Nissan-Honda Merger Could Spark Massive Cost-Cutting, Warns Carlos Ghosn

Former Nissan CEO Carlos Ghosn has raised concerns that Nissan may face severe cost-cutting repercussions if the company proceeds with its proposed merger with Honda. Speaking to CNBC, Ghosn predicted that the merger would lead to “total duplication” and put Nissan at a disadvantage, potentially resulting in significant downsizing.

Key Insights:

Carlos Ghosn warned of “carnage” for Nissan if the merger with Honda proceeds.
Honda and Nissan announced initial plans for a potential business integration to boost competitiveness in the electric vehicle (EV) market.
Ghosn believes Nissan’s current struggles make the company overly reliant on external partnerships to address declining sales and profitability.

Ghosn’s Take on the Merger

Ghosn, who previously led Nissan for 19 years, expressed disappointment over the merger, suggesting that Honda would dominate the deal. “Honda will be in the driver’s seat,” Ghosn remarked, lamenting Nissan’s potential role as the lesser partner.

The former executive highlighted the extensive overlap between the two automakers, noting that cost reductions and technology streamlining could harm Nissan. “Duplication of plans and technologies will inevitably cost Nissan dearly,” Ghosn emphasized.

Ghosn’s Legal Battle

Currently residing in Lebanon, Ghosn faces financial misconduct charges in Japan. Arrested in 2018, he fled the country while awaiting trial. Despite the legal challenges, he continues to voice his perspectives on Nissan’s strategic moves.

The Bigger Picture

Earlier this month, speculation surrounding the merger intensified, culminating in Honda and Nissan’s joint announcement to explore integration. The proposed plan includes creating a holding company listed on the Tokyo Stock Exchange, with Honda expected to nominate most of the board members. Nissan’s partner Mitsubishi is also participating in the discussions.

Should the merger proceed, the $54 billion Nissan-Honda entity would surpass Hyundai, positioning itself as the world’s third-largest automaker after Toyota and Volkswagen. This consolidation reflects broader industry trends, as automakers strive to manage the soaring costs associated with EV and autonomous vehicle development.

Market Reactions and Future Outlook

Honda’s stock surged following the announcement, experiencing its best performance in over 16 years. Executives from both companies highlighted the benefits of resource-sharing, projecting operating profits of approximately 3 trillion yen ($19.1 billion) post-merger.

However, Nissan’s restructuring efforts add complexity to the deal. Announced in November, Nissan’s restructuring involves reducing global production capacity by 20% and cutting 9,000 jobs.

Honda CEO Toshihiro Mibe acknowledged shareholder concerns about supporting Nissan but stressed that the merger’s success hinges on the automakers’ individual resilience. “The integration won’t happen unless both companies prove their stability,” Mibe clarified.

Uncertain Road Ahead

Ghosn expressed skepticism about Nissan’s ability to turn its fortunes around independently. “Nissan seems to be in panic mode, seeking salvation externally,” he commented.

Analysts like Kei Okamura of Neuberger Berman echoed Ghosn’s caution, citing uncertainties regarding post-merger integration. “The next three to five years will determine the success of this merger,” Okamura stated. He underscored the importance of cultural and operational alignment between the two companies, warning that failure to integrate could derail the merger.

Conclusion

As Nissan and Honda chart the course for potential integration, the automotive industry watches closely. While the merger could unlock new opportunities in EV innovation, the challenge lies in balancing cost efficiencies without jeopardizing Nissan’s long-term stability.

Both Nissan and Honda have yet to provide further comments, though official statements released on Monday confirm the ongoing discussions.