As merger talks continue between Honda Motor Co. and Nissan Motor Corp., uncertainty surrounds whether Mitsubishi Motors Corp. will also be a part of that combination.
A Jan. 24 news report said that the automaker was considering withdrawing from the merger talks. However, Mitsubishi in a statement said it did not release any information about its future involvement and indicated it is “studying various options and no conclusion has been reached.”
While it’s still unclear if Mitsubishi will be part of the combination, the merger may benefit both Honda and Nissan. Sharing resources could help each automaker remain competitive in a evolving global auto market where China is becoming a major force, experts say.
The first step for Nissan is turning around its profitability, Toshihiro Mibe, CEO, president and representative director for Honda said during a press conference in December. In November, Nissan reported its H1 operating profits tumbled 90% year over year, leading to 9,000 global job cuts.
“We cannot rule out the possibility that the talks will not come to fruition,” Mibe said. “However as I said in the beginning, as the environment continues to undergo big changes each company should stand on its own feet and build a strong business.”
Why a merger makes sense
Mibe said emerging competition from China is changing the global landscape.
Both Nissan and Honda are investing in electrification and vehicle intelligence technologies while still producing conventional vehicles, according to Mibe. A new business model is needed to ensure long-term success.
“A completely new business model will emerge and it’s not going to take 10, 20 years for that to happen,” Mibe said. “It's going to come much faster so including the new players we want to gain strength and by 2030, we need to have the right artillery in order to be able to be competitive in the battlefield.”
The general rationale behind a merger is to share resources, reduce costs and for each partner to provide something the other needs, Adam Bernard, founder and principal with AutoPerspectives said in an email to Automotive Dive.
Competitive pressure is also a reason Nissan and Honda are talking, said Stephanie Brinley, associate director, AutomotiveIntelligence, S&P Global Mobility. Joining forces would create better cost structure for both sides.
“Nissan and Honda can sell cars less expensively and be more profitable,” she said.
Weighing the pros and cons
Though experts point to the benefits of a merger between Honda and Nissan, Mark Barrott, partner, automotive mobility practice leader with Plante Moran, is uncertain if the deal will proceed.
“Honda is looking at it, ‘what’s in it for me,’” Barrott said. Honda has a broad business including motorcycles and other interests, though the automaker wants to grow its truck sales.
Nissan and Honda compete in the passenger vehicle segment, especially in economy cars, Barrott said. However, Nissan has been successful growing its pickup truck sales.
Production capacity must also be considered as both automakers have substantial global operations, though Nissan is dealing with overcapacity and is in the midst of rightsizing its production, Barrott said.
According to the merger details released in December, Honda would hold a majority of the leadership positions in the new joint holding company but it also will include leaders from Nissan. Both sides will need to work together to blend operational cultures, Barrott said.
“There’s pros and cons on both sides of it,” Barrott said of the merger. “You’re really in the depths of a very, very difficult financial situation.”
A potential hurdle
Bernard said Renault Group’s ownership stake in Nissan may factor into whether the deal proceeds. He said Nissan’s European commercial vehicle business is largely Renault-based, and almost all of its small and compact entries are based on platforms shared with Renault.
Even if the merger doesn’t happen, Bernard expects the companies to continue collaborating on developing automotive technology.
“I do think the earlier agreement to collaborate on software and electrified propulsion makes sense, but a full merger seems a harder sell and even harder to execute,” Bernard said in an email.
No deal with Honda doesn’t mean the end for Nissan, Brinley said. Nissan has noted restoring profitability is a priority.
“Nissan may be able to find another way,” she said. “Nissan’s not going broke tomorrow. They’re not shutting their doors tomorrow if this doesn’t happen.”
