Merger Overview

Honda Motor Co., Ltd. has a rich history of strategic mergers and partnerships that have bolstered its market presence and technological capabilities. One notable example is Honda’s acquisition of a 20% stake in Proton Holdings, a Malaysian automaker, back in 2012. This move was aimed at expanding Honda’s footprint in the Southeast Asian market, enhancing its competitiveness in a region ripe with potential.

Fast forward to 2015, Honda formed a joint venture with Hitachi Automotive Systems, Ltd. to develop and manufacture electric motors for hybrid and electric vehicles. This collaboration was a significant step in strengthening Honda’s position in the burgeoning market for electrified vehicles, showcasing its commitment to innovation and sustainability.

In 2020, Honda announced a partnership with General Motors to develop two new electric vehicles for the North American market. This collaboration leveraged the strengths of both automotive giants, combining Honda’s engineering prowess with GM’s advanced battery technology to create competitive and innovative products.

These strategic moves highlight Honda’s proactive approach to mergers and partnerships, setting a precedent for the potential success of the Honda-Nissan merger. By pooling resources and expertise, Honda Motor Co., Ltd. continues to position itself as a formidable player in the global automotive industry.

The media reported big news about a possible merger between Honda and Nissan. Here’s an analysis of the deal, our hot take, and how it can be relevant to you as an entrepreneur. But first, let’s run through a list of the top-selling cars by rank today.

The top 10 selling cars in the world by sales:

1. Volkswagen AG (VWAGY): Revenue – $284.34 billion
2. Toyota Motor Corp. (TM): Revenue – $270.58 billion
3. Stellantis (STLA): Revenue – $181.58 billion
4. Mercedes Benz AG (MBGYY): Revenue – $156.23 billion
5. Ford Motor Co. (F): Revenue – $151.74 billion
6. General Motors (GM): Revenue – $147.21 billion
7. Honda Motor Co. Ltd. (HMC): Revenue – $126.17 billion
8. Tesla Motors (TSLA): Revenue – $74.86 billion
9. Nissan Motors (NSANY): Revenue – $73.73 billion
10. BYD Co. Ltd. (BYDDY): Revenue – $51.37 billion

The automobile industry is a tight-knit market with very high entry barriers. It’ll take a deep pocket to make a mark in the industry, like Alphabet’s Waymo. So, we witness occasional mergers and acquisitions for companies to scale in the industry. For example, in 1989, Ford acquired Jaguar Cars for $2.5 billion, expanding its luxury vehicle portfolio.

Also, a merger between Fiat Chrysler Automobiles (FCA) and PSA Group to form Stellantis, in a deal valued at $52 billion then, proved to be even more valuable as the company grew to be among the top three (3) car makers in 2024. A spot that a merger between Honda and Nissan could comfortably claim and allow them to compete for the number one spot with Volkswagen and Toyota by catapulting the duo into the top 3.

Reports from the Media: Insights from a Senior Vice President

Most media outlets acknowledge that a merger between Honda and Nissan would make them the third (3rd) largest automaker in the world amid rising competition from China and serious investments required in EV technology. Sales of Honda in China have drastically reduced, with increased demand from Chinese automakers, which produce electric vehicles with many cool, tech features. Also, Chinese vehicles are outpacing Japanese vehicles in the exportation of cars. So, a merger between Honda and Nissan would be a positioning chess move into the electronic car market and reviving global demand.

Honda is the 2nd largest automobile company in Japan, behind Toyota, while Nissan is the 3rd largest automaker. Therefore, a merger between Honda and Nissan, along with Mitsubishi (in consideration), would create a company that could top Toyota as the largest automobile company in Japan. Furthermore, Japanese automakers have been late to the EV party and would need to invest heavily to catch up on lost time, and the merger can provide much-needed resources. Even Toyota is behind the EV trends, still dabbling with hydrogen power. The merger would also see the appointment of a new Representative Director to oversee the integration and strategic direction of the combined entity.

Generally, analysts view both Honda and Nissan shares as undervalued but are skeptical about the merged entity’s ability to defend against competition from Tesla and Chinese EV manufacturers. Also, the merger could provide short-term relief for Nissan’s financial struggles (Nissan has not been able to turn profits and had to cut down over 10,000 jobs), but the combined entity would face challenges such as overlapping operations and extinction of some flagship products, like the Nissan Infinity line.

M&A Synergies and How They Apply to Your Corporate Management Operations

The general media outlook is that a larger company (Honda) is merging with a weaker company (Nissan) to face rising competition from Chinese Automobile companies and compete favourably with the number one company in Japan (Toyota). While this is true, at CFO Pro+Analytics, we consider this a strategic alliance from which even business owners and founders can learn. Consolidating resources will help both companies enhance their competitive stance in the rapidly evolving electric vehicle (EV) market and jump in the ring with the already-established Tesla.

We all have that friend who loves a particular car brand and will drive nothing else. So, a merger between Honda and Nissan will also create a union of loyal customers. The combined sales and operational efficiencies from cost cuts of duplication operations can lead to increased revenue and more profit. Both companies will share knowledge and resources as they both have in the EV space to push them forward. Nissan would learn from Honda’s management efficiency, and Honda could learn from Nissan’s safe driving features. A Senior Vice President from Honda could lead the integration of the two companies’ product lines, ensuring that the strengths of both brands are leveraged effectively.

