At that December press conference, following his long moment of hesitation, Mibe eventually alighted on an answer that highlighted the Yokohama firm’s long history and tradition. In recent years, Nissan’s main tradition has been disappointing investors. If the merger collapses, it will join a long list of failed initiatives – from talks to combine with its largest shareholder, Renault, to bids to electrify its fleet – that was intended to reboot an automaker that has stalled.
Ghosn’s years of cost-cutting left the automaker trailing in R&D in both electric vehicles and hybrids. Nissan needed this deal a lot more than Honda. As billions of dollars of debt due in the next year close in, the former may get pushed into an even less favourable deal. (Recall the reports that Hon Hai Precision Industry Co, better known as Foxconn, was interested in snapping it up, with the Taiwanese firm likely intending to take over Nissan’s manufacturing bases in its push to make cars like it produces iPhones.)
And the growing band of activist investors, including Effissimo Capital Management, won’t be happy – and have a history of causing boardroom headaches until they get what they want.
Honda shares cheered the news, with the prospect of a merger with a failing company having underwhelmed investors since the talks surfaced.
But perhaps they shouldn’t celebrate too soon; Honda also needs to grow to succeed. That these reports came the same day as Toyota – the world’s best-selling automaker for five years running – raised its sky-high profit forecasts even higher was another irony.
Failing to come to merger terms, particularly with a prideful junior partner down on its luck, is a common theme in attempted Japanese mergers. But putting off painful but necessary steps to save face hasn’t ended well for many Japanese firms, much less so for ones in sectors moving as quickly as the auto business.
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It might just be brinkmanship. And it’s not impossible that things might turn around. Previous mergers that didn’t come to pass, such as the mooted combination of industrial conglomerates Mitsubishi Heavy Industries and Hitachi, didn’t necessarily end up as disasters; both companies are now doing better than ever, having reformed their operations independently.
But having taken a wrong turn, heading further down that same road is rarely the way out of a pickle. It’s usually best to swallow your pride, admit fault – and call for help.
Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and the Koreas. He previously led the breaking news team in North Asia and was the Tokyo deputy bureau chief.
Bloomberg
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