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On Thursday, Japanese automotive giants Honda and Nissan announced that they have abandoned discussions regarding a merger that would have formed the world's third-largest automaker by unit sales. The proposed partnership was viewed as a strategy to compete with American powerhouse Tesla and Chinese companies in the electric vehicle sector, while also offering support to the struggling Nissan. In a joint statement, the companies confirmed that they had "agreed to terminate the MOU (memorandum of understanding) signed on December 23 of last year concerning the potential business integration between the two firms."
"That the both companies were not able to reach an agreement is very regrettable," Honda's CEO and president Toshihiro Mibe told reporters. Mibe insisted in December that any merger would not be a bailout for Nissan, which announced last year thousands of job cuts after reporting a 93 percent plunge in first-half net profit. Further illustrating its problems, Nissan said on Thursday that it was now expecting an annual loss of $518 million owing to slumping sales.
Japanese media reports have said the discussions unraveled after Honda proposed making its struggling rival a subsidiary instead of the plan, announced in December, to integrate under a new holding company. The automakers confirmed in the joint statement that Honda "proposed changing the structure from establishing a joint holding company... to a structure where Honda would be the parent company and Nissan the subsidiary through a share exchange".
Nissan's CEO Makoto Uchida said "given the performance of the company, there is a difficulty to stand alone" and Honda's proposal was "carefully discussed". But, he said, "We could not accept this proposal as we were not sure how much our autonomy would be kept and if Nissan's potential would be maximised" under the proposal.
The automakers, however, will continue to seek "synergy effects" through a strategic partnership announced in August last year that also includes Nissan's junior partner Mitsubishi Motors, Mibe said.
Within the partnership agreement, the companies will collaborate to thrive in "the era of intelligence and electrified vehicles, striving to create new value and maximise the corporate value of both companies", the joint statement said. The cancellation of the merger talks would have no impact on the earnings of both automakers, it said.
