The Alliance of the Weak: Nissan and Honda Announce Plans for Business Integration

Nissan turned to its home rival and partner, Honda, to save it from its difficult financial situation. With an aging and unattractive lineup, Nissan took a hit when its former partner, Renault, announced its intention to sell its share in the Japanese carmaker. This will mark the end of a 25-year partnership that saved the company in 1999 from another crisis. Many believe that the Renault-Nissan Alliance only worked thanks to the genius of Carlos Ghosn, Renault's CEO at the time.

Earlier rumors that the two companies are considering a merger have been officially confirmed after signing a memorandum of understanding (MOU). This precedes talks about a business integration between the two companies through the establishment of a joint holding company. The new company will be created through a joint share transfer, with the holding becoming the parent company of both carmakers.

While both Nissan and Honda will become fully owned subsidiaries of the joint holding company, they will continue to coexist as separate brands. However, they will benefit from joint R&D and development, as well as economy of scales afforded by their combined bargaining power. This will also be helped by standardizing vehicle platforms across the new group's brands.

For the intent and purpose of the new holding company, this is similar to a merger between Nissan and Honda, with equal rights. Akin to the "Merger of the Equals" initiated by Daimler and Chrisler in 1998, the Nissan-Honda Alliance might have a similar fate. Many consider it an "alliance of the weak," as neither company has a strong financial position.

The integration of Honda and Nissan under one holding company would create the third-largest auto group by vehicle sales after Toyota and Volkswagen. It's also the highest-profile merger in the auto industry since Fiat Chrysler Automotive and PSA merged in 2021 to create Stellantis. By the way, this is another merger that did not produce the desired results, with the American part of the business essentially divorced from its European side.

Former Nissan CEO Carlos Ghosn has already expressed doubts about the merger. Reuters cited Ghosn as saying that "the plan doesn't make sense" because there's no complementarity between the two carmakers. Ghosn's doubt echoes a consistent trend across the automotive industry, which has been terrible at keeping partnerships alive.

Both Nissan and Honda have lost ground in the world's biggest market, China, to BYD and other local brands. The market shifted toward electric and hybrid cars powered by innovative software, something neither Nissan nor Honda are known for.