Nissan and Honda to merge in a ‘desperate move’

Struggling to stay profitable in a competitive market, Nissan is set to link with Honda to create a joint company.

Nissan and Honda are set to join forces in what former Nissan boss Carlos Ghosn described as a “desperate move” by companies in “panic mode” trying to stay afloat.

The Japanese giants announced on Monday that they intend to share resources and create a new entity in 2025.

Nissan, Honda and Mitsubishi are investigating the possibility of a merger.

Mitsubishi, which is aligned to Nissan, will announce in January if it also intends to take part.

The companies have signed a memorandum of understanding that states cars will continue to be sold under Honda and Nissan brands – as well as their luxury arms Acura and Infiniti which are not offered in Australia.

Carlos Ghosn spoke with Bloomberg TV ahead of the official announcement, declaring that the companies were in “panic mode”.

“It’s a desperate move,” Ghosn said on Friday.

“It’s not a pragmatic deal because frankly, the synergies between the two companies are difficult to find.”

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Nissan is struggling to stay afloat. Photo: Kazuhiro NOGI / AFP

That sentiment relates to differences in the companies product portfolio – Honda has significant expertise in motorcycles and compact cars, while Nissan is a leader in larger vehicles such as the four-wheel-drive Patrol and Navara.

While savings may not be found by merging similar models, they might be found in through departments such marketing, sales, or research and development as the companies stave off fresh competition from China.

Nissan previously announced plans to cur production by 20 per cent and lay off 9000 staff to address financial concerns.

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Honda’s Civic Type R is a class-leading machine.

Nissan chief executive Makoto Uchida said the merger “doesn’t mean that we have given up on the turnaround”.

He said economies of scale were “increasingly important in the current context … in an industry that undergoes a once in a century transformation”.

“The business environment continues to change significantly and faster than expected,” he said.

“By bringing together the strength of Honda and Nissan … we can deliver a new pleasure of mobility and value to all the supporters and owners of our brands.

Honda chief executive Toshihiro Mibe said that the companies needed to find ways to cut costs, and that “business integration is the most rational way” for it to happen.

The companies will be delisted from the Tokyo stock exchange, and be managed by a new entity set to take shape in 2025. Mibe said he “cannot rule out the possibility” that the merger “will not come to fruition”.

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Toshihiro Mibe, President and Representative Executive Officer of Honda, attends a joint press conference. Photo: Philip FONG / AFP

Acknowledging that employees and fans of the brands may not welcome the development, Mibe defended it by saying traditional hardware such as engines, transmissions and suspension layouts will not define cars in the electric era.

“Mobility will no longer be differentiated by traditional hardware and will undergo a significant evolution mainly driven by vehicle intelligence and electrification,” he said.

“We may have to make more daring changes.”

The Honda boss said visible benefits from the merger would not be obvious to consumers until 2030.

Originally published as Nissan and Honda to merge in a ‘desperate move’