Honda's CEO Struggles To Explain Why Nissan Merger Makes Sense

Honda's CEO said it was "difficult" to pinpoint what makes Nissan a strong business partner.

Honda Toshihiro Mibe Hero

Photo by: Honda

Rob Stumpf

By: Rob Stumpf

Dec 27, 2024 at 4:21pm ET

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Honda's CEO said it was "difficult" to explain why Nissan would make a good business partner.
Analysts believe that Honda's ideal partner for a merger would be a more "healthy and financially sound company."
Some speculate that the merger may be an attempt to prevent a hostile takeover of Nissan by a foreign company.

Honda's CEO just had a pretty awkward press moment related to its potential merger with Nissan. When asked why Nissan would make a good business partner for the mid-sized automaker, Toshihiro Mibe struggled to find the right words before blurting out something that brought laughter to a room full of journalists.

"That's a difficult one," said Mibe.

It was an honest statement. Perhaps too honest, as it summed up the collective head-scratching around the world after the merger talks were revealed. Is there some sort of superpower alliance being formed behind the curtain that the world isn't allowed to know about? Or are these just two automakers struggling in different areas looking to combine efforts to stay competitive in a changing market?

Hail Mary Or Calculated Risk?

2024 Honda Prologue Elite

At first glance, the Honda-Nissan merger looks very much like a Hail Mary. Honda is doing decently well—it has a decent gas-powered lineup, a popular following and a strong line of hybrids that have been tiding it over. But the brand is struggling with EVs after its partnership with General Motors fell apart following the launch of the Honda Prologue. Its first home-grown long-range EV should arrive next year, when we'll get a better idea of how the company's EV tech stacks up to the competition.

As for Nissan? It's definitely seen some better days. Nissan's books are a mess, dealers are in shambles and its once-innovative EV segment is populated only by the not-so-popular Ariya and aged Leaf.

So from the outside looking in—especially when you consider that Nissan could be on the cusp of a hostile takeover by Foxconn—it very much seems like Honda is swooping in to be Nissan's white knight despite Mibe saying that the merger is "not a rescue." But the reasoning is questionable. It's hard to see how Honda would benefit given how much overlap there is between the two companies, but there might be some unseen incentives in Yokohama that the folks at Honda have their eye on.

For example, Nissan has spent decades building a vast network of factories, loyal workers and a tight supply chain. It also holds its own weight in Southeast Asia where sales are still holding the brand above water. And, hey, the Nissan Sakura is Japan's best-selling EV, even if it is technically just a kei car. So while it might not have the most healthy financials, it does bring its own empire to the table.

Or, maybe it's about powertrains. Honda's hybrids could push Nissan's aged lineup forward a bit more quickly with additional powertrain options. Then there's Nissan's EV tech, which, while not as mature as some other players, could give Honda the edge it needs to move forward in a developing market rather than remain stagnant and fall behind.

Analyst Are Skeptical

Nissan Ariya Nismo Europe-Spec (2024)

Photo by: Nissan

Julie Boote, an auto analyst with Pelham Smithers Associates, told Bloomberg that Honda “needs to work with another company" to bolster its efforts on EVs and software-defined vehicles due to it being a mid-sized automaker. Honda, Nissan and Mitsubishi have already been working on doing exactly that—and Honda has already admitted that it would be "rough" to develop intelligent and electric vehicles by itself. But with Foxconn on Nissan's doorstep, Honda has threatened to dissolve the partnership and risk another fallout like it had with GM's Ultium tech.

“Ideally," said Boote, "it would’ve been a healthy and financially sound company, rather than Nissan.”

However, Honda isn't daft. It knows that Nissan is in trouble—hell, almost in financial ruin as many see it. And Mibe says that before it commits to a tie-up of any kind, Nissan must enter financial recovery before Honda commits. Given that the deal is expected to be formalized within the next six months, this doesn't leave a lot of time for Nissan to get its business in order.

Rumors have it that Japan’s Ministry of Economy, Trade and Industry helped to influence the deal to avoid Foxconn's takeover of Nissan after METI endorsed the merger. This set off alarms for scorned ex-Nissan CEO Carlos Ghosn who is watching the unknown unfold from the sidelines.

“That means you’re putting control above performance,” said Ghosn. “Personally, I don’t think it’s going to be successful.”

A Long Road Ahead

Honda Nissan Mitsubishi Partnership

Photo by: Nissan

Let's be perfectly clear: a merger, should it take place, won't be a magic fix for either company. The automakers are hedging their bets amidst a series of oddly stacked circumstances that have led to their current situations: Honda backed into an EV-deficient corner, and Nissan nearly in the gutter.

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AlixPartners estimates that the brands won't see results from the merger for at least three to five years. That leaves a lot of time for the competition to sprint ahead of both brands—and even more time for China to continue its dominance in a market where both brands already have a huge overcapacity problem.

It would inspire more confidence in the merger if the brands were a bit more forthcoming about the reasons for the potential merger. If the Japanese government is pushing it forward as some speculate, it would at least explain why the merger talks are happening so spontaneously. But if even Honda's CEO can't articulate why it's choosing Nissan as a partner, there will undoubtedly be some confusion cast on the deal.

More Honda-Nissan Merger News

Nissan-Honda Seek Merger Into 'Global Mobility Company' By 2026

'It’s A Desperate Move': Ex-Nissan Boss Carlos Ghosn On Honda Merger

Honda-Nissan Merger May Prevent A Hostile Takeover

The Nissan-Honda Crisis, Explained

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