A MAJOR merger between an iconic car firm at risk of collapse and a rival brand has broken down within just weeks of negotiations.
Japanese carmakers Nissan and Honda are two of the most renowned names in the motoring world but their “mega-merger” collapsed for two key reasons.
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Merger talks between the two motoring giants were cancelled this month, with one senior Nissan official strongly objecting to the “rude things” his company had been told.
Nissan has been struggling with sales in recent years, brought about by poor management decisions and a failure to adapt to the growing electric vehicle (EV) market.
Worries have been further exacerbated by the Zero-Emission Vehicle, or ZEV, mandate, requiring 28 per cent of car sales to be electric in 2025 — or face fines of £15,000 for every car they fall short on.
A merger with Honda could cut costs for both companies, but there have been two key reasons behind the collapse in talks.
Firstly, discomfort came from Honda’s demand that Nissan would become its subsidiary, something the latter felt went against previous agreements, reports The Japan News.
Secondly, Honda also told Nissan to restructure its business and abandon its original hybrid vehicle (HV) system, e-Power, in order to adopt Honda’s HV system.
These decisions no doubt injured Nissan’s pride and contributed to the collapse of talks.
Honda is understood to have pressured the abandonment of Nissan’s HV system in order to increase its sales channels and its effectiveness of mass production.
This, in turn, would have also helped Nissan to reduce its procurement costs – the costs to acquire the system from Honda.
Nissan was previously world-leading in its production of EVs but has struggled to keep up with Toyota and Honda in production of hybrid motors.
“It is obvious that we are a little better than Nissan when it comes to HVs,” a senior Honda official said on Thursday.
Nissan has also published its financial results outlook for the year ending March 31, and it does not look ideal.
The company is expected to have a net loss of hundreds of millions of pounds, with its operating loss for the automobile division expected to be greater than one billion pounds.
Nissan’s original plans to merge with Honda emerged in December last year but issues meant these never evolved to a full-blown deal.
If they had combined forces, the new carmaker would be the third-largest in the world by sales volume, after Toyota and Volkswagen.
Industry insiders have revealed that Nissan is now open to mergers with other automotive or technology firms.
One of the potential companies is Foxconn, also known as Hon Hai Technology Group.
The company has reportedly already approached Nissan in December before asking Renault to sell its 35 per cent stake in the company.
Nissan announced its plans for a restructure – confirming three of its global factories will shut as part of a £2 billion saving initiative.
NISSAN ‘ON THE BRINK OF COLLAPSE’
This comes as the Japanese car maker has warned it is “on the brink of collapse” and that it could go under without much-needed support.
A Nissan official said the firm has “12 or 14 months to survive” and was likely to endure “tough” months ahead.
The firm has already cut 9,000 jobs across its global operation, while its CEO Makoto Uchida took a 50 per cent pay cut in an economy drive.
Pressure from the Government’s EV sales targets has also played a part in Nissan’s woes.
Currently, Nissan’s sales of electric cars, such as the Leaf, are lagging behind their rivals, putting them at risk of significant penalties.
Naturally, the brand is pushing for a relaxation of these rules – not least because Nissan runs the UK’s largest car factory in Sunderland, and a collapse for the manufacturer could spell disaster for the 6,000 British workers employed there.
According to a report from The Times, Nissan’s global boss Uchida spoke to Prime Minister Sir Keir Starmer at an autumn investment summit and raised concerns about the impact of the Government’s rules on their business.
Nissan warned ministers, including Business Secretary Jonathan Reynolds, that the current rules could put the Sunderland plan at risk.
To this end, Nissan asked the Government to pause the rules for two years, suggesting they make them “monitoring only” instead of enforcing fines.
The Government has since launched a review of the rules, with a consultation closing soon.
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