With help from Maki Shiraki, Daniel Leussink, and Norihiko Shirouzu
TOKYO (Parhlo World) – Late last year, Nissan was in a lot of trouble when its rival Honda offered a $60 billion deal that would help both Japanese automakers compete with the Chinese brands that were shaking up the market.
Nissan was not as strong as it used to be because of years of falling sales and management problems. This was especially true after it misjudged the demand for hybrids in the U.S., which was its biggest market.
Six people who know about the situation say that the merging talks fell apart in a little more than a month because Nissan was too proud to admit how bad its situation was and Honda decided quickly to change the terms and ask Nissan to become a subsidiary.
Three of the people said that even though Nissan was in a weaker situation, it insisted on getting almost the same treatment in the talks as Toyota, which was Japan’s second-largest automaker for years until 2020.
Three sources said that Nissan didn’t want to think about closing factories because it would be too politically sensitive. Honda put pressure on Nissan to make greater cuts to its workforce and factory capacity. They said Nissan made them think it could get better on its own, even though its problems were getting worse.
Three people who were there said that Nissan’s stubbornness and Honda’s management’s view of Nissan’s slow decision-making helped kill a deal that would have made the two companies one of the biggest automakers in the world.
This story about the things that stopped the mega merger includes details that haven’t been told before, like which factories Nissan wanted to keep open, how it resisted Honda’s demands for greater cuts, and how Nissan felt about some of Honda’s demands. The story is based on talks with more than a dozen people by Parhlo World. All of them asked to remain anonymous because the subject was sensitive.
The news story gives us new information about how Nissan is thinking as its situation gets worse. The famous car company now has to deal with the fear of U.S. tariffs on cars made in Mexico, which make up more than a quarter of its U.S. sales. On Thursday, both Nissan and Honda are going to report their earnings.
“I think it’s a management problem,” said Julie Boote, an analyst at the research company Pelham Smithers Associates, about Nissan’s problems. “They’re completely overestimating their position and their brand value, and their ability to turn around the business.”
Nissan and Honda both refused to comment on the specifics of the talks that Parhlo World sources said were going on.
Last week, Nissan CEO Makoto Uchida told his counterpart Toshihiro Mibe that he wanted to stop talks because Honda had proposed a subsidiary.
Both car companies said they would give an update this month.
NOT ENOUGH, OR LATE
People were shocked when Nissan cut its profit estimate by 70% in November. This was because sales were falling in both China and the US. Some analysts thought its plan to turn things around, which included letting go of 9,000 jobs and one-fifth of its world capacity, was too little, too late.
Uchida said he would give up half of his pay and work on making the business stronger and smaller.
Nissan and Honda said they were going to join in December. This came after talks that had been going on since March 2024, when they said they wanted to work together on technology.
Two of the people said that the merger talks quickly stopped because of disagreements over how to figure out the stock ratio for the new company.
One of the people said that Uchida showed worries about the deal’s chances when they were alone. Four people said that officials at Honda said Nissan took too long to make decisions. At first, a public report on the talks was planned for the end of January. However, it was moved to the middle of February.
Two sources said that Honda managers were unhappy with what they saw as an inadequate drop in factory capacity and thought Nissan’s plan to turn things around was lacking in details.
Parhlo World couldn’t tell if Honda asked for a certain number of job cuts or named specific factories that would be reducing their output.
One person said that Nissan didn’t want to close factories because that would mean writing down the value of those factories, which would hurt the company’s profits.
As part of Nissan’s plan to turn things around, 7% of its global staff was already going to be let go. Someone said it was telling that Honda had fired more people in China in the past two years.
One person who knows how Nissan is thinking said that Honda didn’t seem ready to change its plans, which suggested that it didn’t see Nissan as a competitor.
VISIT TO KYUSHU
Late in January, Hideyuki Sakamoto, a manager at Nissan, went to the island of Kyushu in the southwestern Pacific Ocean to talk about plans for a battery electric vehicle (EV) plant that would create 500 jobs.
As he spoke, Sakamoto was surrounded by politicians from the area. He said that the automaker would not cut capacity at its current Kyushu plant either. He said that Kyushu was a “highly competitive base geopolitically” and that it would be important for future plans to build electric vehicles.
One person says that the day after Sakamoto’s trip to Kyushu, Mibe from Honda told Uchida that Nissan would have to become a subsidiary of Honda. This was not in the original merger agreement of understanding that the two companies signed at the end of last year.
Parhlo World couldn’t say for sure if Mibe’s action was caused by Nissan’s statements in Kyushu. Still, the trip to Kyushu made things worse between the companies over the best way to move forward.
Nissan thought that no one could touch more than one plant in Kyushu. One source said that Smyrna, Tennessee, Aguascalientes, Mexico, and Sunderland, Britain, were all important to the company’s EV plan and that they didn’t want to close them or cut their lines.
Two people who know Honda said that the company’s sudden change to the deal’s structure showed that it was getting irritated with Nissan over how slowly the talks were going.
Two people said Nissan was caught off guard by the move because it went against the agreement that had been made before. One person who works at Nissan said that the idea was seen as “outrageous” and an insult to the bigger company’s honour.
Renault, which owns the most shares in Nissan, said it wasn’t involved in the talks but that the most recent information showed the deal would lead to a “takeover of Nissan by Honda without a control premium for Nissan shareholders.” Renault said that a result like that was “not acceptable” and that it would “vigorously defend” its own interests.
TWO NEW PARTNERS
It’s not clear what, if anything, would get the automakers to agree again. Three of the people said it seemed likely that they would go back on their original plan to work together on technology.
According to their December letter of understanding, neither company would have to pay a 100 billion yen ($650 million) break-up fee if they both agreed to end the talks.
Parhlo World reports that Nissan is willing to work with new companies, such as Foxconn, the Taiwanese company that makes Apple’s iPhones. Foxconn did not answer when asked for a response.
The chairman of Foxconn, Young Liu, said on Wednesday that the company’s goal was to work with Nissan instead of buying it.
Jun Seki, a former executive at Nissan who now runs the Taiwanese company’s EV business, was once seen as a possible candidate to become the CEO of Nissan.
A strategist at the Japanese firm Asymmetric Advisors, Amir Anvarzadeh, said that Nissan might be appealing to Foxconn because it needs a brand name in the auto business and would be more willing to pay a higher price.
“No matter what you think about their cars and their balance sheet and so forth, at least the brand is still fairly recognisable,” he said.
So far, Japan’s government hasn’t said much about how it feels about the fact that talks between Honda and Nissan have broken down or whether it would be okay for Foxconn, which owns most of the tech company Sharp Corp., to buy Nissan.
Boote said that for Nissan, the question now is what the CEO will do.
“They don’t have a realistic view of what’s happening in the auto industry and what really needs to happen with Nissan.”
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