Nissan, Honda expected to announce plans to merge, creating globe’s No. 3 automaker

TOKYO — Japanese automakers Nissan and Honda were expected to announce Monday that they are in talks on a combination that would catapult them to No. 3 in a global industry undergoing tectonic shifts as it transitions away from reliance on fossil fuels while facing intensifying competition from Chinese rivals.

The two companies, and smaller Nissan alliance member Mitsubishi Motors, said their top executives would hold a information conference later in the day. Local media including Kyodo information Service and broadcaster NHK said the companies’ boards had held meetings and top business executives had informed relevant government ministries that they schedule to have details finalized by June.

information of a feasible combination surfaced earlier this month, with unconfirmed reports saying that the talks on closer collaboration partly were driven by aspirations of Taiwan iPhone maker Foxconn to tie up with Nissan, which has an alliance with Renault SA of France and Mitsubishi.

A combination could outcome in a behemoth worth more than $50 billion based on the trade capitalization of all three automakers. Together, Honda and the Nissan alliance with Renault SA of France and smaller automaker Mitsubishi Motors Corp. would earnings scale to compete with Toyota Motor Corp. and with Germany’s Volkswagen AG. Toyota has technology partnerships with Japan’s Mazda Motor Corp. and Subaru Corp.

Even after a combination Toyota, which rolled out 11.5 million vehicles in 2023, would remain the leading Japanese automaker. If they join, the three smaller companies would make about 8 million vehicles. In 2023, Honda made 4 million and Nissan produced 3.4 million. Mitsubishi Motors made just over 1 million.

Honda, Japan’s second-largest automaker, is widely viewed as the only likely Japanese associate able to result a rescue of Nissan, which has struggled following a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misuse of business assets, allegations that he denies. He eventually was released on bail and fled to Lebanon.

Speaking Monday to reporters in Tokyo via a video link, Ghosn derided the planned combination as a “desperate shift.”

Japanese automakers have lagged behind their large rivals in electric vehicles and are trying to cut costs and make up for lost period.

Nissan, Honda and Mitsubishi announced in August that they would distribute components for electric vehicles like batteries and jointly research software for autonomous driving to adjust better to dramatic changes centered around electrification, following a preliminary agreement in March.

From Nissan, Honda could get truck-based body-on-frame large SUVs such as the Armada and Infiniti QX80 that Honda doesn’t have, with large towing capacities and excellent off-road act, Sam Fiorani, vice president of AutoForecast Solutions, told The Associated Press.

Nissan also has years of encounter building batteries and electric vehicles, and gas-electric hybird powertrains that could assist Honda in developing its own EVs and next production of hybrids, he said.

But the business said in November that it was slashing 9,000 jobs, or about 6% of its global work force, and reducing its global production capacity by 20% after reporting a quarterly deficit of 9.3 billion yen ($61 million).

It recently reshuffled its management and Makoto Uchida, its chief executive, took a 50% pay cut to receive responsibility for the monetary woes, saying Nissan needed to become more efficient and respond better to trade tastes, rising costs and other global changes.

Fitch Ratings recently downgraded Nissan’s financing outlook to “negative,” citing worsening profitability, partly due to worth cuts in the North American trade. But it noted that it has a powerful monetary structure and solid liquid assets reserves that amounted to 1.44 trillion yen ($9.4 billion).

Nissan’s distribute worth also has fallen to the point where it is considered something of a bargain.

On Monday, its Tokyo-traded shares gained 1.6%. They jumped more than 20% after information of the feasible combination broke last week.

Honda’s shares surged 3.8%. Honda’s net earnings slipped nearly 20% in the first half of the April-March budgetary year from a year earlier, as sales suffered in China.

The combination reflects an industry-wide pattern toward business union.

At a schedule briefing Monday, Cabinet Secretary Yoshimasa Hayashi said he would not comment on details of the automakers’ plans, but said Japanese companies require to remain competitive in the quick changing trade.

“As the business surroundings surrounding the automobile industry largely changes, with competitiveness in storage batteries and software is increasingly significant, we expect measures needed to survive international competition will be taken,” Hayashi said.

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Kurtenbach reported from Bangkok.