Nissan Motor shares rose after the media reported that the Japanese company is merging with Honda Motor to form a larger company that will be able to compete with larger rivals and invest more in the growing electric vehicle market, UNN reports citing CNBC.
Details
Nissan's shares rose by 23.7%, while Honda's fell by 3%.
Honda and Nissan are reportedly considering establishing a holding company and will soon sign a memorandum of understanding. They also plan to eventually acquire Mitsubishi Motors, in which Nissan is the main shareholder with a 24% stake in the holding company, according to reports.
According to Vivek Vaidya, global mobile technology leader at Frost & Sullivan, the reason for the merger was Nissan's poor financial performance.
For example, in November, Nissan published unfavorable results for the second quarter ended in September and cut its full-year revenues and operating forecast.
The automaker also announced plans to cut 9,000 jobs and reduce global production capacity by a fifth amid fierce competition in its main markets.
Nissan to cut 9,000 jobs and lower profit forecast07.11.24, 18:26 • [views_15008]
Joe McCabe, president and CEO of AutoForecast Solutions, said Nissan needs to "revitalize" its relationship with Renault.
"They [Nissan] really didn't have a leadership position in any of the segments they were competing in," he said.
In its statement, Nissan noted that media reports that the company is considering a possible business integration with Honda are not based on the company's announcements. Nissan said it is considering various opportunities for future cooperation with Honda and Mitsubishi Motors, but no decisions have been made.
Expert Vivek Vaidya pointed out that since automakers are currently investing in both engine-powered vehicles and battery-powered electric vehicles, the merger between Honda, Japan's second largest automaker, and Nissan, number three, will reduce innovation risks.
According to the Nikkei, a combined Nissan-Honda-Mitsubishi enterprise would mean annual sales of more than 8 million cars. This would put the company among the world's largest automakers, but still behind Japanese automaker Toyota Motor and German automaker Volkswagen.
Such a combination would be the largest merger in the automotive industry since Fiat Chrysler merged with France's PSA Groupe to create Stellantis in January 2021.
Recall
Earlier it was reportedthat Nissan Motor lowered its annual profit forecast from 500 to 150 billion yen due to the deteriorating situation in the US and China. The company plans to lay off 9,000 employees and reduce production capacity by 20%.