Nissan and Honda in merger talks to create auto giant, Foxconn also in hunt for stake

Nissan and Honda are exploring a merger that could reshape the global automotive landscape, creating the third-largest automaker worldwide. Accelerated by fears of a Foxconn takeover, the potential deal would bolster both companies' competitiveness in a shifting market dominated by electrification and global challenges. If finalized, the merger could consolidate Japan's auto industry into two major camps, with significant implications for jobs, alliances, and the balance of power in the global auto sector..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here..By Reed Stevenson___STEADY_PAYWALL___.Nissan Motor Co. is in talks with fellow Japanese carmaker Honda Motor Co. to merge, in a deal that would help the ailing company survive, while also creating the world's third-largest automaker with a better chance of withstanding the industry's ructions. .In a reflection of Nissan's vulnerability, discussions between the two appear to have accelerated after Hon Hai Precision Industry Co., the Taiwan-based producer of iPhones known as Foxconn, approached Nissan about taking a stake, a person familiar with the matter said. Foxconn has been investing heavily in factories to build EVs..Nissan shares jumped 24%, the most ever, while Honda's stock slipped 3%..Nissan's troubles exploded into the headlines in early November, when the company slashed its profit forecast and said it would have to cull 9,000 jobs globally. It also announced a 20% cut to global output as consumers turn their backs on its lackluster lineup, leaving Nissan models gathering dust at dealerships..Since then, various entities have circled the troubled carmaker, with activist investors building up positions in its stock. Even though it makes marginally more cars, Honda's market value is more than quadruple that of Nissan, giving it the upper hand in merger talks which may have to cover tricky ground like the prospect of layoffs in Japan..French automaker Renault SA will also necessarily have a say in any deal, considering it owns 36% of Nissan — a holdover from a longstanding alliance between it, Nissan and Mitsubishi Motors Corp. Renault is open to Nissan pursuing merger talks with Honda as the French automaker seeks way to insulate itself from the crisis plaguing its partner, according to people familiar with the situation..It's unclear whether Nissan is also in talks with Foxconn or already rebuffed its overture. .Shinji Aoyama Photographer: Kiyoshi Ota/Bloomberg.A spokesperson for Nissan declined to comment. A representative for Foxconn wasn't immediately available for comment. Honda Executive Vice President Shinji Aoyama said the carmaker is considering several options that may also involve a capital tie-up or the establishment of a holding company. .Options being considered the creation of a new holding company under which the combined businesses of Honda and Nissan would operate, a person familiar with the talks said. The transaction could also be expanded to include Mitsubishi Motors, which already has capital ties with Nissan, the person said. .An announcement by Honda and Nissan could happen as soon as on Dec. 23, TBS reported Wednesday. The duo plan to sign a memorandum of understanding to discuss shared equity stakes in a new holding company, the Nikkei reported earlier. .Vulnerable to Foreigners.The Nikkei suggested that Foxconn's interest in Nissan accelerated the Honda-merger efforts out of fears that the Japanese company may be vulnerable to a takeover by the Taiwanese firm. .A similar dynamic is playing out with one of Japan's largest consumer brands — Seven & i Holdings Co. Its founding family is leading a consortium to take the company private in order to fend off a buyout proposal from Canada's Alimentation Couche-Tard Inc..A merger between Honda and Nissan would effectively consolidate the Japanese auto industry into two main camps: One controlled by Honda, Nissan and Mitsubishi and another consisting of Toyota Motor Corp. group of companies. .Nissan and Honda are facing challenges globally but especially in China, where they're both suffering at the hands of wildly popular local brands like BYD Co. and Elon Musk's Tesla Inc. The shift toward electrification, which is happening at varying speeds in different markets, is also disrupting manufacturing and business models that have been in place for decades..Honda, Nissan and Mitsubishi combined sold about 4 million vehicles globally in the first six months of the year, well shy of the 5.2 million that Toyota sold on its own. .Combining forces would allow the two companies to fend off Toyota, the world's largest automaker, at home and abroad. Toyota has taken stakes in Subaru Corp., Suzuki Motor Corp. and Mazda Motor Corp., creating a powerhouse of brands backed by its top-notch credit rating.."There are just too many Japanese carmakers, and mergers are becoming necessary to become more competitive, globally," said Hiroki Ihara, an analyst at Tachibana Securities Co..For Foxconn, taking a controlling stake in a Japanese firm wouldn't be unprecedented. In 2016, it took a two-thirds stake in electronics maker Sharp Corp., handing it a number of benefits including a well-known consumer electronics brand, LCD display production capacities and intellectual property. It has been reducing that interest slowly over time but is still the top shareholder..Japanese business publication Diamond Online reported Foxconn's proposal earlier Wednesday..For Nissan, one thing is for certain: it needs help to put it back on a stronger financial footing. Revenue growth has stalled, profit is dwindling, and a daunting debt load has led to speculation in the credit markets about its investment grade rating..Read also: .Mahindra XUV3X0 1.2T AX7L AT: A compact SUV that knows its audienceFord Territory: Another compelling SUV enters the SA market🔒The perils of personalizing your $500,000 Ferrari: Chris Bryant.© 2024 Bloomberg L.P.

Nissan and Honda in merger talks to create auto giant, Foxconn also in hunt for stake

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