The Japanese automakers Honda and Nissan are discussing a possible merger, in a bid to share costs and help themselves compete in a fast-changing and increasingly competitive industry.
But a merger, even of two companies from the same country, is no guarantee of success, and the history of automotive deals is littered with failures and disappointments.
Combining two large, global manufacturing operations is an incredibly difficult feat that involves reconciling different technologies, models and approaches to doing business. A merger’s success rests on getting ambitious managers and engineers who have spent decades competing with one another to cooperate. Teams and projects have to be scrapped or changed, and executives must cede power to others. In some cases, the merging companies are hamstrung by elected leaders who force them to keep operating money-losing factories.
Thomas Stallkamp, an automotive consultant based in Michigan, was involved in the struggles of one of the biggest auto mergers, the 1998 merger of Chrysler and the German company Daimler. Mr. Stallkamp spent years in senior roles at Chrysler and DaimlerChrysler.
“Car companies are big, complicated organizations, with large engineering staffs, manufacturing plants all over the world, hundreds of thousands of employees, in a capital-intensive business,” Mr. Stallkamp said. “You try to put two of them together and you run into a lot of egos and infighting, so it’s very, very difficult to make it work.”
Honda and Nissan announced plans this year to work together on electric vehicles, and on Monday they formally began talks about extending that cooperation to a merger that could also include Mitsubishi Motors, a smaller manufacturer that works closely with Nissan. A pairing would unite Japan’s second- and third-biggest automakers, after Toyota, and create a company that would be the third largest in the world by number of cars produced, after Toyota and Volkswagen.
The merger discussions were prompted by difficulties the companies are facing around the world.
Chief among those problems is that sales have plummeted in China, the world’s largest auto market. Chinese car buyers are moving much more quickly to electric and plug-in hybrid cars and trucks than most industry experts had expected. Honda and Nissan offer few such models, which now account for more than half of all cars sold in China. Companies that are doing the best in the shift away from gasoline cars are domestic manufacturers like BYD and SAIC, as well as Tesla.
Last month, Honda said it expected net profit for the fiscal year ending in March to fall 14 percent, and lowered its forecast for global vehicle sales to 3.8 million from 3.9 million, largely as a result of its difficulties in China, which had once accounted for about a third of its sales.
Nissan has more significant troubles than Honda and in recent years has slogged through management upheaval. In the United States, a critical market where Nissan used to earn significant profits, the company’s market share has fallen sharply as it struggles to sell cars and trucks that haven’t received significant upgrades in recent years. In the period from April to September, Nissan’s operating profit plunged 90 percent, and the automaker recently said it aimed to lose 9,000 employees worldwide and cut global production by about 20 percent.
A merger could help Honda and Nissan develop electric cars faster and at lower cost — in theory. But other companies have struggled to achieve such gains in practice, often because the priorities of companies working together often shift and diverge. Ford Motor and Volkswagen teamed up a few years ago to work on electric vehicles and autonomous driving technology. But the companies shut down their self-driving car business and reaped few benefits from collaborating on electric vehicles.
Honda had a partnership with General Motors, and currently sells two electric sport utility vehicles, the Honda Prologue and Acura ZDX, that are manufactured by G.M. But the companies have decided not to extend the partnership beyond those two models, and G.M. is now exploring ways to work with Hyundai, the South Korean automaker.
Still, analysts said a merger of Honda and Nissan had the potential to help both companies. In the United States, the two companies have similar product lines focused on small and medium-size cars and sport utility vehicles like Nissan’s Sentra, Altima and Rogue and Honda’s Civic, Accord and CRV.
Sam Fiorani, a vice president at Auto Forecast Solutions, a research firm, said Nissan had the technology to build full-size pickup trucks bought by many Americans, something Honda lacks. “That’s something that could be valuable for Honda in the future,” he said.
On the production side, Nissan has two vehicle assembly plants in the United States and Honda has four. Each also has engine and transmission factories and engineering centers.
They could in theory reap savings by combining their operations, closing some plants and locations and eliminating jobs. But that’s where the difficulties are likely to arise.
“That means one of the two merger partners is going to gut their development organization or scrap their engine program, and that where you always run into heavy resistance,” Mr. Stallkamp said. “When it comes down to it, neither side wants to take the hit.”
In many cases, downsizing measures run into political opposition because governments push companies to preserve jobs. Stellantis was formed in a 2021 merger of France’s Peugeot and Fiat Chrysler, and the French and Italian governments have fought to keep the combined company from closing factories.
After some initial success, Stellantis this year has suffered a slump in vehicle sales and a drop in profit. The chief executive who helped shepherd the merger, Carlos Tavares, resigned this month. The company, now run by a board committee, is looking for a new top executive and scrapping parts of the strategy it put in place after the merger.
For more than two decades Nissan was the junior partner in an alliance with Renault. The partnership saved Nissan from collapse and helped it become profitable, but neither company saw the kind of long-term success that had been envisioned by Carlos Ghosn, who had led the alliance and served as chief executive of both companies.
Eventually, executives at Nissan chafed at being effectively controlled by Renault. In 2018, Mr. Ghosn was arrested and jailed in Japan on charges of financial wrongdoing. He fled to Lebanon before a trial. Renault still owns a significant stake in Nissan, but the two don’t work as closely together as they used to.
DaimlerChrysler faced few battles over closing plants, but struggled to merge a luxury carmaker with an automaker that made more affordable models. The combined company had a balky management structure that included two executives sharing power at the top, and with vast cultural differences between its German and American operations. The two sides separated in 2007 after nine years.
“It was a constant battle of egos on both sides,” Mr. Stallkamp said.
Other partnerships that proved disappointing include BMW’s takeover of Britain’s Rover in the 1990s. Ford owned all or part of Jaguar Land Rover, Mazda and Volvo but sold those assets during and after the 2008 financial crisis.
A few automotive mergers have seemed to live up to expectations. Fiat Chrysler — formed when Fiat, an Italian automaker, took over Chrysler as the American company was emerging from bankruptcy — is one example of a merger that seemed to flourish. Under its chief executive, Sergio Marchionne, the Chrysler part of the business, which also included the Dodge, Jeep and Ram brands, recovered and became the more profitable half of the combined company.
The South Korean automakers Hyundai and Kia, which have been in an alliance since 1998, are together one of the world’s largest automakers and have enjoyed strong growth in recent years. They share development, engineering and manufacturing resources, but have separate sales and marketing operations.
Marc Cannon, a consultant who was a senior executive at AutoNation, a large automotive retailer, said Honda and Nissan could try to emulate Hyundai and Kia, but he expressed doubts about how well the Japanese companies would fare.
“Honda is still a great brand with great products. Nissan’s brand has been damaged with all the turmoil they’ve had in the last few years, and their quality is not great,” Mr. Cannon said. “So it doesn’t make that much sense to me. Why would Honda be interested in taking on Nissan’s problems?”
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