by Daniel Leussink and Maki Shiraki

Tokyo (Reuters) – The Japanese car manufacturer Nissan ended negotiations on a possible merger with Honda, reports the economic daily Nikkei on Wednesday, thus abandoning a rapprochement that could have given birth to the third world automobile group, and arousing questions about Group prospects.

A source who said the issue said on Wednesday in Reuters that Nissan could end the talks and that the Nissan board of directors should come together soon to decide an action plan.

Discussions for a merger were complicated by disagreements between the two groups, added two sources.

The Nissan action fell by more than 4% before the Tokyo Stock Exchange suspended transactions, while that of Honda, increased by more than 8% on Wednesday, a sign of the apparent relief of investors in the face of the abandonment of the project.

Nissan and Honda announced in December the signing of a memorandum of understanding for a merger by 2026.

A Nissan spokesperson said Nikkei’s information was “not based on the information announced by Nissan”. “We want to finalize our orientation by mid-February and we will announce it at that time,” he added.

A spokesperson for Honda said the group had heard nothing from Nissan concerning an abandonment of the project.

According to a source, Honda proposed to Nissan the hypothesis of becoming a subsidiary, but such an agreement would be far from the spirit of the discussions which had originally took place within the framework of a merger between equals, -It added.

A possible failure of negotiations raises new questions about Nissan’s ability to overcome its difficulties without external help, while the Japanese group has an ongoing restructuring plan aimed at suppressing 9,000 jobs and 20% of its global capacity.

Honda, whose market value is almost five times that of Nissan, is increasingly worried about the progress of its rival in its recovery plan, said the other source.

“The news that Nissan did not want to be a subsidiary of Honda seems to emphasize that control was a disputed issue,” said Christopher Richter, analyst at the CLSA broker.

Disruption

Nissan has been harder than other car manufacturers by transition to electric vehicles, never completely recovered from several years of crisis triggered by the arrest and eviction of former boss Carlos Ghosn in 2018 .

Negotiations between the two Japanese groups have coincided with the disruptions caused by threats of customs tariffs from US President Donald Trump. Customs duties against Mexico would do more damage to Nissan than Honda or Toyota, analysts say.

Renault, a long -standing partner of Nissan, said that it would in principle be open to the merger with Honda.

The French automaker holds 36% of Nissan.

Nissan and Honda had initially declared that they planned to decide on the orientation of integration by the end of January, but this date was postponed in mid-February.

Spokesperson from the two groups have reiterated that an advertisement to report on the management taken should be made in mid-February.

Sources told Reuters last month that Mitsubishi Motors, Nissan’s smallest partner within the Alliance with Renault, may not participate in the merger after having envisaged it.

(Maki Shiraki and Daniel Leussink report, with the contribution of Rocky Swift; written by David Dolan; Camille Raynaud and Diana Mandiá, edited by Kate Entringer)

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