Honda, Nissan take historic step toward merger amid industry challenges

Honda Motor Co. and Nissan Motor Co. have officially begun merger talks, marking a significant move to create a powerful alliance capable of facing intensified competition, particularly from China, in the global automotive market.

The two Japanese auto manufacturers signed a basic agreement for merger talks on Monday and held a joint media briefing in Tokyo. Honda also said it will buy back as much as ¥1.1 trillion yen ($7 billion) of its own shares, News.az reports, citing Bloomberg.

A holding company will be created to house the new entity and should be listed by August 2026, the firms said, adding that Honda will be able to nominate a majority of the new company’s board of directors.

Mitsubishi Motors Corp., which is 24.5% owned by Nissan, also signed the memorandum of understanding and will likely be part of the group with a final decision on that expected by the end of January.

Such an alliance would give rise to one of the world’s largest carmakers, pitting the trio against Toyota Motor Corp. at home and Chinese automakers abroad, including BYD Co. and Geely Automobile Holdings Ltd. Toyota has stakes in Subaru Corp., Suzuki Motor Corp. and Mazda Motor Corp., creating a powerhouse of brands backed by its top-notch credit rating.

Yet while forecasting an operating profit of more than ¥1 trillion that would eventually climb to ¥3 trillion for the combined entity, Honda Chief Executive Officer Toshihiro Mibe did not address how the companies would combine their businesses to face pressing issues like shutting or streamlining factories.

“Both companies will continue as wholly owned subsidiaries of the joint holding company with their respective brands in place,” Mibe said. Honda will take the lead as the new company is being formed, he said, underscoring the company’s much stronger position versus Nissan, whose sales have slumped amid a lineup of cars that consumers no longer find exciting.

The holding company will include the brands of both Honda and Nissan, and fold in Honda’s large motorcycle unit.

Honda’s share buyback cancels a previously announced one of ¥100 billion and will start on Jan. 6 and run through most of 2025, according to Monday’s announcement. The company plans to repurchase as many as 1.1 billion shares, or almost 24% of its stock excluding treasury securities.

The large buyback is being launched now because such transactions face regulatory limits while merger talks are underway, the companies said.

News.Az