Honda, Nissan Drop Talks To Combine, Pledge To Collaborate

Honda Motor Co. and Nissan Motor Co. formally ended negotiations to combine, bringing to a swift end a partnership that in theory would have created one of the world’s biggest carmakers.

Although plans to bring both brands together under a holding company are dead, the two said Thursday that, along with Mitsubishi Motors Corp., they will continue their strategic partnership and collaborate on the in-house development of batteries, autonomous driving, software and electric vehicle technology.

The consequences of a failed deal are likely to be pivotal for both but especially Nissan, considering the battered automaker will now have to look elsewhere for a lifeline to salvage its weak financial position. Honda, on the other hand, at least kept its annual profit guidance steady after third-quarter results that met expectations.

Operating profit for the three-month period ended Dec. 31 came in at ¥397 billion ($2.6 billion), shy of consensus analyst estimates for ¥407 billion after a rebound in the US helped counteract stagnant sales across Japan, China and Southeast Asia, Honda said.

The Japanese carmaker still sees ¥1.42 trillion in operating profit during the fiscal year that will end March 31.

Nearly three months have passed since reports surfaced of a possible tie-up between Honda and Nissan. One was looking build scale to compete with heavyweights in a changing global industry; the other was looking for a financial rescue.

Such a deal would have split Japan’s automobile industry in half, pitting the new team against Toyota Motor Corp. and its myriad of smaller car compaines. On a global scale, it would have meant a fairer fight against Volkswagen AG and other legacy brands which too are struggling to compete with a wave of electric and hybrid vehicles from China.

Hon Hai Precision Industry Co., meanwhile, the Taiwanese iPhone-maker better known as Foxconn, is open to buying Renault SA’s 36% stake in Nissan, Chairman Young Liu said earlier this week, adding that it has already approached both Nissan and Honda about potential cooperation.

Foxconn’s interest came to light late last year but it backed off after Nissan penned a potential deal with Honda. 

After disagreements between the two Japanese firms saw negotiations stall, the door for Foxconn opened again, along with the opportunity for it to leverage its experience in electronics to become a contract manufacturer for EVs.

Nissan was thrust into the limelight in November, after it announced a 94% drop in first-half net income. It also flagged plans to cut 9,000 jobs, reduce production capacity by 20% and lowered its annual profit guidance by 70%. 

Revolving-door leadership and an outdated product lineup has dulled its competitive edge against gas-electric hybrids in the US and EVs in China, giving it little hope to compete in either market.

Honda, on the other hand, is more optimistic.

It aims to double hybrid car sales by the end of the decade, having set a target to deliver 1.3 million units by 2030 — effectively doubling the 650,000 it sold in 2023 excluding China. 

“We see most of that growth happening in North America,” Honda executive Katsuto Hayashi told reporters in December.

Days later, when the pair kicked off talks to combine both brands under a single holding company, Honda insisted that Nissan had to get its house in order for any transaction to materialize.

Nissan however believed it could repair its flailing business without closing any factories, according to people familiar with the matter.

Honda then floated the idea of acquiring Nissan and making it a wholly owned subsidiary, which was met with strong opposition from the latter, Bloomberg reported earlier this month. Now, Nissan is looking for a new partner as it looks beyond Honda for a lifeline.