Chief among those problems is that sales have plummeted in China, the world’s largest vehicle market. Chinese buyers are moving much more quickly to electric and plug-in hybrid cars and trucks than most industry experts had expected.
Honda and Nissan offer few such models, which now account for more than half of all cars sold in China. Companies that are doing the best in the shift away from petrol cars are Chinese manufacturers such as BYD and SAIC, as well as Tesla.
Chinese company BYD is capitalising on the shift to electric and hybrid vehicles.Credit: Bloomberg
Last month, Honda said it expected net profit for the fiscal year ending in March to fall 14 per cent, and lowered its forecast for global vehicle sales to 3.8 million from 3.9 million, largely as a result of its difficulties in China, which had once accounted for about a third of its sales.
Nissan has more significant troubles than Honda and in recent years has slogged through management upheaval. In the United States, a critical market where Nissan used to earn significant profits, the company’s market share has fallen sharply as it struggles to sell cars and trucks that haven’t received significant upgrades in recent years. In the period from April to September, Nissan’s operating profit plunged 90 per cent, and the carmaker recently said it aimed to shed 9000 employees worldwide and cut global production by about 20 per cent.
A merger could help Honda and Nissan develop electric cars faster and at lower cost — in theory. But other companies have struggled to achieve such gains in practice, often because the priorities of companies working together often shift and diverge.
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Ford Motor and Volkswagen teamed up a few years ago to work on EVs and autonomous driving technology. But the companies shut down their self-driving car business and reaped few benefits from collaborating on EVs.
Honda had a partnership with General Motors, and currently sells two electric SUVs — the Honda Prologue and Acura ZDX — that are manufactured by GM. But the companies have decided not to extend the partnership beyond those two models, and GM is now exploring ways to work with Hyundai, a South Korean vehicle maker.
Still, analysts said a merger of Honda and Nissan had the potential to help both companies. In the US, the two companies have similar product lines focused on small and medium-size cars and SUVs such as Nissan’s Sentra, Altima and Rogue and Honda’s Civic, Accord and CRV.
Sam Fiorani, a vice president at research firm Auto Forecast Solutions, said Nissan had the technology to build the full-size utility vehicles bought by many Americans, something Honda lacked. “That’s something that could be valuable for Honda in the future,” he said.
On the production side, Nissan has two vehicle assembly plants in the US and Honda has four. Each also has engine and transmission factories and engineering centres. They could in theory reap savings by combining their operations, closing some plants and locations and eliminating jobs. But that’s where the difficulties are likely to arise.
Nissan Motor chief executive Makoto Uchida and Honda CEO Toshihiro Mibe in Tokyo this week with Mitsubishi Motors president Takao Kato.Credit: Getty Images
“That means one of the two merger partners is going to gut their development organisation or scrap their engine program, and that where you always run into heavy resistance,” Stallkamp said. “When it comes down to it, neither side wants to take the hit.”
In many cases, downsizing measures run into political opposition because governments push companies to preserve jobs. Stellantis was formed in a 2021 merger of France’s Peugeot and Fiat Chrysler, and the French and Italian governments have fought to keep the combined company from closing factories.
After some initial success, Stellantis suffered a slump in vehicle sales this year and a drop in profit. The CEO who helped shepherd the merger, Carlos Tavares, resigned this month. The company, now run by a board committee, is looking for a new top executive and scrapping parts of the strategy it put in place after the merger.
For more than two decades, Nissan was the junior partner in an alliance with Renault. The partnership saved Nissan from collapse and helped it become profitable, but neither company had the kind of long-term success that had been envisioned by Carlos Ghosn, who had led the alliance and served as CEO of both companies.
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Eventually, executives at Nissan chafed at being, in effect, controlled by Renault. In 2018, Ghosn was arrested and jailed in Japan on charges of financial wrongdoing. He fled to Lebanon before a trial. Renault still owns a significant stake in Nissan, but the two don’t work as closely together as they used to.
DaimlerChrysler faced few battles over closing plants but struggled to merge a luxury carmaker with one that made more affordable models. The combined company had an awkward management structure that included two executives sharing power at the top. There were vast cultural differences between its German and American operations, and the two sides separated in 2007 after nine years.
“It was a constant battle of egos on both sides,” Stallkamp said.
Other partnerships that proved disappointing include BMW’s takeover of Britain’s Rover in the 1990s. Ford owned all or part of Jaguar Land Rover, Mazda and Volvo but sold those assets during and after the 2008 financial crisis.
A few automotive mergers have seemed to live up to expectations. Fiat Chrysler — formed when Italian company Fiat took over Chrysler as the American company was emerging from bankruptcy — is one example of a merger that seemed to flourish.
Under its CEO, Sergio Marchionne, the Chrysler part of the business, which also included the Dodge, Jeep and Ram brands, recovered and became the more profitable half of the combined company.
South Korean vehicle makers Hyundai and Kia, which have been in an alliance since 1998, are together one of the world’s largest automakers and have enjoyed strong growth in recent years. They share development, engineering and manufacturing resources, but have separate sales and marketing operations.
Marc Cannon, a consultant who was a senior executive at AutoNation, a large automotive retailer, said Honda and Nissan could try to emulate Hyundai and Kia, but he expressed doubts about how well the Japanese companies would fare.
“Honda is still a great brand with great products. Nissan’s brand has been damaged with all the turmoil they’ve had in the last few years, and their quality is not great,” Cannon said. “So it doesn’t make that much sense to me. Why would Honda be interested in taking on Nissan’s problems?”
This article originally appeared in The New York Times.
