Nissan could face cost-cutting ‘carnage’ in Honda merger

Nissan will be the victim of cost-cutting “carnage” if it combines forces with Japanese peer HondaFormer Nissan CEO Carlos Ghosn told CNBC on Tuesday.

“I think, without a doubt, Honda will be in the driver’s seat, which is very sad to see after driving Nissan for 19 years. [and] brought Nissan to the front line of the industry, to see that they will be victims of a carnage, because there is a total duplication between Nissan and Honda,” he told CNBC’s “Squawk Box Europe”.

Ghosn, who once led three automakers as part of the Nissan-Renault-Mitsubishi alliance, resided in Lebanon after being arrested in Japan in November 2018 and fleeing trial on charges of financial crimes. He denies wrongdoing.

“There is practically no complementarity here, which means, if they want to do synergy, it will be perhaps through a reduction of costs, duplication of the plan, duplication of technology, and we know exactly who will pay the price of this. to be the junior partner, and it will be Nissan,” said Ghosn.

Nissan had more complements with France RenaultGhosn estimated, referring to a long-standing collaboration that has largely been cancelled.

Speculation of a potential Honda and Nissan merger began earlier this month, and the two companies confirmed the official start of discussions on a commercial integration during a press conference on Monday. Under the current proposals, a holding company would act as the parent of the two companies and be listed on the Tokyo Stock Exchange, with Honda – which has a market capitalization roughly four times that of Nissan – appointing the majority of the board members of the new entity. Nissan strategic partnership Mitsubishi is also engaged in discussions to join the group.

A $54 billion Nissan-Honda group surpassed South Korea Hyundai to become the third largest car manufacturer in the world by vehicle sales, behind Japan Toyota and Germany Volkswagen. The integrated group also represents a landmark in the long-awaited consolidation of the auto industry in Japan and around the world, as companies struggle to cope with vehicle development costs electric and autonomous driving technology.

Executives at Honda and Nissan stressed monday that a combined company could share the intelligence and resources needed to compete in the EV transition and provide economies of scale, increasing operating profit to a 3 trillion yen ($19.1 billion) long-term project.

Nissan embarks on ambitious merger while simultaneously undertaking deep merger restructuring announced in November that it will reduce global production capacity by a fifth and cut 9,000 jobs.

Honda CEO Toshihiro Mibe acknowledged on Monday that some shareholders may feel his company is backing down. the Nissan fight as part of the agreement, but he stressed that the integration talks of the companies “will not get there” if the two builders cannot stand alone.

However, Ghosn told CNBC that the merger plan suggests “Nissan is in panic mode, looking for someone to save it from the situation, because they are not able to generate the solution by themselves.”

He expressed “high doubts” that the turnaround at Nissan will be successful, without providing details.

Kei Okamura, SVP and Portfolio Manager at Neuberger Berman, echoed the sentiment that the details of the merger plan have yet to be worked out.

“If you are an investor, you will think about the three to five prospects of earnings. What has been announced [Monday] it was the near term, so the timeline, and the long term vision. The only problem is how this merged entity will be achieved, and that’s where there are a lot of uncertainties ahead,” Okamura told CNBC’s “Street Signs Asia” on Tuesday.

“Post-merger integration will be absolutely essential … unless these companies are able to really fully integrate together in terms of people, assets and of course culture, these businesses have the potential to unwind, and we must take into consideration that this business cannot happen if [Nissan] it doesn’t come with their turnaround program,” Okamura added.

Nissan declined to comment beyond this story his statement out on Monday. Honda did not immediately respond to a CNBC request for comment.