Honda to Take Lead in Planned Merger with Nissan

Honda and Nissan will merge under a new holding company, the automaker’s announced, confirming months of rumors, with the smaller of the Japanese automakers effectively taking control of the new alliance. Mitsubishi, which was rescued by Nissan in 2016, has yet to decide whether to become part of the alliance. And Renault, which bailed out Nissan in 1999, plans to determine what role it may have going forward.

Confirming months of rumors, Honda and Nissan have confirmed that they will merger under a new holding company, a move meant to help them remain competitive in a fast-changing auto industry where China EV manufacturers are rapidly gaining ground around the world.

In a significant move, the deal – set to be completed by August 2026 – will put Honda, the third-largest Japanese automaker – in the driver’s seat, selecting the new entity’s top executives. It marks a demotion for Nissan which has long been the Asian nation’s second-largest car manufacturer. But there has been growing concern that Nissan was heading for insolvency due to declining sales and earnings.

“We have the potential to be a world-class, leading company in new mobility,” Honda CEO Toshihiro Mibe said during a joint news conference on Monday in Tokyo. “By 2030, we need the artillery to compete on the battlefield. So, we are starting today.”

Nissan’s faltering health forces merger

The formal announcement – attended by the CEOs of all three companies – confirms reports initially posted by Japan’s Nikkei news service. And it marks what is arguably the most significant change in the Japanese auto industry in a quarter century. The last development at this level began with the $6 billion bailout of Nissan by France’s Renault back in 1999. What became the Renault-Nissan Alliance began to unravel in November 2018 when its boss, Carlos Ghosn was arrested for alleged financial improprieties.

Nissan ha

s since faced a series of setbacks complicated by internal strife and problems with its product line-up. It reported a 2.3 billion yen, or $61 million, loss during its most recent quarter, compared to a year-earlier profit of 190.7 billion yen. In November Nissan’s CEO warned that “extreme” measures were needed, starting with 9,000 job cuts globally.

The outlook for the number two manufacturer has reached the point where a number of analysts have been warning Nissan might fail over the next two years without significant changes – such as a merger. But Honda has faced increasing scrutiny, as well. Ironically, both companies were earlier leaders in the emerging market for electrified vehicles. But both have fallen behind traditional competitors, such as Toyota, Volkswagen, General Motors and the Hyundai Motor Group – and they are facing an increased threat from rising Chinese brands, such as BYD, which are rapidly gaining sales and market share with their low-cost EVs.

Lots left to be worked out

Under the new agreement, Nissan and Honda plan to finalize their agreement by next June. In turn, shareholders will be asked to give their approval during extraordinary meetings currently expected to take place in April 2026. If given the go, the holding company would be formally established four months later and both automakers would be delisted from the Tokyo Stock Exchange. The new, as yet-unnamed entity would then be listed.

But there are plenty of details first to be worked out, starting with the holding company’s executive roster. As it now stands, the once-powerful Nissan will become subservient to the smaller manufacturer. Honda is set to be given the choice of the new executive management team.

Then there’s the question of what happens to the other, current partners in what currently is the Renault-Nissan-Mitsubishi Alliance.

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Partners no more?

Until now, the French automaker had declined to comment on the talks between Nissan and Honda. Following the Monday announcement, however, it issued a statement noting that, “As the main shareholder of Nissan, Renault Group will consider all options based on the best interest of the Group and its stakeholders.”

For the moment, it added, “Renault Group continues to execute its strategy and to roll-out projects that create value for the Group, including projects already launched within the Alliance.”

The other Japanese member of the alliance also deferred any immediate decision on how – or whether – it might fit into the new holding company. It plans to make a formal decision by the end of January 2025.

What next?

For his part, Nissan CEO Makoto Uchida sounded a positive note during the news conference. “We will definitely be able to address all the challenges ahead and deliver significant new value that we have never seen in the past,” he said. “We will be among the top class.”

But completion of the deal will require the troubled automaker to address a number of its current problems, the erstwhile partners said.

As for Honda, it is planning to take some major steps before the planned merger takes place, among other things, by buying back as much as 20% of its outstanding stock, Mibe said.

Targeting a “bigger scale”

As with other automotive mergers, the two companies see significant opportunities to improve economies of scale. That could prove critical in holding down costs during the transition to EVs and other electrified vehicles.

“We see it as a positive move,” Mitsubishi CEO Takao Kato said. “It is extremely difficult to afford all the investment and engineering resources alone.”

There is speculation there could be further job cuts beyond the ones Uchida recently announced, but the Honda CEO stressed that, “We aren’t thinking about just carving out, carving out, carving out and leaving only the good parts,” Mibe said. “We want to think about options that lead us to bigger scale.”

That could include leveraging each other’s strengths, such as Honda’s hybrid technology and Nissan’s body-on-frame truck hardware.

Making the merger work

The immediate question is whether the plan laid out Monday can be implemented under the timetable they’ve outlined.

The next concern is whether it can achieve the stated goals. The Renault-Nissan Alliance never fully accomplished what proponents hoped for. And there are plenty of examples of mergers and other alliances that faltered or failed, starting with the promised “merger of equals” that created DaimlerChrysler. It eventually broke apart, with the U.S. side of the company later declaring bankruptcy and surviving only after receiving a U.S. bailout.

“On paper, many proposed mergers look great,” S&P Global Associate Director Stephanie Brinley wrote in a research note. “Merging Nissan and Honda creates scale,” she added, but “Finding meaningful and sustainable synergies in the product portfolio, in product development and in manufacturing is where many mergers stumble and fail to live up to the potential.”