Honda and Nissan officially part ways, leaving uncertainty in future partnerships

Honda Motor Co. and Nissan Motor Co. have officially parted ways, at least for now.

When talk of an alliance surfaced about three months ago, it seemed genuinely possible that two of the industry’s most recognizable brands would join forces to take on the world. But as the weeks wore on, it became clear the legacy automakers would struggle to see eye to eye.

Now they’re back where they started — one needs scale to compete on the global stage, the other a lifeline to stay afloat.

Honda Chief Executive Officer Toshihiro Mibe tried to be positive, telling reporters on Thursday that “while the outcome is unfortunate, we now have a mutual appreciation of our synergies that can be utilized in our existing strategic partnership."

Nissan Chief Executive Officer Makoto Uchida was more forthright when talking about his company’s prospects. “It will still be difficult to survive without leaning on future partnerships," he said.

But when it comes to courting other players, both may find that the pickings are slim and other suitors might not be so amicable. The need to find a partner is particularly acute for Nissan, which has struggled to keep up with the car industry’s seismic changes.

“At the end of the day, we still believe that Nissan will need support from another big automaker," said James Hong, an analyst at Macquarie Securities Korea Ltd. “Without that, it seems to be quite a difficult situation for them."

Talks End

Honda and Nissan formally ended negotiations on Thursday, the mutual parting a clever way for both to avoid the ¥100 billion ($650 million) breakup fee stipulated by the agreement they signed in December.

It also reopens the door for Hon Hai Precision Industry Co., the Taiwanese iPhone-maker better known as Foxconn, to solidify its pursuit of Nissan as the company best known for making iPhones ventures into newer arenas such as electric vehicles to offset stalling smartphone sales.

Hon Hai Chairman Young Liu said Wednesday he’s open to buying Renault SA’s 36% stake in Nissan. When asked about the comment, Nissan CEO Uchida said he hasn’t spoken to anyone from Foxconn’s management.

New suitors may also enter the picture. KKR & Co. is in the early stages of evaluating an equity or debt investment to improve Nissan’s financial position, Bloomberg News reported, citing people familiar with the matter.

The carmaker’s financial woes were thrust into the spotlight late last year, when it announced a plunge in net income and plans to cut jobs and manufacturing. Nissan warned investors Thursday that it’s not out of the woods yet, lowering its full-year outlook and laying out restructuring plans.

“Nissan needs a financially stable partner in Honda’s stead," Bloomberg Intelligence senior auto analyst Tatsuo Yoshida said.

The company has struggled with revolving-door leadership in the years since the ouster of Carlos Ghosn, who forged the original alliance with Renault and Mitsubishi Motors Corp.

Nissan has also been weighed down by an outdated lineup of unpopular cars — something that’s particularly problematic in China, where domestic automakers are winning market share with an array of affordable, tech-laden electric cars, and in the US, where hybrids are back in vogue.

Losing Share

A deal would have created one of the world’s biggest carmakers, giving Honda and Nissan the scale to compete globally and, in Japan, the fire power to take on Toyota Motor Corp. The world’s biggest carmaker has stakes in Subaru Corp., Suzuki Motor Corp. and Mazda Motor Corp., creating a powerhouse of brands backed by Toyota’s top-notch credit rating.

Left on their own, however, Honda and Nissan are languishing in eighth and ninth place when ranked by global deliveries, and in danger of being overtaken by China’s Geely Automobile Holdings Ltd., whose sprawling empire includes brands like Zeekr, Volvo and Lotus.

Honda at least is in a better position financially, as its third-quarter results released on Thursday showed. It still sees ¥1.42 trillion in operating profit during the fiscal year that will end March 31.

Honda’s net sales for the three months ended Dec. 31 meanwhile were ¥5.5 trillion versus the ¥5.4 trillion the market was looking for, and operating profit came in at ¥397 billion, just shy of consensus analyst estimates for ¥407 billion.

And although it’s backed away from its partnership with General Motors Co., Honda will still continue its strategic partnership with Nissan and Mitsubishi Motors and collaborate on the in-house development of batteries, autonomous driving, software and EV technology.

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