OAN Staff James Myers
10:00am – Monday, December 23, 2024
There was a big move in the auto industry when Honda and Nissan announced plans to merge to form the world's third-largest automaker by sales.
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The Japanese automakers signed a memorandum of understanding on Monday, announcing that Mitsubishi Motors, a smaller member of the Nissan Alliance, had also agreed to participate in talks about the business combination.
Nissan CEO Makoto Uchida said in a statement: “We expect this integration to deliver even greater value to a broader customer base.''
Japanese automakers have struggled to lag behind larger rivals in electric vehicle production and are trying to cut costs and make up for lost time.
The announcement comes after news of a possible merger emerged earlier this month. The merger was driven by Taiwanese iPhone maker Foxconn's desire to partner with Nissan, which also has alliances with France's Renault and Mitsubishi Corporation.
A merger, on the other hand, could result in a deal worth more than $50 million, based on the market capitalizations of all three automakers.
Despite the merger, Toyota, which will produce 11.5 million cars in 2023, will remain Japan's leading automaker.
In 2023, Honda produced 4 million vehicles and Nissan produced 3.4 million vehicles. Mitsubishi Motors sold more than 1 million cars in the same year.
Following a preliminary agreement between Nissan and Honda in March, Nissan, Honda and Mitsubishi announced in August that they would share parts for electric vehicles, such as batteries, in order to adapt to the dramatic changes centered on electrification. The two companies announced that they will jointly research software for autonomous driving.
Honda is seen as the only Japanese partner who can bail out Nissan, which has been in turmoil due to scandals that began in late 2018 when former chairman Carlos Ghosn was arrested on charges of fraud and misappropriation of company assets. He denies the charges.
He was eventually released on bail and fled to Lebanon.
Ghosn said at a press conference Monday that Nissan is known for its years of experience in manufacturing batteries, electric vehicles and gas-electric hybrid powertrains, and that it will help Honda develop its own EVs and next-generation hybrids. He said it could be helpful.
But in November, the company announced it would cut 9,000 jobs, or about 6% of its global workforce, and cut global production capacity by 20%, after reporting a quarterly loss of $61 million.
On the other hand, Fitch Ratings gave Nissan's credit outlook as “negative” due to deterioration in profitability due to price cuts in the North American market.
However, he noted that the company has a strong financial structure and solid cash reserves amounting to $9.4 billion.
Nissan stock rose more than 20% after news of a possible merger was announced last week.
Honda's stock price rose 3.8%. Honda's net profit for the first half of the April-March period fell nearly 20% from the same period last year due to sluggish sales in China.
Chief Cabinet Secretary Yoshimasa Hayashi said at a press conference on Monday that Japanese companies need to remain competitive in a rapidly changing market.
Mr. Hayashi said, “The business environment surrounding the automobile industry is changing significantly, and the competitiveness of storage batteries and software is becoming increasingly important.It is hoped that the necessary measures will be taken to survive international competition.'' ” he said.
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