Star Metro - Honda and Nissan expected to begin merger talks

Their collaboration would create the world's third largest automaker, expanding development of EVs and self-driving tech while coming to the rescue of struggling Nissan.

The pair have not released any details publicly but it was widely reported in Japanese media that they would sign a memorandum of understanding on Monday afternoon.

Honda and Nissan -- Japan's number two and three automakers after Toyota -- are aiming to finalise a merger deal in June 2025, several media outlets said.

Mitsubishi Motors, which could join the new holding company early next year, is also expected to take part in Monday's announcement, after Honda and Nissan hold board meetings.

In the morning, the presidents of Honda, Nissan and Mitsubishi Motors told the industry and transport ministries of their plan to start negotiations, Kyodo News reported.

Honda and Nissan's partnership could include a manufacturing tie-up where they build vehicles at each other's plants, Kyodo said, citing sources close to the matter.

Lacklustre consumer spending and stiff competition in several markets is making life hard for many automakers.

Business has been especially tough for foreign brands in China, where electric vehicle manufacturers such as BYD are leading the way as demand grows for less polluting vehicles.

China overtook Japan as the biggest vehicle exporter last year, helped by government support for EVs.

"We hope Japanese companies will take steps to respond to these changes and take measures to survive and win amid international competition," top government spokesman Yoshimasa Hayashi said Monday.

He declined to comment on the merger reports but highlighted the "importance of strengthening competitiveness in areas such as... batteries and in-vehicle software".

Debt-laden Nissan last month announced thousands of job cuts as it reported a 93 percent plunge in first-half net profit, making a merger with Honda welcome news.

But Taiwanese electronics manufacturer Foxconn has also reportedly sensed an opportunity.

Foxconn, which builds devices for tech companies including Apple's iPhones, first unsuccessfully approached Nissan with a bid to acquire a majority stake, according to Bloomberg.

Then a Taiwanese media outlet said Foxconn's Jun Seki -- a former Nissan executive -- had visited France to ask Renault to sell its 35 percent share of Nissan, although reports later said this pursuit had been put on pause.

Honda and Nissan had already agreed in March to explore a strategic partnership on software and components for EVs among other technologies.

This partnership was joined in August by Mitsubishi Motors, of which Nissan is a majority shareholder.

Nissan has weathered a turbulent decade, including the 2018 arrest of former boss Carlos Ghosn, who later jumped bail and fled Japan concealed in a music equipment box.

Kyodo said that Honda would ask Nissan to achieve a "V-shaped recovery" in performance as a condition for the merger.

D.Ch. Nadeau--SMC