Prime Highlights:
Former Nissan CEO Carlos Ghosn warns that Nissan may face severe problems if it merges with Honda, calling it a “carnage” because of duplication of resources between the two automakers.
Ghosn predicts that Honda would lead the way in the merger, and Nissan would take most of the cost-cutting measures since there is virtually no complementarity between the two companies.
Nissan and Honda have confirmed that they are in talks to possibly integrate their businesses into a $54 billion automaker, which would make it the world’s third-largest by vehicle sales.
Key Background:
Former Nissan chief Carlos Ghosn said, “It would be a merger which would bring only carnage to Nissan and expressed his fear that the firm would get mercilessly punished in the event of a merger.” He told the media that there will be serious duplication of resources and major job cuts which are bound to take place as both the companies can never be operated on identical patterns. He further prophesies that the integration process would experience Honda at its leadership, but Nissan will, no doubt, take some blows to cut the flab as the complementarities between the companies are inapplicable.
Ghosn, who led Nissan for 19 years and was instrumental in the company’s rise to global prominence, feels that Honda’s strength will overshadow Nissan’s in this merger, which he terms a “sad” situation for the company. “Nissan will be the minor partner, and sacrifices will be the highest,” Ghosn said. Comparing it with the previous alliance that Nissan had with Renault, Ghosn said it was more complementary in terms of strengths.
This warning came after Nissan and Honda announced they were in talks over potential business integration to strengthen their positions in an evolving electric vehicle market. A merger would create a $54 billion group and make it the world’s third-largest automaker by vehicle sales behind only Toyota and Volkswagen. Honda’s market capitalization is four times that of Nissan’s, and under the plan proposed, Honda would nominate most of the new entity’s board. Mitsubishi, Nissan’s strategic partner, also participates in the talks.
Although the two firms argue of the advantage of the pool of common resources and economy of scales, Ghosn finds Nissan investment as a move of a last resort with the backdrop of the previous company restructuring involving massive layoffs and cutting of its production. However, Industry analysts are being cautious pointing out that successful integration on culture, people, and resources is mainly what makes the merger success. “If that doesn’t come off, the deal may unravel,” warn the industry analysts.