Nissan and Honda Merger Discussions

Investing.com — Nissan (OTC:NSANY) Motor Co. is reportedly in discussions with Honda Motor Co (NYSE:HMC) about a potential merger. If successful, this deal could lead to the creation of the world's third-largest automaker, providing Nissan with the necessary support to withstand current industry challenges.

The discussions have gained momentum following an approach by Taiwan's Hon Hai (TW:2317) Precision Industry Co., known as Foxconn (SS:601138). Foxconn, which produces iPhones, has reportedly expressed interest in acquiring a stake in Nissan and is investing heavily in electric vehicle (EV) production facilities.

Nissan's difficulties became evident in early November when it slashed its profit forecast and announced plans to cut 9,000 jobs worldwide, alongside a 20% reduction in global production as consumer interest waned, leading to an excess of unsold models.

Various entities, including activist investors, have shown interest in Nissan amidst these challenges. Despite producing slightly more vehicles, Honda's market value is over four times that of Nissan, potentially giving Honda an advantage in merger discussions, which may involve complex issues such as layoffs in Japan.

French automaker Renault SA (OTC:RNLSY), which owns a 36% stake in Nissan through a longstanding alliance with Nissan and Mitsubishi Motors Corp. (TYO:7211), will also play a role in any potential deal. According to sources, Renault (EPA:RENA) is open to Nissan engaging in merger discussions with Honda to shield itself from the crisis involving its partner.

It's unclear whether Nissan is also in talks with Foxconn or if it has already declined their proposal.

Nissan declined to comment, while Foxconn representatives were unavailable. Honda's Executive Vice President Shinji Aoyama stated that the carmaker is exploring several options, which may involve a capital tie-up or the creation of a holding company.

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