Shares in both Nissan (OTCM: NSANY) and its Japanese rival Honda (NYSE: HMC) moved in opposite directions overnight after unverified media reports suggested the former was about to renege on merger talks that started late December.
Revelations by Japan’s Kyodo News agency, Nikkei newspaper, plus Reuters that a potential $50bn merger deal is off the table would be an about-face to the initial suggestion that by joining forces both car companies could catch up with Tesla and Chinese electric vehicle firms.
Smaller Japanese carmaker Mitsubishi, which is already in an alliance with Nissan, was also party to the merger talks.
Some reports suggest that by joining forces, these three legacy automakers could better transition from traditional gasoline-powered vehicles to electric vehicles to comply with tougher environmental regulations around the world.
While Honda shares closed higher by 8% on the news, Nissan’s share price was down around 5% before the company entered a trading halt.
Strong opposition
It’s understood that the merger plans to create the world's third-largest automaker – behind Toyota and Volkswagen - may have fallen over due to strong opposition within Nissan to a number of issue, not the least of which included the integration ratio.
It’s also suggested that Nissan baulked at the prospect of becoming a Honda subsidiary.
According to other media sources, Nissan’s restructuring plan has also failed to convince Honda that the latter is on track to turn around its fortunes, a key condition for the planned merger.
While Nissan is not expected to make an official announcement until mid-February, a recent update suggested that the two companies "are in the stage of advancing various discussions, including the contents of the report."
Nissan could collapse next year
In a statement on its website, Nissan noted media coverage “stating that our company has withdrawn the basic agreement for the merger with Honda” but said that “this matter has not been announced by our company.”
“Based on the memorandum of understanding signed on [23 December] last year, Honda and our company are in the stage of advancing various discussions … and we plan to establish a direction and make an announcement around mid-February,” Nissan added.
Underscoring Nissan’s severe financial problems was the collapse of its alliance with Renault, which only hastened the search for a larger merger partner.
Nissan’s profits in the six months ending in September plunged 94% compared with the same period in 2023. Following this dismal result, Nissan announced cuts to its manufacturing output by 20%, 9,000 worker layoffs.
As a result, Nissan slashed its forecast for full-year operating profit by 70%.
Based on some analysts' reports, Nissan could collapse as soon as 2026 when huge amounts of debt need to be paid or refinanced.
