By Maki Shiraki and Daniel Leussink
TOKYO (Reuters) – Japan’s Nissan has called off merger talks with rival Honda, the Nikkei newspaper said, abandoning a tie-up that would have created the world’s no.3 automaker and raising questions about its ability to ride out a crisis on its own.
Shares in Nissan slid more than 4% before trade was suspended by the Tokyo Stock Exchange following the report. Shares of Honda, which were still trading, were up more than 8% in a sign of apparent investor relief about the deal being scrapped.
A Nissan spokesperson said the Nikkei report was “not based on information announced by Nissan. We aim to finalize our direction by mid-February and will announce it at that time.”
A Honda spokesperson said the company had not heard anything from Nissan about a decision to withdraw from their memorandum of understanding to work on a tie-up.
Reuters earlier reported that Nissan could call off the talks and that the board was due to meet to decide a course of action.
Honda, Japan’s second-largest car maker, and Nissan, its third-largest, last year said they were in discussions to merge and create the world’s third-largest automaker by sales, bulking up in an industry that faces a vast threat from China’s BYD and other electric vehicle entrants.
But the talks have been complicated by growing differences on both sides, according to two people familiar with the matter, both of whom declined to be identified because they were not authorised to speak to the media.
Honda had sounded Nissan out about becoming a subsidiary, one of the people said, adding that such an arrangement was a departure from the spirit of discussions originally framed as a merger of equals.
The development raises fresh questions about how hard-hit Nissan could ride out its latest crisis without external help. Nissan is in the middle of a turnaround plan, aiming to cut 9,000 employees and 20% of global capacity.
Honda, with a market value nearly five times bigger than Nissan, was increasingly worried about its smaller rival’s progress on the turnaround plan, said the other person.
“The news saying that Nissan did not want to be a Honda subsidiary appears to highlight that control was a contentious issue,” said Christopher Richter, senior Japan autos analyst at brokerage CLSA.
“Without being able to have control, Honda appears to be walking away.”
DISRUPTION
Nissan has been hit harder than some other carmakers by the shift to EVs, having never fully recovered after years of crisis sparked by the arrest and ouster of former Chairman Carlos Ghosn in 2018.
The tie-up talks have coincided with the disruption posed by potential tariffs from U.S. President Donald Trump. Tariffs against Mexico would be more painful for Nissan than for Honda or Toyota, according to analysts.
Nissan’s long-term alliance partner Renault had said it would be open in principle to the merger with Honda. The French automaker owns 36% of Nissan, including 18.7% through a French trust.
Nissan and Honda had initially said they planned to decide the direction of the integration by the end of January, but that was later pushed back to mid-February.
Sources told Reuters last month that Nissan’s smaller alliance partner Mitsubishi Motors, which had considered joining the merger, might not do so.
(Reporting by Maki Shiraki and Daniel Leussink; additional reporting by Rocky Swift; Writing by David Dolan; Editing by Sam Holmes, Lisa Shumaker, Jamie Freed and Sonali Paul)
