The proposed merger between Honda and Nissan encounters its first major hurdle as Honda demands Nissan buy out Renault’s shares.
Nissan executives are taking pay cuts as the company continues to try to turn around.
It has been roughly a month since Nissan and Honda announced their plans to merge into an automotive superpower with both companies benefitting from enhanced access to resources for EV development while Nissan also got a much-needed lifeline as it faces an existential threat to its survival from multiple fronts.
The honeymoon period appears to have ended with Honda giving Nissan its first major hurdle by asking the Japanese firm to buy out the shares of its longtime partner French automaker Renault in a move that isn’t as easy as it looks once you look at the finer details of Honda’s request.
Renault emerges as first major obstacle
Renault has emerged as a new osbtacle in the ongoing merger talks with Honda, with the firm asking Nissan to buy out their shares according to a new report.
This latest news comes from a report released by Kyodo News who consulted with several unnamed sources that were familiar with the current state of the talks between the two companies. According to those sources, Honda is concerned Nissan might come “under an undesirable foreign influence” if Renault’s massive 37.5% stake in Nissan is purchased by an outside foreign party during the ongoing negotiations. This massive influence dates all the way back to 1999 when the original partnership between the two companies was established. The partnership was expanded with the addition of Mitsubishi in 2016 before it was later renewed in 2023.
This established partnership and the considerable amount of investment the company has made into solidifying its relationship with Nissan will ensure that Renault will not let go easily and the French automaker could put up a fight before it’s forced to relinquish its stake in the partnership for the betterment of the merger process.
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Does Nissan have the money to do what Honda wants?
Nissan might not have enough money to buy out Renault due to the company struggling with slumping sales and bloated vehicle inventories.
According to Bloomberg Renault’s stake in Nissan is currently listed at ¥557 billion yen ($3.6 billion) which is a large sum of money. This is also an amount that might be too much for Nissan to throw around with the company currently struggling with crashing sales and decreasing profits across the board.
These slumping profits would impact the company’s ability to potentially buy out Renault and the French automaker’s resistance to the move could cause the process to be long and to be dragged out. This will not make Honda happy with the company wanting the merger process to move as smoothly as possible with little hiccups. If Nissan cannot buy out Renault’s shares, Honda might pull out of the merger which would leave Nissan in a tight spot as it continues its attempts to stay alive with the company recently enacting massive cost-cutting to try and slow the financial bleeding.
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