Discussions are underway car manufacturers Honda and Nissan in order to deepen their ties, even with a possible merger.

The possible merger of the two automakers would lead to to a $54 billion company with annual production 7.4 million vehicles, making her the third largest car group in the world after Toyota and Volkswagen.

According to Reuters, the two companies had already forged a strategic partnership in March to work together on the development of electric vehicles, but Nissan’s intensifying financial and strategic problems in recent months have made the need for closer cooperation with Honda now urgent.

Nissan announced a $2.6 billion cost-savings plan last month that includes cutting 9,000 jobs and 20 percent of its global production capacity, as falling sales in China and the U.S. led to an 85 percent plunge in profits in Quarter of the year.

“This deal seems to be more about saving Nissan, but Honda itself is not resting on its laurels,” said Sanshiro Fukao, executive partner at the Itochu Research Institute. “Honda’s cash flow is set to deteriorate next year and its electrics haven’t fared so well.”

Automakers have faced significant challenges from electric vehicle manufacturers, particularly in China.

According to people who spoke on condition of anonymity, discussions between the two automakers are focused on finding ways to strengthen their partnership and include the possibility of a holding company.

The companies are also discussing a full merger, according to one of the sources, as well as ways to work with Mitsubishi Motors in which Nissan is the leading shareholder with a 24% stake.