How Nissan-Honda's $60b merger talks collapsed

Nissan insists on equal treatment, rejects Honda's demand for deeper cuts

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TOKYO:

Nissan was deep in trouble late last year when rival Honda offered a lifeline: a $60 billion tie-up that would help both Japanese automakers compete against the Chinese brands upending the car industry.

But the merger talks unravelled in a little more than a month due to Nissan's pride and insufficient alarm about its predicament, as well as Honda's abrupt decision to revise the terms and propose that Nissan become a subsidiary, according to six people familiar with the matter.

The storied carmaker now faces the added threat of US tariffs on vehicles made in Mexico, which account for more than a quarter of its US sales. Both Nissan and Honda are due to report earnings on Thursday.

Honda managers felt Nissan's turnaround strategy lacked details and were frustrated by what they saw as an insufficient reduction in factory capacity, two sources said.

Nissan didn't want to shut factories because that would force a write-down of their value on paper and hurt its earnings, one person said.

In late January, Nissan executive Hideyuki Sakamoto visited the southwestern island of Kyushu to announce plans for a battery EV plant that would create 500 jobs.

Flanked by local politicians, Sakamoto said the automaker wouldn't reduce capacity at its existing Kyushu plant, either.

The day after Sakamoto's visit to Kyushu, Honda's Mibe told Uchida that Nissan would need to become a Honda subsidiary, a stipulation not in the original merger memorandum of understanding the two companies signed late last year, according to one person.

Nissan was blindsided by that move, given that it went against the previously agreed memorandum, two of people said.

Renault, Nissan's top shareholder, said while it was not privy to the discussions, the latest information suggested the transaction would result in a "takeover of Nissan by Honda without a control premium for Nissan shareholders". Such an outcome was "not acceptable", Renault said, adding it would "vigorously defend" its interests.

It's not clear what, if anything, could bring the automakers back to the table.