JAPAN TODAY



 

Nissan Motor Co is expected to struggle to find a new partner after the breakdown of its planned merger with Honda Motor Co. indicated a lack of urgency by the ailing carmaker about restoring its battered operations.

Some foreign companies, particularly newcomers in the auto industry, may have been considering Nissan as a possible partner but could lose interest after seeing Nissan stick to its management independence, analysts say.

Honda is also expected to face a tough challenge for survival after the collapse of the deal, which would have created the world's third-largest auto group. But it is more serious for Nissan, given the scant progress it has made in its efforts to restructure.

"I wonder if a sense of crisis was really shared by Nissan's management team," said Seiji Sugiura, senior analyst at Tokai Tokyo Intelligence Laboratory Co. "Their management decision is rather naive."

Behind the failure of the negotiations was Nissan's rejection of a proposal for it to operate under the Honda group, the two companies said Thursday. Under the initial plan, they sought to merge under a holding company.

Honda CEO Toshihiro Mibe said at a press conference Thursday that prolonged talks between the two carmakers would have delayed decisions on merger details and his company had sought to speed things along by making Nissan its subsidiary.

"We thought a stock swap (to make Nissan Honda's unit) was the only way for a successful merger," Mibe said.

When the two carmakers said at a press conference in December that they would begin talks on a merger, Nissan chief executive Makoto Uchida said they would be on equal footing.

But given Honda, Japan's second-largest carmaker by volume, has roughly five times the market capitalization of Nissan, Japan's third-largest, the deal was seen effectively as a bailout of struggling Nissan, analysts say.

"Considering Nissan's low profitability and lower market capitalization, an equal merger was a tall order in the first place," Jin Tang, senior principal researcher at Mizuho Bank, said.

Analysts say Nissan cannot survive by itself without finding a new partner, with Taiwanese electronics giant Foxconn, formally known as Hon Hai Precision Industry Co, emerging as a candidate.

Foxconn has approached Renault SA, which owns Nissan shares as a long-time partner but plans to reduce its stake in the Japanese carmaker, the Taiwanese company's chairman Young Liu told reporters in Taiwan on Wednesday.

Foxconn is looking at cooperation with Nissan, not an acquisition, the chairman said.

Nissan began talks with Honda out of fear that the Taiwanese company may be planning to acquire it, according to the sources.

"We will be aggressive in seeking a new partnership to maximize our corporate value," Nissan's Uchida said at a separate press conference on Thursday after unveiling the decision to abandon the merger plan.

Among other companies, Vietnam's Vingroup, which recently entered the auto market, and some Chinese automakers may be interested in Nissan, analysts say.

As vehicles become more electrified and software-driven, a growing number of firms have entered the auto market such as Sony Group Corp and Chinese smartphone maker Xiaomi.

Nissan plans to cut 9,000 jobs and reduce its global production capacity by 20 percent. But Honda wanted more drastic restructuring steps to ensure Nissan's swift turnaround.

Analysts say Nissan's management team led by CEO Uchida was too slow in launching measures to address its faltering sales in China and the United States, the world's two biggest auto markets.

After the ouster of Carlos Ghosn, a charismatic former Nissan CEO, the carmaker has become more bureaucratic, a source familiar with the company's management said.

"If Nissan cannot put aside its pride and break its back for restructuring, it cannot open a path for its future," Mizuho's Tang said.