San Francisco Frontiers - Honda and Nissan to launch merger talks

Their collaboration would create the world's third largest automaker, expanding development of EVs and self-driving tech while coming to the rescue of struggling Nissan.

The two firms along with Mitsubishi Motors said they had signed a memorandum of understanding to start discussions on integrating their business under a new holding company.

Citing "dramatic changes in the environment surrounding both companies and the automotive industry", a joint statement said they planned to list the holding company on the Tokyo Stock Exchange in August 2026.

Honda and Nissan -- Japan's number two and three automakers after Toyota -- want to seal the merger deal in June next year, but it's unlikely to be a marriage of equals.

Honda will nominate the president of the new holding company, whose board will be mostly made up of Honda executives, their joint statement said.

"Mitsubishi Motors aims to reach its conclusion by the end of January 2025 on the participation or involvement in the business integration between Nissan and Honda," it added. Nissan is a majority shareholder of Mitsubishi Motors.

Lacklustre consumer spending and stiff competition in several markets is making life hard for many automakers.

Business has been especially tough for foreign brands in China, where electric vehicle manufacturers such as BYD are leading the way as demand grows for less polluting vehicles.

China overtook Japan as the biggest vehicle exporter last year, helped by government support for EVs.

- Foxconn interest -

Honda and Nissan's partnership could include a manufacturing tie-up where they build vehicles at each other's plants, according to Kyodo News.

"We hope Japanese companies will take steps to respond to these changes and take measures to survive and win amid international competition," top government spokesman Yoshimasa Hayashi said on Monday.

He declined to comment on the merger reports but highlighted the "importance of strengthening competitiveness in areas such as... batteries and in-vehicle software".

Debt-laden Nissan last month announced thousands of job cuts as it reported a 93 percent plunge in first-half net profit, making a merger with Honda welcome news.

Kyodo said Honda would ask Nissan to achieve a "V-shaped recovery" in performance as a condition for the merger.

In the meantime, Taiwanese electronics manufacturer Foxconn has also reportedly sensed an opportunity.

Foxconn, which builds devices for tech companies including Apple's iPhones, first unsuccessfully approached Nissan with a bid to acquire a majority stake, according to Bloomberg.

Then a Taiwanese media outlet said Foxconn's Jun Seki -- a former Nissan executive -- had visited France to ask Renault to sell its 35 percent share of Nissan, although reports later said this pursuit had been put on pause.

- 'Panic mode' -

Honda and Nissan already agreed in March to explore a strategic partnership on software and components for EVs among other technologies. This partnership was joined in August by Mitsubishi Motors.

Nissan has weathered a turbulent decade, including the 2018 arrest of former boss Carlos Ghosn, who later jumped bail and fled Japan concealed in a music equipment box.

Ghosn told reporters in Tokyo on Monday via video link from Lebanon, where he is at large, that turning to its arch-rival Honda showed that Nissan was in "panic mode".

Although the two companies might be able to "find synergies for the future... I don't see anything obvious into this partnership or this alliance", Ghosn said.

Z.Phillips--SFF