# **Honda-Nissan Merger Discussions at Risk Following Honda’s Audacious Proposal**
A planned $58 billion merger between Honda and Nissan, set to form the world’s fourth-largest automotive manufacturer, is now in jeopardy. The talks, which commenced in December, have taken an unforeseen twist after Honda suggested making Nissan a wholly owned subsidiary. This proposal has escalated tensions among the two Japanese carmakers and raised alarms among stakeholders and leaders.
## **The Original Merger Concept**
The initial blueprint aimed to unify Honda and Nissan under a jointly controlled holding company. This arrangement would have permitted both brands to keep their identities while preserving decision-making independence. However, as negotiations evolved, conflicts arose regarding equity distribution and asset assessment, causing friction between the two firms.
## **Honda’s Contentious Proposition**
Over the past weekend, Honda introduced a modified proposal, insisting on total ownership of Nissan. This surprising offer was presented as a “take it or leave it” proposition, leaving Nissan’s executives taken aback. The proposal marks a significant deviation from the original merger framework and has incited internal pushback within Nissan.
Despite an unfavorable response during a Nissan board meeting on Wednesday, no conclusive resolution has been made to abandon the merger discussions. Sources indicate that an official statement about the deal’s future might be postponed until next week.
## **Renault’s Involvement and Market Responses**
Renault, which possesses a 36% share in Nissan, has advised its Japanese partner to seek a higher premium for its stake should Honda gain control. Renault is also urging Nissan to hasten negotiations as it aims to prioritize its own business revitalization.
Nissan initially framed the agreement as a “merger of equals” to secure internal backing. Nevertheless, with Nissan’s current weaker financial status—its market capitalization sitting at merely one-fifth of Honda’s—control in the negotiations has shifted favorably toward Honda.
The merger discussions have also been complicated by Taiwanese electronics titan Foxconn, which last year expressed interest to Renault in acquiring a portion of its holding in Nissan. Renault has been incrementally decreasing its stake in Nissan after a restructuring of their 25-year partnership in 2023.
In response to reports regarding Honda’s updated proposal, Nissan’s stock increased by 7%, while Honda’s shares rose by 3.5% on Wednesday.
## **Obstacles and Future Perspectives**
During the original merger announcement in December, Honda’s CEO Toshihiro Mibe highlighted the necessity for a holding company framework to safeguard both brands. He also cautioned that the merger would only advance if Nissan effectively implemented a turnaround strategy, which includes reducing production capacity by 20% and eliminating 9,000 positions.
Both Honda and Nissan had initially intended to finalize and disclose their management integration direction by the end of January. However, due to the prevailing tensions, this timeline is now extended to mid-February.
As the situation develops, industry experts are keenly observing whether Nissan will concede to Honda’s bold proposal or if the merger discussions will ultimately fail. The result of these talks could significantly influence the global automotive landscape.
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