Honda’s flagship product is the Honda Accord, which is known for its beauty, reliability, and safety features and has been dominant in the sedan market. Still, recent sales have plummeted due to rising competition from electronic and intelligent vehicles.

While the Nissan Rogue, a compact SUV with cutting-edge technology, is Nissan’s best-selling car in the United States, however, the product does not have the same global reach as the Honda Accord.

With Honda’s strength in sedan vehicles and Nissan with SUVs and trucks, a merger can help both companies improve across all product lines.

The potential Honda-Nissan merger offers valuable insights for small business owners contemplating mergers or acquisitions:

1. Complementary Strengths Matter: Just as Honda excels in sedans while Nissan dominates in SUVs, entrepreneurs should look for merger partners whose strengths complement their weaknesses. Consider how your combined capabilities could strengthen your market position. For instance, if your company has strong product development but weak distribution, merging with a company with established distribution channels could create immediate value.
2. Market Position Strategy The merger would make Honda-Nissan the third-largest automaker globally. While small businesses operate on a different scale, the principle remains: consider how a merger could improve your competitive position in your market. Could combining forces help you better compete with more prominent players or expand into new territories?
3. Cost Efficiency Through Integration Like Honda and Nissan, which want to eliminate duplicate operations, small businesses should identify potential cost savings through merged operations. This might include:

• Shared administrative functions
• Combined facilities
• Unified technology systems
• Streamlined workforce

4. Cultural Integration Challenges Both companies face cultural integration challenges, as Japanese firms have different corporate cultures. Similarly, small business owners must carefully evaluate cultural fit and plan for integration challenges. Consider:

• Management styles
• Company values
• Operating procedures
• Employee expectations

5. Innovation and Technology Sharing The merger aims to accelerate EV development through shared resources. Small businesses should evaluate how combining technological capabilities or intellectual property could drive innovation and create competitive advantages.
6. Customer Base Expansion Just as Honda and Nissan would unite their loyal customer bases, consider how a merger could expand your customer reach. Look for opportunities to cross-sell products or services to each other’s established customers.

Remember: While mergers can offer significant benefits, they also come with risks and challenges. Careful due diligence, clear communication, and thorough integration planning are essential for success at any scale.

Industry Impact and Competition

In the fiercely competitive automotive industry, Honda Motor Co., Ltd. stands out as a leader, constantly innovating to stay ahead of the curve. The company faces stiff competition from other major automakers like Toyota, Volkswagen, and General Motors. To maintain its competitive edge, Honda focuses on three key pillars: innovation, quality, and customer satisfaction.

Honda’s commitment to innovation is evident in its development of advanced technologies, including hybrid and electric powertrains, autonomous driving systems, and cutting-edge safety features. This relentless pursuit of technological advancement ensures that Honda remains at the forefront of the industry.

Quality is another cornerstone of Honda’s strategy. The company’s rigorous testing and inspection processes guarantee that its products meet the highest standards of reliability and performance. This dedication to quality has earned Honda a loyal customer base and a reputation for producing dependable vehicles.

Customer satisfaction is paramount for Honda. The company builds strong relationships with its customers through an extensive dealership network and robust customer service programs. Engaging with customers via social media and other digital channels allows Honda to gather valuable feedback and continuously improve its products and services.

Honda’s regional operations are meticulously coordinated to align with its global business objectives. Kazuhiro Takizawa, Honda’s Managing Executive Officer, oversees the company’s North American operations, ensuring seamless integration of manufacturing, sales, and marketing activities. The Regional Operation Planning Division plays a crucial role in this coordination, driving Honda’s strategic initiatives across different markets.

Eiji Fujimura, Honda’s Chief Financial Officer, is at the helm of the company’s financial management, overseeing accounting, finance, and investor relations. Fujimura’s expertise ensures that Honda’s financial performance aligns with its business goals, driving growth and profitability.

Shinji Aoyama, the Senior Managing Executive Officer and Chief Operating Officer, oversees Honda’s global operations. His extensive experience and leadership skills are instrumental in driving operational excellence and maintaining Honda’s competitive edge.

At the top of the leadership hierarchy is Toshihiro Mibe, Honda’s Chief Executive Officer and Representative Executive Officer. Mibe’s vision and strategic direction have been pivotal in steering Honda towards growth and innovation, reinforcing its reputation as a trusted and reliable brand.

Honda’s Executive Officers, including the Chief Officer of Corporate Management Operations and the Chief Officer of Business Management Operations, work collaboratively to achieve the company’s strategic objectives. The Deputy General Manager of the Automobile Development Center plays a key role in overseeing the development of Honda’s automotive products, including its hybrid and electric vehicles.

In summary, Honda Motor Co., Ltd. is a powerhouse in the global automotive market. Its strong brand reputation, unwavering commitment to quality and customer satisfaction, and relentless focus on innovation ensure that Honda remains a dominant force in a rapidly evolving industry.

About the Author: Perspectives from a Fractional CFO

Salvatore Tirabassi is a seasoned Chief Financial Officer and change agent with over 25 years of success transforming finance to innovate, grow, and increase shareholder value. Based in or operating out of the New York City Area, Salvatore specializes in providing Fractional CFO services to businesses, offering strategic financial guidance to drive growth and success. Connect with Salvatore on LinkedIn or CFO PRO+Analytics for more financial management and strategic planning insights.