not decided on a business integration yet, but in order to find a direction for the possibility of business integration by the end of January 2025, we strive to be the one and only leading company that creates new mobility value through chemical reaction that can only be driven through synthesis of the two teams,” said Mibe.
Despite news of the merger, Nissan announced it would be slashing about 6% of its global workforce of 133,000 people last month, as well as reducing its overall production by about 20%.
It remains unknown where exactly the layoffs will take place, however, the company recently suffered a quarterly loss of nearly $85 million, resulting in CEO Makoto Uchida voluntarily cutting his monthly compensation by half.
“These turnaround measures do not imply that the company is shrinking,” wrote Uchida in a press release at the time. “Nissan will restructure its business to become leaner and more resilient, while also reorganizing management to respond quickly and flexibly to changes in the business environment.”
