Honda is expected to nominate the majority of directors and the president of the new company. The final share transfer ratio will be decided later and be based upon share prices, among other factors. Still undecided is the name and headquarters of the new holding company.
Mibe pitched the agreement as a way to sharpen the companies’ competitive edge on everything from production and vehicle R&D to sales financing, electrification and software development.
The combined operations won’t be a quick fix, Mibe cautioned. The first outcomes will start to manifest only before the end of the decade, with the big payoffs coming after 2030.
A combined Honda and Nissan will be able to generate annual revenue exceeding 30 trillion yen ($181.84 billion) and operating profit exceeding 3 trillion yen ($19.18 billion), the companies predicted.
Mibe said the new combination was not a bailout of Nissan. Rather, he said, Nissan and Honda will be expected to stabilize their own businesses before joining hands.
Embattled Nissan, fighting long-term sales decline, massive debt and crumbling profits, launched a revival plan in November that slashes global capacity and cuts 9,000 jobs worldwide.
Any finalized deal will hinge on Nissan getting its house in order first, Mibe said.
In the meantime, Honda is initiating large buybacks of its own stock to bolster its share price, Mibe said. Honda wants to buy back up to 20 percent of its outstanding. Honda is acting now before regulatory restrictions on buybacks take effect during merger talks.
“It’s not going to stay like is is today forever,” Mibe said.
The long-term goal is not downsizing and rationalizing operations but rather growth and bigger scale, he added. As an example of a potential impact on the U.S. market, Mibe dangled the possibility of delivering a hybrid pickup truck, leveraging Honda’s strength in gasoline-electric powertrains and Nissan’s experience in body-on-frame trucks.
“We aren’t thinking about just carving out, carving out, carving out and leaving only the good parts,” Mibe said. “We want to think about options that lead us to bigger scale.”
Honda and Nissan aim for massive scales and savings
Mibe and his Nissan counterpart Makoto Uchida said Honda will take the lead in setting up the holding company because its market capital is bigger than Nissan’s. Before news of the talks broke this month, Nissan’s share price had tumbled 35 percent this year, as the company struggled with a litany of financial problems including a net loss in the latest quarter.
“We will definitely be able to address all the challenges ahead and deliver significant new value that we have never seen in the past,” Uchida said. “We will be among the top class.”
The Dec. 23 agreement builds upon a looser technology and purchasing partnership the companies began exploring in March. At that time, Honda and Nissan said they would explore teaming up on electric vehicles, automotive software, batteries, procurement and more. Mitsubishi joined those talks in August.
“Without the courage to transform, we will be unable to continue,” Uchida said. “If we can enter discussions with speed, even against the many emerging players, we can become a winner.”
Combining would give the automakers bigger scale to drive down costs and share the R&D burden for new technologies in an industry under siege by change.
But it also would create a complicated overlap in Japanese production facilities, key markets, management and product segments. Moreover, cross-holdings could entangle the companies in a knotty shareholder web with existing Nissan partners Renault and Mitsubishi.
Renault, in a statement, acknowledged the merger plans.
“As the main shareholder of Nissan, Renault Group will consider all options based on the best interest of the Group and its stakeholders,” the statement said. “Renault Group continues to execute its strategy and to roll-out projects that create value for the Group, including projects already launched within the Alliance.”
Even after the tie-up, Honda is expected to continue its project-based cooperation with General Motors on the side, and Nissan will be able continue its own with Renault, Mibe said.
Last year, Nissan emerged from two decades as the junior partner in its alliance with Renault, after both companies agreed to rebalance their cross-holdings. Each will have a 15 percent stake in the other after Renault sells down the balance of its 43 percent stake that is held in a trust.
As part of its own restructuring and revival plans, Nissan is meanwhile selling down its controlling 34 percent stake in Mitsubishi Motors Corp. that it acquired in 2016.