Nissan has made a huge move and replaced their current CEO with a veteran of Nissan and a real car guy, Ivan Espinosa. Makoto Uchida resigned under pressure as the automaker struggles with falling sales and high debt. The failed Honda merger was blamed on him. New CEO Ivan Espinosa may revive stalled merger talks with Honda, which could create one of the world’s largest automakers. Mitsubishi’s involvement remains uncertain, but negotiations could accelerate soon.
Ivan Espinosa joined Nissan in 2003 as a product planner in the brand’s Mexican division. He’s held a dozen positions within the brand since, so he brings a massive amount of experience to the CEO’s office, but the problems that he will need to solve are massive as well.
We recently talked about Nissan’s challenges, and that insiders admitted that the company had “12 to 14 months to survive” if it didn’t find an investor, as executives announced plans to slash 9,000 jobs and reduce the group’s global production capacity by 20%. Nissan is facing headwinds in the United States and China, two of the biggest markets in the world.
In China, Nissan is among the many global carmakers that have lost ground amid a cutthroat price war and consumers’ shift away from conventional gas-powered vehicles. Its global sales in January fell 5.9% from a year earlier.
The merger with Honda blew up, and it still hasn’t found an investor. In theory, Nissan now has less than a year to live. So, what’s next?
What Uchida’s resignation means for the canceled merger with Honda isn’t clear yet. Talks could continue after April 1st when the new CEO steps in. The original merger or alliance would place Honda and Nissan on equal footing in spite of the vast differences in size and revenue that separate them. While Mitsubishi, which Nissan has a 24% stake in, had decided not to get into the merger.
Let’s reflect on Nissan for a moment. Nissan turned to a non-Japanese executive for a turnaround in 1999, when it tapped Carlos Ghosn for a top role. Ghosn, who was born in Brazil and grew up in Lebanon, went on to serve as chief executive and chairman before he was arrested in Japan in 2018 over financial charges that he denied. The company’s stock price and global sales sank after the arrest and haven’t recovered since.
I believe that the Japanese government put pressure on Honda to make this merger work in order to save face. The Japanese culture is very proud, and they would prefer a merger versus a potential failure. The impact to the Japanese economy could be jarring and have global impact.
Much like President Trump and Zelinsky, Honda holds all the cards. Honda can make or break this possible merger and Nissan is in no place to make any demands. If Nissan wants to survive they need money and business guidance.
Honda and Nissan could have instantly formed the world’s third-largest carmaker behind Toyota and Volkswagen. Toyota has a partnership with Mazda and Subaru, which are Japanese brands.
It’s not terribly far-fetched to imagine that Nissan could use Honda’s technology to fast-track hybrids and plug-in hybrids, or that Honda might get some truck experience from Nissan. But this is speculation and their first attempt to create a merger failed. The merger presented to Nissan should be the life preserver it needs to stay afloat.
Insiders familiar with the past negotiations reported that what started as a merger of equals part turned into a full-on takeover by Honda, which is worth nearly five times more than Nissan and stands has a better financial standing. Nissan refused to become a Honda subsidiary, and that lead to a quick ending the conversations.
Other potential buyers include Taiwan-based electronics that builds Apple devices manufacturer Foxconn. Honda must see some kind of long term financial benefit for this relationship to work, as with any buyer. Any other interested party will have to consider Nissan’s past history with past president Carlos Ghosn is a consideration.
We will be giving you updates as they unfold.
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