Nissan Honda Split: Merger Talks Collapse

On 13 February 2025, two of Japan’s biggest car makers, Nissan and Honda, made a major announcement that has sent ripples through the global finance and automotive sectors. The boards of both companies voted to end talks about a merger that could have created a $60 billion giant. This deal would have combined the resources of both companies to create the world’s fourth-largest auto group by vehicle sales. In simple terms, merging means joining two companies to work as one. However, disagreements and differing priorities meant that the merger talks could not go ahead.

The idea for the merger started in December 2024. At that time, many experts believed that by joining forces, Nissan and Honda could face challenges in the rapidly changing car market, especially with the rise of electric vehicles (EVs) and new competitors from China. For many finance professionals, the merger was seen as a smart move to increase strength and competitiveness. Yet, as talks went on, differences between the two companies became clear, and both sides began to pull in different directions.

One of the key reasons for ending the merger was Honda’s proposal to change the structure of the deal. Honda wanted Nissan to become its subsidiary. This means Honda would have been the main company, with Nissan working under it. For many, this was a big change from what was originally planned. Nissan, on the other hand, was in the midst of its own restructuring efforts. Restructuring is a process where a company makes major changes to improve its performance and fix its problems. Nissan’s attempts to turn its fortunes around did not convince Honda that the merger would work. In simple words, Honda did not believe Nissan was on a clear path to recovery.

Speed was another major factor. The automotive market is moving fast, especially with the shift to electric vehicles. Both companies needed to act quickly to keep up with competitors like Chinese EV manufacturer BYD, and to manage the impact of potential tariffs in the United States. The fast pace of change meant that any delay in decision-making could hurt the companies even more. Finance professionals around the world watched closely, knowing that a delay or a bad decision in this race could have wide effects on the market.

When the news broke, the stock market did not react dramatically. Honda’s shares settled 2.14% higher, while Nissan’s dipped slightly by 0.34% on the day of the announcement. For investors, this mixed reaction was a sign that the market had already priced in much of the news, or that it was waiting for further details. The minimal impact on share prices also shows that while the merger was a big idea, the market might see the decision as just one step in the long and complex journey of both companies.

Behind the scenes, both companies are now planning their own paths. Even though the merger is off, Nissan and Honda have agreed to work together on other projects. They will continue to collaborate on electric vehicles and smart car technology, including work on self-driving cars. This joint effort shows that both companies recognise the need to innovate and work on new technology, even if they cannot merge their entire businesses.

The fallout from the end of the merger talks highlights the different financial challenges each company faces. Honda, though not without its own difficulties, is in a relatively stronger financial position. For example, Honda reported a 7% drop in profits for the period from April to December 2024. Their profits for that period reached 805 billion yen (about $5 billion). On the other hand, Nissan has been hit much harder by its financial struggles. In the same period, Nissan’s profits dropped to only 5.1 billion yen, a drastic fall from the 325 billion yen it had earned the previous year. Nissan now expects losses of 80 billion yen (around $519 million) for the full fiscal year ending in March. In response to these challenges, Nissan has already cut 9,000 jobs and is exploring many different options to turn its fortunes around. Nissan CEO Uchida has stated that a detailed turnaround plan will be announced within a month. He also made it clear that there were no talks with Foxconn, a company that has been in the news for its own business deals.

The collapse of the merger talks may be seen as a controversial moment in the automotive world. Some experts argue that merging could have saved Nissan from its severe financial troubles. By joining with Honda, Nissan might have gained a stronger backing and more resources to fight its losses. However, others believe that forcing the merger under the wrong conditions could have harmed both companies in the long run. The disagreement over who should lead the new company and how the merger should be structured shows that even large companies can struggle with basic issues of control and management.

For finance professionals, the end of these talks is a reminder that mergers and acquisitions are never simple. They involve careful planning, trust, and a shared vision for the future. When companies try to combine, differences in strategy, financial health, and management styles can lead to problems. In this case, Honda’s desire to have a controlling role and Nissan’s ongoing struggles made it difficult for the companies to agree on a path forward. This situation is a clear example of how even promising deals can fall apart when the details do not align.

The timing of the merger talks was crucial. The auto industry is in the middle of a big change as it moves from traditional internal combustion engines to electric vehicles. This shift is not just about building different cars; it is about changing the way the industry operates. With new players from China gaining strength and governments around the world pushing for cleaner energy, old methods are being replaced. The need for quick decisions and innovative technology is higher than ever. For Honda and Nissan, merging could have meant combining their strengths to meet these challenges. However, the differences in their financial health and their ideas about the future meant that merging was not the right solution at this time.

There is also an argument to be made about the importance of timing in any merger. Finance professionals know that the market rewards speed and decisiveness. With the rapid development of EV technology and the entrance of new competitors, any hesitation can lead to missed opportunities. In this light, the failure of the merger talks may be seen as a reflection of the companies’ inability to align their strategies quickly enough in a fast-changing market.

Even as the merger talks end, both Nissan and Honda are aware that the future of the auto industry is uncertain. They must adapt to new technology and a shifting global market. While Honda seems to be in a better financial position at the moment, Nissan faces an uphill battle with its significant losses and restructuring challenges. The end of the merger talks is not the end of cooperation between the two companies. Their decision to continue working together on EVs and smart car technology suggests that they are not abandoning the idea of collaboration. Instead, they are choosing paths that they believe will better serve their individual needs while still taking advantage of shared expertise.

The split in the merger talks also offers a glimpse into the broader challenges of the automotive industry today. Many companies are trying to balance legacy operations with the need to innovate. Mergers can offer a way to combine strengths, but they can also create new conflicts and management issues. For Nissan and Honda, the failure to merge shows that even well-intentioned plans must meet practical realities. The debate over whether merging would have been the best path forward is likely to continue among industry experts and finance professionals alike.

What’s next

Both companies now face crucial decisions. Nissan must urgently develop a clear turnaround plan, while Honda will look to strengthen its position in a competitive EV market. Continued collaboration on EV and smart car technology could prove beneficial for both, even without a full merger. Finance professionals will be watching these developments closely as the automotive industry evolves.