Nissan and Honda announced today that they have ended talks to merge and create a $60 billion auto group “to prioritize speed of decision-making and execution of management measures in an increasingly volatile market environment heading into the era of electrification,” said Honda in a statement.
Following the announcement, Nissan shares fell 0.34 percent while Honda shares rose 2.14 percent to 1,434 yen.
In late December after the merger talks were reported, Nissan shares surged over 60 percent and Honda’s shares gained around 26 percent Those gains have since declined to 21 percent for Nissan and 11 percent for Honda.
Companies to continue technology cooperation
In a statement, Honda said the companies, which include Mitsubishi Motors, “today agreed to terminate their MOU regarding the consideration of the structure for a tripartite collaboration, in light of the termination of the MOU signed on December 23 last year regarding the consideration of a business integration between Nissan and Honda.”
Nissan and Honda also agreed to terminate the deal signed on December 23 last year for consideration of a business integration between the two companies.
During the discussions, the two companies considered various options regarding the structure of the business integration. Honda proposed changing the structure from establishing a joint holding company, where Honda would appoint the majority of directors and the chief executive officer based on a joint share transfer as initially outlined in the MOU, to a structure where Honda would be the parent company and Nissan the subsidiary through a share exchange.
The two sought to join forces to combat the challenges of the fast-rising Chinese electric vehicle makers. They still plan to continue to cooperate on technology and other areas.
“Going forward, the three companies will collaborate within the framework of a strategic partnership aimed at the era of intelligence and electrified vehicles. This framework was established with the MOU signed on August 1 last year, striving to create new value and maximize the corporate value of each company,” Honda said.
Read: Egypt issues new guide to help investors understand rights, tax obligations
Honda seeks new partnerships
Nissan was the weaker link, having never fully recovered from years of crisis and management turmoil. Nissan’s market capitalization is now nearly five times lower than that of Honda, which is about $48.6 billion. Around 10 years ago, the two companies were both worth around 4.6 trillion yen. The merger would have created the world’s fourth-biggest auto group by vehicle sales after Toyota, Volkswagen and Hyundai.
In a press conference, Toshihiro Mibe, CEO of Honda, said that while merging the two companies would have meant “quick pain”, he became more worried about the fallout if the talks dragged on without progress. He called the failure of the discussions “disappointing” but said that Honda wanted to think about the possibility of collaborating with companies other than Nissan and Mitsubishi Motors.
In addition to the surge in Chinese electric vehicle makers, Japanese carmakers are facing the prospect of tariffs in the United States. Amid mounting challenges, Nissan is going forward with a restructuring plan it announced in November that includes cutting 9,000 jobs and reducing global capacity by 20 percent.
