When marquee Japanese automakers Nissan and Honda announced that they were merging in December 2024, it was largely believed that the move was a hallelujah for the ailing company formerly known to American buyers as Datsun.
Prior to the announcement, Nissan was on the verge of losing everything. In remarks to the Financial Times the month before, Nissan execs said that the once-great automaker exists on borrowed time, noting that it has “12 to 14 months” to survive if circumstances do not improve.
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At roughly the same time, Nissan CEO Makoto Uchida sounded the alarm on the automaker’s situation and noted that it needed bold restructuring to get out of an “extremely tough situation.”
In addition to sales and operating outlook adjustments, it announced that it is going to squeeze out whatever it can to save $3 billion, whether by reducing its workforce, slashing a significant part of its production capacity, or selling a sizable share in domestic rival Mitsubishi.
“The question is how to do it fast and adapt to reality,” Uchida said.
Makoto Uchida, chief executive officer of Nissan Motor Co., left, and Toshihiro Mibe, chief executive officer of Honda Motor Co., pose for photographs during a joint news conference in Tokyo on Aug. 1, 2024.
Honda seeks more control over Nissan
According to informed sources close to the matter cited by both NHK and Kyodo News in Japan, Honda (HMC)  is looking to make an offer to acquire a majority share in Nissan to make it a subsidiary of Honda.Â
At their December 2024 joint meeting, Honda and Nissan’s CEOs initially said that they aim to set up a joint holding company that would be their parent company, similarly structured to auto giant Stellantis.
Though both automakers envisioned a partnership in which they could save money by jointly developing new cars and vehicle software as equals, Honda’s latest move shows that it feels like it is carrying some of Nissan’s weight, as it is somewhat unsatisfied with Nissan’s efforts to turn around its business.Â
On Jan. 31, Honda and Nissan said they would postpone the announcement of their merger details from the originally planned end of January to mid-February. According to sources who spoke with Kyodo, Honda has been dissatisfied with Nissan’s efforts to turn around its business and demanded more sweeping changes.
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Honda has tough conditions for a merger
Though it has enacted a series of reforms to improve its situation, Honda’s precondition of financial stability still hangs over Nissan’s journey to establish a merger with Honda.Â
Given the desperate situation surrounding Nissan prior to the merger announcement with Honda, one would assume that Honda is helping a fellow Japanese automaker.
Despite this, during the press conference, Honda CEO Toshihiro Mibe heavily emphasized that Honda’s gesture of an extended hand is not exactly a “bailout” of Nissan, emphasizing that Nissan will need to get itself out of the red for the merger to happen.
“This is not a rescue of Nissan,” Mibe said.
To put it mildly, Nissan has a financial mountain to climb before the merger’s set ‘deadline’ in August 2026. In the first half of fiscal year 2024, Nissan’s operating profits fell 90.2% from the equivalent of $2.3 billion to $225 million.Â
At the same time, net income took a much harder dive, dropping from about $2.02 billion to $131 million, a 93.5% drop from the same period in the previous fiscal year.
Related: Nissan’s US factory workers are being forced into a harsh reality
Per Honda’s conditions, Nissan will need to earn the equivalent of roughly $2.6 billion in fiscal 2026 for it to go through. Additionally, Honda has reportedly asked Nissan to buy out Reanult’s stake in the brand to fend off outside influence.
Already, Nissan is implementing extensive restructuring. In addition to plans to cut 9,000 jobs worldwide and reduce its global production capacity, the Japanese automaker is making cuts that will affect American autoworkers.Â
In an effort to reduce the headcount at the factories that make its Rogue SUV and the midsize Altima sedan, Nissan’s assembly lines at its Smyrna, Tenn. and Canton, Miss. factories will transition from a two-shift schedule to a one-shift schedule in April. This will cut U.S. total annual production by an estimated 12%, or 63,000 cars this year.
Nissan is very exposed to Trump’s tariff threats
Nissan has another headwind that could impact its ability to stand on its own: President Trump’s tariff back-and-forth with Mexico and Canada.Â
Although the leaders of both neighboring countries have worked with the president to delay such tariffs and negotiate during a 30-day period, the implementation of tariffs can affect the price tags of many popular offerings eyed by American buyers, including some of Nissan’s value-minded runabouts.Â
In Aguascalientes, Mexico, Nissan builds its bestselling compact Sentra sedan, as well as two low-priced subcompact models: the Versa sedan and the Kicks crossover. With the base price of both models starting under $23,000; a 25% tariff could lead to an price hike that might price some buyers out.
In a statement to Automotive News, Nissan U.S. sales and marketing chief Vinay Shahani said that the Japanese automaker is “prepared” for any scenario.Â
“We’ve got to be very broad in our planning for multiple scenarios, whether it’s the amount of the tariff, whether it affects a full vehicle or specific parts,” Shahani said. “It’s all spreadsheets at this point, but we’ve got prepared for all different types of outcomes.”
The Nissan Motor Company trades on OTC markets in the United States as NSANY and on the Tokyo Stock Exchange under the ticker number 7201.
The Honda Motor Company is listed on the New York Stock Exchange under the ticker HMC.Â
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