Nissan to Reject Honda Deal to Create World’s No. 3 Automaker
Shares in Nissan fall while Honda stock jumps
TOKYO—Nissan’s 7201 -4.87%decrease; red down pointing triangle board is planning to reject Honda’s terms for a combination of the two automakers, putting in danger a merger plan announced less than two months ago, people familiar with the matter said Wednesday.
Nissan’s board was scheduled to meet later Wednesday, and the people cautioned that no final decision to kill the deal has been made.
The two Japanese automakers said on Dec. 23 that they planned to combine under a structure in which Honda and Nissan would both be subsidiaries of a single holding company.
A combination of Honda and Nissan would create the world’s third-largest automaker by vehicle sales when including Mitsubishi Motors, whose biggest shareholder is Nissan.
In recent days, Honda presented a new proposal that would have made Nissan a subsidiary of Honda instead of the more equal structure originally planned, according to a person familiar with the negotiations. The person said Nissan found the new proposal unacceptable and planned to reject it.
The person said Nissan and Honda would continue other cooperation that predates the merger talks, including collaboration on software and electric vehicles.
Honda said it was continuing to discuss the potential combination with Nissan and aimed to decide on a general plan by mid-February.
Nissan shares initially held up in Wednesday’s trading following reports of a rejection but fell later in the Tokyo session. Its shares were down 4.9% in the afternoon when the Tokyo Stock Exchange called a halt to trading. Honda shares closed up 8.2%. The price moves reflected investor views that Nissan was more likely to benefit if the merger went through.
If the automakers’ plan to combine falls apart, it would raise pressure on Nissan to reassure lenders, employees and customers that it can survive amid stiff competition in the U.S. and China. Nissan has lost ground in both markets.
Nissan said in November that it would lay off 9,000 workers and slash its factory capacity by one-fifth to cut costs.
The initial merger plan had drawn some skepticism, in part because of the differing corporate cultures at Honda and Nissan. Honda’s leaders have usually been engineers. Nissan historically favored graduates of the prestigious University of Tokyo, and its top jobs often went to sales leaders.
Honda’s chief executive stumbled at the December news conference announcing the potential deal when he was asked what he found attractive about Nissan as a partner. He couldn’t give specifics beyond Nissan’s long history as a carmaker and concluded by saying he wasn’t sure his answer was satisfactory.
Nissan’s troubles have left it with a market capitalization that is less than one-fifth of Honda’s.
For Nissan, “it was naive to imagine they could go into this as equals,” said Fumio Matsumoto, chief strategist at Okasan Securities. “If you’re going to do it, it’s best to make clear who’s on top.”
Matsumoto said Nissan’s effort to overhaul its business and look for partners was likely to continue, given the high cost of developing artificial-intelligence-powered autonomous vehicles and other new technologies. He said Nissan might seek foreign partners because apart from Honda, there were no obvious candidates in Japan.