Carlos Ghosn, the fugitive former chairman of Nissan, warned that the automaker could suffer significant cost-cutting impacts if the proposed merger with Honda proceeds.
In an interview with CNBC on December 24, Ghosn, now residing in Lebanon, shared his concerns about the potential merger between the two Japanese automakers.
Ghosn expressed disappointment, noting that Honda appears to be taking the lead in the merger talks. This, he said, was particularly regretful given his 19-year tenure at Nissan, during which he elevated the company to industry prominence. He also lamented that both companies are becoming victims of redundancy, describing the merger as a "cost-cutting bloodbath."
Ghosn, who previously led the Nissan-Renault-Mitsubishi alliance, fled Japan in late 2019 after being arrested in November 2018 on charges of financial misconduct, including hiding income and misusing funds. Nissan dismissed him, and Ghosn has denied all charges, claiming the evidence was fabricated.
Concerns About Redundancy
Ghosn emphasized that Honda and Nissan lack clear synergies, and any potential collaboration would likely rely on reducing redundancies in plans and technologies. As the smaller partner, Ghosn said, Nissan would bear the brunt of these cost-cutting measures.
Reflecting on his tenure, Ghosn highlighted how the Nissan-Renault partnership offered more complementarities compared to the current Honda-Nissan talks.
During his leadership, Ghosn earned the nickname "Cost Killer" for his aggressive cost-cutting measures, including job cuts, factory closures, and efficiency optimizations, which helped revitalize Renault and bring Nissan back to profitability within two years.
Merger Talks Progress
Last week, Nissan and Honda confirmed they had entered formal discussions about a potential merger. Under the current proposals, a holding company would serve as the parent entity and be listed on the Tokyo Stock Exchange. Honda, with a market capitalization four times larger than Nissan’s, would nominate the majority of the board members. Mitsubishi, Nissan's strategic partner, is also considering joining the talks.
The $54 billion Honda-Nissan alliance would surpass South Korea’s Hyundai to become the world’s third-largest automaker by sales, trailing only Toyota and Volkswagen. The merger also represents a pivotal moment in the global auto industry, long anticipated as companies struggle to afford the development of electric vehicles (EVs) and autonomous driving technologies.
Executives from both Honda and Nissan emphasized in a December 23 press conference that the merged entity would enable resource sharing and scale efficiencies, boosting long-term operating profits to a projected 3 trillion yen ($19.1 billion).
Challenges for Nissan
Nissan is pursuing this ambitious merger while implementing a sweeping restructuring plan announced in November, which includes a 20% reduction in global production capacity and 9,000 job cuts.
Honda CEO Toshihiro Mibe acknowledged concerns from shareholders that Honda might be propping up a struggling Nissan. However, he emphasized that the merger discussions would not move forward unless both automakers could stand independently.
Ghosn criticized the merger as evidence that "Nissan is in a state of panic, looking for someone to save them from their current situation because they cannot create a solution themselves." He expressed "serious doubts" about Nissan’s ability to recover without offering specific details.
Investor Outlook
Kei Okamura, senior vice president and portfolio manager at Neuberger Berman, cautioned that the merger’s details must be finalized, advising investors to consider the 3–5-year profit outlook. He noted that the announcements made on December 23 were short-term plans, leaving key questions about achieving the projected profits.
Okamura stressed the importance of post-merger integration. "If the companies cannot truly integrate their people, assets, and cultures, the deal risks falling apart," he said. He also warned that the merger might not happen if Nissan fails to execute its restructuring program successfully.
(Sources: CNBC, Reuters, WSJ)
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