By Nicholas Takahashi | Bloomberg
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 automakers.
Although plans to unite both brands under a holding company are dead, the two said Thursday that they will continue their strategic partnership with Mitsubishi Motors Corp. and collaborate on the in-house development of batteries, autonomous driving, software and electric vehicle technology.
The consequences of a failed tie-up are likely to be pivotal for all three 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 largely met expectations.
“While the outcome is unfortunate, we now have a mutual appreciation of our synergies that can be utilized in our existing strategic partnership,” Honda Chief Executive Officer Toshihiro Mibe told reporters.
Honda has not and will not consider a hostile takeover of Nissan, Mibe said, nor did the Japanese government initiate or participate in talks with his counterpart at Nissan.
Honda’s operating profit for the three-month period ended Dec. 31 came in at ¥397 billion ($2.6 billion), just 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.
Net sales for the third quarter were ¥5.5 trillion versus the ¥5.4 trillion the market was looking for. Honda still sees ¥1.42 trillion in operating profit during the fiscal year that will end March 31.
Nissan turned in a much weaker set of numbers, saying it now sees operating income for the full fiscal year at ¥120 billion versus ¥150 billion previously. A restructuring charge of ¥100 billion is included in its forecast.
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 companies. 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.
“Nissan needs a financially stable partner in Honda’s stead,” Bloomberg Intelligence senior auto analyst Tatsuo Yoshida said. “Now that the tie-up has failed to materialize, concerns over its financial plight will likely resurface.”
Renault said in a separate statement Thursday that it had taken note of the Nissan-Honda talks ending.
Renault speaks
“As a Nissan shareholder, the terms of such transaction, including the fact that it did not include any premium, were unacceptable,” the French carmaker said. “We welcome Nissan’s intent to focus first and foremost on the execution of their turnaround plan.”
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.
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 future survival plan.
Honda, on the other hand, is more optimistic.
Honda’s motorbikes
It aims to supercharge 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.
On Thursday, Honda raised its annual sales outlook for its motorcycle segment to 20.6 million units, up from previous expectations for 20.2 million, due in large part to strong demand in Asia. A poor showing in Japan, however, led the firm to lower its outlook for car sales to 3.75 million units, down slightly from 3.8 million.
“Strong motorcycle sales were weighed down by a decrease in automobile sales, and a decline in profit as a result,” Honda Vice President Shinji Aoyama said at the company’s third-quarter results briefing.
The ¥1.1 trillion stock buyback Honda announced in December will proceed as planned, Aoyama said.
–With assistance from Albertina Torsoli at Bloomberg.