How Nissan’s Pride And Inability To Accept Reality Reportedly Killed The Honda Merger

It seems Nissan cannot get out of its own way. If the first step is admitting you have a problem, the second step might be admitting how big of a problem you actually have. Nissan, as a company, seems incapable of doing this. A new report says this is one of the big reasons why the Nissan-Honda deal fell apart, though Honda has a part in this as well.

If the Honda deal is, in fact, dead, then it’s Foxconn who is likely to swoop in, though only as a friend. The “Foxconn in the henhouse” joke is right there if someone wants to take it.

Auto executives have tried, it seems, to be deferential to President Trump, and gave his inauguration committee a bunch of money. This doesn’t mean they’ll all hold their tongues. Ford CEO Jim Farley was clear yesterday that a long-term tariff against Mexico and Canada would be good for a lot of America’s competitors and bad for America.

Well, it wouldn’t be good for all European automakers. I’m not sure what Porsche would do.

Nissan, Unfortunately, Nissans It Up

I had such high hopes for the Nissan/Honda/Mitsubishi “Three Amigos” graphic. I thought that a Honda and Nissan partnership had a lot of promise. Honda is doing well as a company, in large part by successfully pivoting to hybrids and not over-indexing on EVs. Nissan did the opposite and is doing poorly.

Yet, Honda still remains small relative to the big global players (Toyota, GM, Stellantis, Hyundai-Kia) and could use more help. Nissan just flat-out needs a rescue. None of its brands are doing well in the United States, and the company as a whole has had to reduce its estimates of future profits by 70%.

Even worse for Nissan, Renault (the company’s French ex) still holds a decent chunk of Nissan shares it got in the divorce. Renault’s interest here is, first, to get a great share price and, second, to not inadvertently create a bigger competitor for itself in Europe. In fact, the whole reason this is happening at all is because the Japanese government found out that Taiwan’s Foxconn was talking to Renault about maybe buying its shares in Nissan (the current head of Foxconn’s auto unit is an ex-Nissan exec).

Confirming what we all suspected, a big report from Reuters says that the deal fell apart because of Nissan’s general intransigence. Honda, according to the report, thought that Nissan’s plans to cut jobs were too vague and too slow. Specifically, Reuters says that “Nissan’s pride and insufficient alarm about its predicament” helped sour Honda on the whole idea.

To make things worse, Nissan execs reportedly didn’t seem to want to fully close any plants or reduce its EV ambitions, including a new EV facility on the Japanese island of Kyushu. The report implies that the continued pursuit of Kyushu put a bad taste in the mouth of Honda CEO Toshihiro Mibe. Why would Nissan be averse to closing plants or touching Kyushi?

Reuters could not determine whether Mibe’s move was triggered by Nissan’s announcements in Kyushu. Nevertheless, the Kyushu trip crystallized the tensions between the companies over the best way forward.

Kyushu was not the only plant that Nissan considered untouchable. Smyrna in Tennessee, Aguascalientes in Mexico and Britain’s Sunderland were all seen as critical to the company’s EV strategy, and the automaker did not want to close them or reduce their lines, one source said.

Nissan needs the company to be as valuable as possible in order to justify not being subordinate to Honda. Renault needs Nissan to be valuable to extract the highest share price, as mentioned earlier. Honda, reportedly upset over what it saw as Nissan’s inability to move quickly, just decided to tell Nissan it would only accept a deal where Nissan was basically a sub-brand of Honda.

Whether or not this was a poison pill is unclear, but Nissan clearly balked.

Was that a good move? One analyst that Reuters talked to doesn’t think so:

“I think it’s a management problem,” said Julie Boote, analyst at research firm Pelham Smithers Associates, about the turmoil at Nissan. “They are completely overestimating their position and their brand value, and their ability to turn around the business.”

[…]

“They do not have a realistic view of what’s happening in the auto industry and what really needs to happen with Nissan.”

