By Maki Shiraki and Daniel Leussink

Yokohama (Reuters) – Nissan and Honda announced Thursday that they officially put an end to their negotiations for a merger, whose failure plunges Nissan into uncertainty and highlights the challenges of a sector shaken by the boom in electric vehicles and Chinese competition.

The discussions announced at the end of December between Honda and Nissan, second and third Japanese car manufacturers respectively, have stopped on increasing differences, especially on the balance of powers in the context of a merger.

According to sources, Honda’s project to make Nissan a subsidiary was finally right for the envisaged merger.

The operation would have given birth to a new set worth around 60 billion dollars which would have classified fourth world manufacturer in terms of sales, behind Toyota, Volkswagen and Hyundai.

The two groups, with Mitsubishi Motors as the third lower partner, announced the possibility of a merger at the end of 2024. Sources then declared that Mitsubishi would probably not participate in the project.

“In the future, the three companies will collaborate within the framework of a strategic partnership aimed at the era of intelligence and electrified vehicles,” they said in a press release.

French Renault, Nissan’s first shareholder, said Thursday that the terms of the merger as it was envisaged, “including the fact that it did not include any control premium, were unacceptable”.

Nissan also announced on Thursday an operating result in a fall of 78% in the third quarter, at 31.1 billion yen (193 million euros), less than analysts’ expectations. He also lowered his forecasts for the third time, with an annual operating profit now expected at 120 billion yen.

“Nissan is in a bad pass”

“Our most urgent role is to put an end to the decline in performance and to the current turmoil,” said at a press conference its managing director, Makoto Uchida, adding that he wanted to carry out his mission and Pass the relay to a successor “as quickly as possible”.

According to the Bloomberg agency, Nissan has initiated discussions with KKR to study various financing options which include a capital increase.

Honda has published an operating profit up 5% in the third quarter, at 397.3 billion yen (2.47 billion euros), largely thanks to the performance of its motorcycle activity, in The weakness of the yen and solid sales in the United States, but its sales in China fell.

Its general manager, Toshihiro Mibe, said at a press conference that the failure of discussions was “disappointing” but that Honda wanted to think about the possibility of associating with other companies than Nissan and Mitsubishi.

According to Christopher Richter, analyst at Clsa, “Honda is quite confident and has a lot of assets, while Nissan is in a bad pass”.

Nissan “has no dance partner at the moment” and “should probably think about doing something different,” he said.

Nissan and Honda saw the automotive sector and the Chinese key market upset by the rapid boom of Chinese manufacturers of electric vehicles such as Byd. They are also faced with the prospect of customs duties in the United States, another key market.

Nissan wants to accelerate its restructuring

Nissan continues its restructuring plan announced in November, which provides for the abolition of 9,000 jobs and a 20% reduction in its global production capacities.

The group said Thursday that it would accelerate its recovery efforts and planned to reduce its costs by around 400 billion yen (2.5 billion euros) during the year 2026, with the closure of a Factory in Thailand in the first quarter and two other sites later.

Renault said that Nissan’s contribution to its own 2024 results had raised 211 million euros, compared to 797 million in 2023.

Sources said in December that Nissan should further reduce his capacities in China, where he operates eight factories through his joint venture with Dongfeng Motor. He has already suspended the production of his Changzhou factory as part of his optimization plan.

Before announcing discussions with a view to a merger in December, Nissan and Honda had initiated separate talks around a technological collaboration, the extent of which they were able to emphasize.

Foxconn does not exclude participation in Nissan

Nissan is now open to the idea of ​​working with new partners. The Taiwanese Foxconn is considered one of the candidates, sources in Reuters said last week.

Young Liu, president of Foxconn, said on Wednesday that the company would plan to participate in Nissan, but that its main objective was to establish a partnership.

Nissan, who has never completely recovered from years of crisis launched by the ouster and arrest of former President Carlos Ghosn in 2018, was touched more hard than others by the development of electric vehicles.

Its market capitalization is today almost five times lower than that of Honda, which reaches approximately 7,500 billion yen (46.6 billion euros). Ten years ago, the two companies were each worth around 4.600 billion yen.

(Written by Daniel Lesussink, Maki Shiraki, Satoshi Sugiyama, Rocky Swift; with the contribution of Gilles Guillaume in Paris, Benjamin Mallet; edited by Blandine Hénault)

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