Nissan ends merger talks with Honda, seeks new US partner
What's the story
Nissan Motor Company is ending its talks to form a joint holding company with Honda, insiders familiar with the matter told Reuters. The Japanese automaker is now looking for a new partner, one from the tech industry and US-based. The move comes as Nissan still sees North America as a key market amid global shifts toward electrification and automation.
Market response
Shares rise amid partnership search
Notably, the news of Nissan's search for a new partner sent its share value soaring. The company's shares jumped as much as 8.7% in early afternoon trading in Tokyo today. However, Shiro Nagai, a spokesperson for Nissan, refused to comment on the developments and said any information on the Honda discussions would be revealed as planned by mid-February.
Deal complications
Honda's acquisition proposal faces resistance
The car manufacturers confirmed they are still exploring various options, including the potential termination of deal negotiations. Honda had proposed to acquire Nissan and turn it into a subsidiary, a suggestion that met with significant resistance within Nissan. The extent of investment required was another point of contention in these discussions.
Business overhaul
Nissan's restructuring plans under scrutiny
Honda had made it clear a comprehensive overhaul of Nissan's operations was necessary for any deal to proceed. However, Nissan's current restructuring plans do not include any factory shutdowns, despite job cuts and reduced production. Ending exclusive talks with Honda would allow either party to withdraw from the agreement without paying a substantial cancelation fee of JPY 100 billion ($657 million), according to their memorandum of understanding dated December 23.
Strategy shift
Nissan's board urges comprehensive restructuring
Nissan's board is pushing CEO Makoto Uchida and other executives to come up with a more comprehensive restructuring plan in tandem with talks with any potential new partner. The goal is to finalize the broad overhaul by February 13, when Nissan is scheduled to announce its quarterly results and the board will meet to formalize its decision. This strategic shift comes as Nissan faces challenges after former Chairman Carlos Ghosn's 2018 arrest on charges of underreporting compensation.
Financial fallout
Financial crisis triggers restructuring plans
The depth of Nissan's financial crisis was exposed in November when a shocking 94% drop in net income prompted plans to cut 9,000 jobs, reduce production capacity by 20%, and cut its annual profit guidance by 70%. Any new restructuring plans would exceed these numbers. "Further earnings deterioration is possible at Nissan," warned Citigroup Inc. analyst Arifumi Yoshida, stressing the need for more restructuring steps.