The deal between Japanese auto makers Nissan and Honda will no longer happen. Both companies have decided not to pursue it further. On December 23 last year, Honda and Nissan had signed a Memorandum of Understanding or MOU for the merger. If this deal had happened, then both of them combined would have created a group worth $ 60 billion (current value – about Rs 5.21 lakh crore). Which would have been the fourth largest group in the world in terms of vehicle sales after Toyota, Volkswagen and Hyundai.
Honda wanted to make Nissan its subsidiary
According to reports, the first decision to back out of the deal was taken by Nissan because Honda wanted Nissan to become its subsidiary. Due to this, differences between the two increased due to which further talks became difficult. Mitsubishi Motors, another partner in this deal, had talked about considering a merger.
Why Nissan and Honda Decided on the Deal
Due to decline in sales and profits in the Chinese and American markets, companies were forced to cut their workforce and production capacity. For some time now, there has been a decline of about 70% in the profits of companies. Decrease in share in both the big markets was considered to be the main reason for the companies coming together.
The three companies said in a statement that we will cooperate with each other through strategic partnerships in the era of intelligence and electrified vehicles. Nissan and Honda have seen the rapid growth of electric vehicle manufacturers like BYD in their industry and major Chinese markets impacting their markets. Apart from this, both fear the imposition of tariffs by America.
After the deal did not move forward, Nissan is focusing on its restructuring plan announced in November. Under which the company will cut 9,000 jobs and reduce 20% of its capacity from the global market. According to reports, Nissan will have to reduce its capacity in China. The company operates eight factories here through its joint venture with Dongfeng Motor. Nissan has already halted production at its Changzhou plant to ease the company’s operations.
Nissan and Honda Shares
Nissan Motor shares fell 0.34% after the news of the deal breaking. Whereas, Honda Motor shares closed at Rs 1,434, up 2.14%. Earlier, after the merger talks were first reported on December 17, Nissan shares surged more than 60% in late December and Honda shares rose nearly 26%. However, this profit later fell to 21% for Nissan and 11% for Honda.
