Reports have emerged that Nissan is in talks with Honda regarding a potential merger. The news comes as Nissan navigates a challenging financial period, having recently revised its full-year forecast for fiscal year 2024 downwards. Nissan’s first-half results for fiscal year 2024 showed a significant decrease in consolidated net revenue and operating profit, with the latter falling to ¥32.9bn, representing an operating profit margin of 0.5%. The company chalks up the decline to higher selling expenses, inventory optimisation efforts, and rising production costs.
Nissan CEO Makoto Uchida announcing the financial results. Source: Nissan
In response to these challenges, Nissan has announced a series of turnaround actions, including a reduction in fixed costs by ¥300bn, a 20% cut in global production capacity, and a 9,000 reduction in its global workforce.
The talks of a merger with Honda is also one of these turnaround efforts.
Speaking at the global launch of the Nissan Patrol in September, Nissan CEO Makoto Uchida told journalists about the importance of partnerships.
“We want to have a small partnership… we do have a strong partnership with Renault, Mitsubishi, as the alliance, but you may be aware that we also introduced our collaboration with the Honda, which could be some other market that we are that we can further to grow together what we do together.”
It is unclear what shape the possible joint venture could take, but it could involve a deeper collaboration on electric vehicle technology and battery technology, areas where, as Uchida mentioned, the two companies have already partnered.
Operational decline
Adding to the context of the merger talks, Nissan global production and export figures for October 2024 declined 6.3% from a year earlier, while global sales declined 2.7%.
The potential merger with Honda and the ongoing turnaround efforts mark a critical juncture for Nissan.
The Financial Times, citing insider sources, reported in November that Nissan is seeking an anchor investor to help survive a make-or-break period over the next year.
“We have 12 or 14 months to survive,” a senior official close to Nissan was quoted as saying.
Leadership changes
The company has also made significant changes to its leadership team, aiming to restructure its operations for enhanced efficiency and resilience.
These new appointments are effective 1 January 2025 and designed to respond quickly to current issues and restructure the management following the appointment of a chief performance officer (CPO) in December.
With the support of our leadership team, we will carefully execute our turnaround actions to secure sustainable profits while focusing on future growth.
The new leadership team includes Stephen Ma as chairperson of the management committee for China, Jeremie Papin as CFO, Christian Meunier as chairperson of the management committee for Americas, and Shohei Yamazaki as chairperson of the management committee for Japan/ASEAN.
“These leadership appointments will bring the necessary experience and urgency to the countermeasures we are taking to get the company back on track,” said Uchida in a company statement.
Uchida is big on partnerships
“The world today, as you may be aware, is one of market fragmentation… and I always say this to everyone and, internally and externally, I firmly feel that we cannot continue how we have been in the past for future,” Uchida told Bizcommunity in September.
“We keep the good core spends, but we need to have a transformation very quickly in order to adapt ourselves to develop with a company in the market and how we also can sustainably keep our presence.”
The potential merger with Honda, the ongoing turnaround efforts, and the new leadership team all play a crucial role in shaping Nissan’s future.
Positive reception
Whether the merger with Honda materialises or not, Nissan’s ability to overcome these challenges and return to profitability will depend on the successful implementation of its turnaround strategy and the effectiveness of its new leadership team.
Bloomberg reported a share price surge as much as 24% following the news of potential merger with Nissan the top performer on Japan’s Nikkei 225 Stock Average as investors welcomed the news for the ailing carmaker, whose shares had been performing their worst in 50 years under current leadership.
