News reports indicate that the proposed merger between Nissan and Honda, which aimed to create the world's third-largest automaker, is facing significant challenges. The sticking point appears to be Nissan's insistence on an equal partnership despite Honda's significantly larger market capitalization.
Like the driver who stubbornly insists they know where they’re going but ends up lost, pride may have caught up with Nissan Motor Co. Now, the Japanese automaker might be stranded in a place where even roadside assistance can’t reach it.
News reports on Wednesday said in a $US60 billion ($97 billion) deal, just over a month after the two firms formally entered talks on whatThe sticking point appears to be Nissan’s demand that the merger be one of equals despite Honda having a market capitalisation more than five times its size. Honda, in turn, had proposed first turning Nissan into its unit, the reports said, ostensibly to quicken the pace of restructuring at the troubled firm — a proposal unlikely to have gone down well with executives at a company that traces its roots back to before World War I. There was already good reason to suspect the deal had been foisted on Honda. Both companies pitched it as necessary to “maintain global competitiveness”, one that would have created the world’s third-largest carmaker. But when chief executive Toshihiro Mibe was asked in December what was attractive about teaming up with Nissan, he struggled to answer – responding, “Er, that’s a tough one ...” and unable to contain a nervous laugh. Miles apart: When Honda CEO Officer Toshihiro Mibe (right) was asked at a joint press conference with Nissan CEO Makoto Uchida (left) what was attractive about teaming up, he struggled to answer. Some observers felt the hand of Japan’s powerful Trade and Economy Ministry to prevent one of the country’s most iconic companies from falling into the wrong hands, especially when stories surfaced over foreign interest. The two firms stopped short of confirming reports on Wednesday, leaving some hope that a deal might yet be salvaged. But they acknowledged that discussions about calling off the merger were true.At that December press conference, following his long moment of hesitation, Mibe eventually alighted on an answer that highlighted the Yokohama firm’s long history and tradition. In recent years, Nissan’s main tradition has been disappointing investors. If the merger collapses, it will join a long list of failed initiatives – from talks to combine with its largest shareholder, Renault, to bids to electrify its fleet – that was intended to reboot an automaker that has stalled. Ghosn’s years of cost-cutting left the automaker trailing in R&D in both electric vehicles and hybrids. Nissan needed this deal a lot more than Honda. As billions of dollars of debt due in the next year close in, the former may get pushed into an even less favourable deal. (Recall the reports that Hon Hai Precision Industry Co, better known as Foxconn,, with the Taiwanese firm likely intending to take over Nissan’s manufacturing bases in its push to make cars like it produces iPhones.) And the growing band of activist investors, including Effissimo Capital Management, won’t be happy – and have a history of causing boardroom headaches until they get what they want. Honda shares cheered the news, with the prospect of a merger with a failing company having underwhelmed investors since the talks surfaced. But perhaps they shouldn’t celebrate too soon; Honda also needs to grow to succeed. That these reports came the same day as Toyota – the world’s best-selling automaker for five years running – raised its sky-high profit forecasts even higher was another irony.Failing to come to merger terms, particularly with a prideful junior partner down on its luck, is a common theme in attempted Japanese mergers. But putting off painful but necessary steps to save face hasn’t ended well for many Japanese firms, much less so for ones in sectors moving as quickly as the auto business.It might just be brinkmanship. And it’s not impossible that things might turn around. Previous mergers that didn’t come to pass, such as the mooted combination of industrial conglomerates Mitsubishi Heavy Industries and Hitachi, didn’t necessarily end up as disasters; both companies are now doing better than ever, having reformed their operations independently. But having taken a wrong turn, heading further down that same road is rarely the way out of a pickle. It’s usually best to swallow your pride, admit fault – and call for help. Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and the Koreas. He previously led the breaking news team in North Asia and was the Tokyo deputy bureau chief
MERGERS AND ACQUISITIONS AUTO INDUSTRY JAPANESE COMPANIES HONDA NISSAN BUSINESS NEWS
Australia Latest News, Australia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Nissan and Honda Merger Talks Stall Over Pride and PowerDiscussions between Nissan and Honda about a potential $60 billion merger have hit a roadblock due to disagreements over partnership terms. Nissan's insistence on an equal footing despite Honda's significantly larger market capitalization has led to a stalemate.
Read more »
Honda-Nissan Merger May Force Renault Out of AllianceA potential merger between Honda and Nissan could lead to the end of Renault's long-standing partnership with Nissan. Honda reportedly wants Nissan to buy out Renault's 35.7% stake in the company before the merger begins in mid-2026. This move is causing concern as Honda fears a third party could acquire Renault's stake during negotiations. The merger would create the world's third-largest carmaker, trailing behind Toyota and the Volkswagen Group.
Read more »
Nissan's Withdrawal From Honda Merger Deal Sparks Fears of StrandingBloomberg Opinion columnist Gearoid Reidy warns that Nissan's exit from the proposed $60 billion merger with Honda Motor Co. could leave the Japanese automaker in a difficult position. He compares the situation to a driver stubbornly refusing directions, ultimately becoming lost. The merger talks, which formally began a month ago, reportedly collapsed due to Nissan's insistence on an equal partnership despite Honda's significantly larger market capitalization. Honda allegedly proposed initially making Nissan a subsidiary to accelerate restructuring, a move unlikely to be well-received by Nissan's long-standing executives.
Read more »
Is Honda looking to take on the Toyota LandCruiser with a rebadged Nissan Patrol?7NEWS brings you the latest local news from Australia and around the world. Stay up to date with all of the breaking sport, politics, entertainment, finance, weather and business headlines. Today's news, live updates & all the latest breaking stories from 7NEWS.
Read more »
Mitsubishi won’t join Nissan-Honda merger7NEWS brings you the latest local news from Australia and around the world. Stay up to date with all of the breaking sport, politics, entertainment, finance, weather and business headlines. Today's news, live updates & all the latest breaking stories from 7NEWS.
Read more »
ASX set to rise, Google’s parent weighs on Wall Street; Nissan-Honda merger in jeopardyGoogle’s parent company and other tech stocks are weighing on a mixed Wall Street as the focus swings back toward how much profit businesses are making.
Read more »