Nissan to step back from Honda merger after board votes against $58 billion tie-up: Report

Honda-Nissan merger: Nissan will likely set to step back from merger talks with rival Honda, calling into question a $60 billion tie-up to create the world's third-biggest automaker. According to news agency Reuters, the collapse of the merger could potentially leave Nissan to drive its turnaround alone. Reportedly, talks between the two Japanese automakers have been complicated by growing differences.

According to reports, Honda had floated the idea of acquiring Nissan and making it a subsidiary, after which Nissan was likely to hold off the merger talks. That was a departure from plans made public on December 23 to establish a joint holding company, which was met with strong opposition from Nissan.

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Honda-Nissan merger called off? What reports say

Honda, whose market value of about 7.92 trillion yen is more than five times bigger than Nissan's at 1.44 trillion yen, was worried about its smaller rival's progress on the turnaround plan. According to a report by The Financial Times, Honda faces shareholder and internal pressure to take full ownership to revive the ailing carmaker.

The latest proposal, delivered to Nissan at the weekend, deviates from initial plans to bring the two companies under a jointly owned holding company, a structure that would have provided room to retain Nissan’s brand and decision-making powers. According to the report, tensions emerged in the negotiations as the rivals clashed over their assets' equity ratio and valuation.

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Nissan executives were taken aback by the new proposal — delivered as a “take it or leave it” offer — but the company will make a formal decision later this month. Nissan and Honda said they aimed to finalise a future direction by mid-February.

Nissan’s weak financial performance has led to its market capitalisation collapsing to a fifth of Honda’s, skewing the balance of power in negotiations. French carmaker Renault, which owns 36 per cent Nissan, including 18.7 per cent through a French trust, has previously said it would be open in principle to the merger.

Honda chief Toshihiro Mibe warned multiple times in December that the merger would only proceed if Nissan successfully executed a turnaround plan that involved cutting production capacity by 20 per cent and shedding 9,000 jobs.

Honda is Japan's second-largest car maker behind Toyota, and Nissan is third. The two companies said in December they were in talks to create the world's third-largest automaker by sales, which would allow them to bulk up in an industry facing a huge threat from China's BYD and other electric vehicle entrants.

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The talks have also coincided with disruption posed by potential tariffs from US President Donald Trump. Nissan has been hit harder than some rivals by the shift to electric vehicles (EVs). It has never fully recovered after years of crisis sparked by the 2018 arrest and removal of former chairman Carlos Ghosn. 

Nissan and Honda had initially said they planned to decide the direction of the integration by the end of January, but that was later pushed back to mid-February. According to Reuters, Mitsubishi Motors Corp., which has reportedly decided against joining the alliance, said it would make a final decision this week once Honda and Nissan reach an agreement later this month.