Honda, Nissan Move to Deepen Ties, Sources say, Including Possible Merger

Honda and Nissan are in talks to deepen ties, two people said on Wednesday, including a possible merger, the clearest sign yet of how Japan's once seemingly unbeatable auto industry is being reshaped by challenges from Tesla and Chinese rivals.
A combined Honda and Nissan would create a $54 billion company with annual output of 7.4 million vehicles, making it the world's third-largest auto group by vehicle sales after Toyota and Volkswagen, Reuters reported.
The two firms already forged a strategic partnership in March to cooperate in electric vehicle development, but Nissan's deepening financial and strategic trouble in recent months has added more urgency for closer cooperation with larger rival Honda.
Nissan announced a $2.6 billion cost savings plan last month that includes cutting 9,000 jobs and 20% of its global production capacity, as slumping sales in China and the United States led to an 85% plunge in second-quarter profit.
"This deal appears to be more about bailing out Nissan, but Honda itself is not resting on its laurels," said Sanshiro Fukao, executive fellow at Itochu Research Institute. "Honda's cash flow is set to deteriorate next year and its EVs haven't been going so well."
Shares of Nissan closed nearly 24% higher in Tokyo trade on Wednesday, while shares of Honda, whose market value of $43 billion is more than four times bigger than that of Nissan, declined 3%. Shares of Mitsubishi Motors, in which Nissan is the top shareholder with a 24% stake, gained nearly 20%.
The automakers have been grappling with challenges from EV makers, particularly in China, where BYD and others have surged ahead.
The talks between Honda and Nissan, first reported by the Nikkei newspaper, could allow the companies to cooperate more on technology and help them create a more formidable domestic rival to Toyota.
The discussions are focused on finding ways to bolster collaboration and include the possibility of setting up a holding company, said the people, who declined to be identified because the information has not been made public.
The companies are also discussing the possibility of a full merger, according to one of the people, as well as looking at ways to cooperate with Mitsubishi.
Honda, Nissan and Mitsubishi said no deal had been announced by any of the companies, though Nissan and Mitsubishi noted the three automakers had said previously they were considering opportunities for future collaboration.
French automaker Renault, a major Nissan shareholder, said it had no information and declined to comment.
Renault shares jumped 6.5%.
The three Japanese automakers are expected to hold a joint news conference in Tokyo on Monday, according to a source familiar with the matter.
Taiwan's Foxconn, which manufactures Apple's iPhones and has been seeking to expand its nascent EV contract manufacturing business, approached Nissan about a bid but it was rejected by the Japanese firm, two separate sources familiar with the matter said.
Bloomberg News reported earlier on Wednesday that Foxconn had approached Nissan to take a controlling stake.
Foxconn did not immediately respond to a request for comment, while a Nissan spokesperson declined to comment on Foxconn.
CHANGING LANDSCAPE
Over the past year, an EV price war launched by Tesla and BYD has intensified pressure on any automakers losing money on the next-generation vehicles. That has put pushed companies like Honda and Nissan to seek ways to cut costs and speed vehicle development, and mergers are a major step in that direction.
"In the mid- to long-term, this is good for the Japanese car industry as it creates a second axis against Toyota," said Seiji Sugiura, a senior analyst at Tokai Tokyo Intelligence Laboratory.
"Constructive rivalry with Toyota is a positive for the rather stagnating Japanese car industry when it must compete with Chinese automakers, Tesla and others."
Any merger would face significant US scrutiny and President-elect Donald Trump has vowed to take a hard line on imported vehicles, including threatening 25% tariffs on vehicles shipped from Canada and Mexico. He could seek concessions from Honda and Nissan to approve any deal, auto industry officials said.
Honda and Nissan both produce cars in Mexico for export to the US
Honda and Nissan would also have to work out how to integrate their different corporate cultures if they proceed with a merger, analysts said.
"Honda has a unique, technology-centric culture with strengths in powertrains, so there should be some internal resistance to the merger with Nissan, a competitor with a different culture that is now faltering," said Tang Jin, a senior researcher at Mizuho Bank.

The Iranian rial on Wednesday fell to its lowest level in history, losing more than 10% of value since Donald Trump won the US presidential election in November and signaling new challenges for Tehran as it remains locked in the wars raging in the Middle East.

The rial traded at 777,000 rials to the dollar, traders in Tehran said, down from 703,000 rials on the day Trump won.

Iran’s Central Bank has in the past flooded the market with more hard currencies in an attempt to improve the rate.

In an interview with state television Tuesday night, Central Bank Gov. Mohammad Reza Farzin said that the supply of foreign currency would increase and the exchange rate would be stabilized. He said that $220 million had been injected into the currency market, The AP reported.

The currency plunged as Iran ordered the closure of schools, universities, and government offices on Wednesday due to a worsening energy crisis exacerbated by harsh winter conditions. The crisis follows a summer of blackouts and is now compounded by severe cold, snow and air pollution.

Despite Iran’s vast natural gas and oil reserves, years of underinvestment and sanctions have left the energy sector ill-prepared for seasonal surges, leading to rolling blackouts and gas shortages.

In 2015, during Iran’s nuclear deal with world powers, the rial was at 32,000 to $1. On July 30, the day that Iran’s reformist President Masoud Pezeshkian was sworn in and began his term, the rate was 584,000 to $1.

Trump unilaterally withdrew America from the accord in 2018, sparking years of tensions between the countries that persist today.

Iran’s economy has struggled for years under crippling international sanctions over its rapidly advancing nuclear program, which now enriches uranium at near weapons-grade levels.

Pezeshkian, elected after a helicopter crash killed hard-line President Ebrahim Raisi in May, came to power on a promise to reach a deal to ease Western sanctions.

Tensions still remain high between the nations, 45 years after the 1979 US Embassy takeover and the 444-day hostage crisis that followed. Before the revolution, the rial traded at 70 for $1.

Honda, Nissan Move to Deepen Ties, Sources say, Including Possible Merger