As we know, Honda and Nissan have reached an agreement in principle concerning closer collaborations, and possibly a merger. Before something of that magnitude can happen, there are items to be negotiated, of course.
One of those items, as reported by Kyodo News, is Renault's shares in Nissan. Honda has reportedly asked Nissan whether it is in a position to acquire Renault's stake, which is valued at 35.7 percent. This is equivalent to some 3.6 billion USD. The alliance between Nissan and Renault dates back to 1999, and Mitsubishi joined the group in 2016.
Foreign influence
Honda’s concern is that Nissan could fall under unwanted foreign influence if Renault's stake were bought by a third party while negotiations to absorb Nissan are underway. Kyodo News cited sources close to the matter, but who did not wish to be identified.
The announcement of Honda's negotiations with Nissan was preceded by a fair amount of speculation, some of which concerned iPhone manufacturer Hon Hai Precision Industry, also known as Foxconn. That group was interested in a partial or total takeover of Nissan in order to use its production capacity and support its own foray into electric vehicles.
The Japanese government would not have liked to see one of its automakers pass into Taiwanese hands. Honda and Nissan say they plan to announce the framework of their agreement by the end of the month, and that they aim to float a separate company combining the two companies by August 2026.
Easier said than done
It’s not clear if Nissan has the funds to buy Renault's stake. Nissan's market value has fallen to around 1.56 trillion yen, while its cash and cash equivalents stood at around 1.52 trillion yen on December 31.
Nissan is experiencing financial difficulties, which partly explains the interest in a tie-up with Honda. In November, Nissan announced it was laying off 9,000 workers and cutting a fifth of its production capacity after a 94-percent drop in net profit in the first half of its fiscal year.
Nissan now expects its operating profit to fall to 150 billion yen for the year ending March, down 70 percent on its previous forecast.
Management has also lowered its revenue forecast by more than 9 percent, meaning that it hardly expects any further growth for the year.