What happens to Nissan next? It’s possible the company does manage to turn it around, though I don’t see what the path is.

Foxconn Is Here For You, Baby

You may know Foxconn as the Taiwanese company that makes iPhones. Or, maybe, as the company that now owns the old Lordstown, Ohio facility that was once a GM plant, and then a Lordstown Motors plant, and then a Foxconn-owned plant that was going to make Fiskers.

Either way, it has played this Nissan business quite well. First, reports say it spooked Nissan into an almost-merger with Honda by talking to Renault about buying Nissan shares. And, now that this deal has fallen apart, Foxconn is in a position to swoop in and be the good guy.

Here’s how the company is playing it, according to Nikkei Asia:

The chairman of Taiwan’s Foxconn said Wednesday that its aim is “not acquisition but cooperation,” confirming that his company had discussed Renault’s Nissan stake with the French car maker, Nissan’s largest shareholder.

Chairman Young Liu made the remarks to reporters at an event held at the company’s headquarters in the suburbs of Taipei, according to Central News Agency of Taiwan.

Liu expressed his wish to cooperate with Japanese automakers, including Nissan, through the design and manufacturing of electric vehicles on a contract basis, and his company has no plans to have its own automobile brand. Liu also said that he expects to have good news within a month or two regarding the EV business.

That is smooth. Knowing fully now that Nissan is afraid of a takeover, Foxconn can offer “cooperation” and soothe Renault by implying it isn’t going to make its own car brand. Will this end with Foxconn buying a lot of Nissan? Possibly!

Tariffs Would ‘Blow A Hole In The U.S. Industry That We’ve Never Seen’ Says Farley

Ford CEO Jim Farley says out loud what everyone in the industry seems to believe, which is that a long-term 25% tariff on goods that cross into America from Canada or Mexico wouldn’t end well for most carmakers.

Farley is going to D.C. to talk to politicians, and here’s his warm-up act, via the Detroit Free Press:

While Trump has talked about strengthening the U.S. auto industry, which would be a signature accomplishment, “So far what we’re seeing is a lot of cost and a lot of chaos,” Farley said.

“Let’s be real honest: Long term, a 25% tariff across the Mexico and Canada borders would blow a hole in the U.S. industry that we’ve never seen,” Farley said. “Frankly, it gives free rein to South Korean, Japanese and European companies that are bringing 1.5 million to 2 million vehicles into the U.S. that wouldn’t be subject to those Mexican and Canadian tariffs. It would be one of the biggest windfalls for those companies ever.”

This does make sense to me. Generations of Republicans and Democrats, including President Trump in his first term, have encouraged companies to build cars across the border. This sudden reversal will, at least in the short term, be good for Japanese and South Korean automakers who have a bigger footprint in the United States and in their home countries. The same is probably true for European automakers like BMW and Mercedes.

That doesn’t mean all European automakers would be winners.

Porsche Would Take A Big Hit From An Anti-European Tariff

Volkswagen and, in particular, Porsche, are stuck trying to balance out competing messages from China and the United States. Complicating matters for Porsche, as Bloomberg reports, is that it doesn’t make any cars in the United States.

Could Porsche just shift production here? Ehh…

Chief Executive Officer Oliver Blume can ill afford the major investment that moving production around would require. Porsche is falling further off track from targets floated when the company staged one of Europe’s biggest-ever initial public offerings in 2022. Its return on sales will slump to as low as 10% this year, half of what management once touted as a long-term target.

That downbeat outlook sent Porsche shares tumbling 7% on Friday to a new low since the IPO. At €50.8 billion ($52.4 billion), the company is now worth less than half its peak market value in May 2023.

Good luck with that one.

What I’m Listening To While Writing TMD

I don’t know why, but “Paradise by the Dashboard Light” by Meatloaf with Ellen Foley is the perfect song for February 12th. Just trust me.

The Big Question

If you’re a car CEO and you can build a plant anywhere in the world, where do you do it?

Top photo: The Naked Gun