two Japanese giants sign an agreement for a possible merger

Honda y Nissantwo of Japan’s three largest automakers, announced the start of negotiations for a merger that could make it the third largest car sales groupafter Toyota and Volkswagen.

Both companies signed their third memorandum of understanding today (the other two occurred last March and August), seeking a strategy that seeks to consolidate resources and strengthen their position in the competitive electric vehicle market, dominated by Tesla and Chinese manufacturers.

Throughout the process, Nissan and Honda have engaged in discussions in which various possibilities and options have been taken into account, allowing Mitsubishi Motorsa member of the Nissan alliance, will also join the merger.

Both companies will establish an integration preparatory committee to facilitate a smooth integration that is estimated to be completed by mid-2025.

Commenting on the announcement, Makoto Uchida, chairman, president, CEO and executive representative of Nissan, said: “Today is a decisive moment as we begin conversations about business integration that has the potential to shape our future. If Specifically, I believe that by bringing together the strengths of both companies, we will be able to offer unparalleled value to customers around the world who appreciate our respective brands. Together, we can create a unique way for them to enjoy vehicles, unlike any other. the two companies could achieve by themselves alone”.

For his part, Honda director and executive representative, Toshihiro Mibe, said: “Creating new mobility value by uniting the resources, including the knowledge, talents and technologies that Honda and Nissan have been developing for many years is essential to overcome the challenging environmental changes facing the automotive industry. Honda and Nissan are two companies with distinctive strengths.

Based on the committee’s discussions, as well as the results of due diligence, the companies will examine and analyze more specific synergies. By quickly realizing the synergies of the integration, Nissan and Honda can aim to become a world-class mobility company with sales revenues exceeding 190 million dollars and operating profits of more than $19 million.

The synergies expected from business integration at this time are:

1. Scale advantages through standardization of vehicle platforms

• By standardizing both companies’ vehicle platforms across various product segments, the companies hope to create stronger products, reduce costs, improve development efficiency, and improve investment efficiency through standardized production processes.

• The integration is projected to increase sales and operating volumes, allowing companies to reduce development costs per vehicle, including future digital services, while maximizing profits.

• By accelerating the mutual complementation of their global vehicle offerings, including electrified models, Nissan and Honda will be better positioned to meet the diverse needs of customers around the world and deliver optimal products, leading to greater customer satisfaction.

2. Improved development capabilities and cost synergies by integrating research and development (R&D) functions

• Pursuant to the memorandum of understanding to deepen strategic partnership and joint research agreement on core technologies dated August 1, the two companies have begun joint research on core technologies in the area of ​​vehicle platforms for defined vehicles next-generation software delivery (SDV), which is the cornerstone of the intelligence field.

Following the business integration, both companies will encompass more integrated collaboration across all R&D functions, including fundamental research and vehicle application technology research.

This approach is expected to enable both companies to efficiently and quickly enhance their technological expertise, achieving both improvements in development capabilities and reductions in development costs through the integration of overlapping features.

3. Optimization of manufacturing systems and facilities

• The companies anticipate that optimizing their manufacturing plants and energy service facilities, combined with improved collaboration through shared use of production lines, will result in a substantial improvement in capacity utilization, leading to to a reduction in fixed costs.

4. Strengthening competitive advantages throughout the supply chain through the integration of purchasing functions

• To make the most of the synergies derived from optimizing development and production capacity, both companies aim to boost their competitiveness by improving and streamlining purchasing operations and obtaining common parts from the same supply chain and in collaboration with business partners.

5. Achieving cost synergies through improvements in operational efficiency

• Companies expect that the integration of back-office systems and operations, along with the updating and standardization of operational processes, will drive significant cost reductions.

6. Acquiring scale advantages by integrating sales financing functions

• By integrating the relevant areas of the sales financing functions of both companies and expanding the scale of operations, the companies aim to provide a range of mobility solutions, including new financial services throughout the vehicle life cycle, to clients of both organizations.

7. Establishing a talent base for intelligence and electrification

• Business human resources are an invaluable asset, and establishing a solid human resource base is crucial to the transformation that will come with business integration.

After integration, increased employee exchanges and technical collaboration between companies are expected to promote further skill development. Additionally, by leveraging each company’s access to talent markets, it will be more achievable to attract exceptional talent.