Former Nissan CEO Carlos Ghosn told CNBC on Tuesday that if Nissan joins forces with its Japanese rival Honda, it will be the target of cost-cutting bloodbath.
“There is complete duplication between Nissan and Honda, so I think, without a doubt, Honda is going to be in the driver’s seat. It is very sad to see after having led Nissan for 19 years [and] bringing Nissan to the forefront of the industry to see that they’re going to be the victim of a carnage,” he told CNBC’s Squawk Box Europe.
Following his arrest in Japan in November 2018 and subsequent escape from trial on financial crime accusations, Ghosn, who previously oversaw three manufacturers as part of the Nissan-Renault-Mitsubishi alliance, has been living in Lebanon. He denies any wrongdoing.
There is essentially no complementarity in this situation, therefore if they wish to create synergy, it will likely be through cost-cutting, plan-or technology-duplication, and we know exactly who will bear the expense. According to Ghosn, Nissan will be the lesser partner in this arrangement.
Ghosn thought that Nissan and France Renault had more complementary qualities, citing a long-standing but mostly unraveled cooperation.
Earlier this month, there were rumors that Honda and Nissan would merge. On Monday, the two firms announced that formal negotiations to integrate their businesses had begun. Current plans call for a holding company to serve as the parent company of both businesses and list on the Tokyo Stock Exchange. Honda, which has a market valuation that is around four times that of Nissan, would nominate the majority of the new company’s board members. Discussions on joining the group were also held with Mitsubishi, Nissan’s strategic partner.
A Nissan-Honda alliance worth $54 billion would surpass By car sales, South Korea’s Hyundai has risen to the third-largest position in the world, behind Germany’s Volkswagen and Japan’s Toyota. The combined company would also signal a significant milestone in the consolidation of the automotive sector, which has long been anticipated in Japan and globally as companies find it difficult to pay for the advancement of autonomous driving and electric vehicle technologies.
On Monday, executives from Honda and Nissan emphasized that a merged business will be able to pool resources and intelligence to compete in the EV transition and provide economies of scale, increasing operational profit to an estimated 3 trillion yen ($19.1 billion) over the long run.
Nissan is launching the ambitious merger at the same time as a severe restructuring that was announced in November and would result in 9,000 job losses and a five percent reduction in worldwide manufacturing capacity.
Toshihiro Mibe, the CEO of Honda, acknowledged on Monday that some shareholders could believe his company would be helping struggling Nissan with its portion of the agreement. However, he emphasized that the corporate integration talks will not proceed if the two automakers are unable to survive alone.
Despite this, Ghosn told CNBC that the merger plan indicates Nissan is in a panic, seeking someone to rescue them from the predicament since they are unable to come up with a solution on their own.
Without giving specifics, he stated that he had serious doubts about Nissan’s turnaround being successful.
Senior vice president and portfolio manager Kei Okamura of Neuberger Berman agreed that the merger plan’s specifics still need to be worked out.
You will be considering the three to five earnings outlook if you are an investor. On Monday, the short-term, timeframe, and long-term goals were announced. Okamura told CNBC’s Street Signs Asia on Tuesday that the only question is how this combined company would get there, and that’s where there are a lot of unknowns.
We have to consider that this deal may not happen if [Nissan] doesn’t follow through with its turnaround program. “The post-merger integration is going to be absolutely essential… unless these companies are able to really fully integrate themselves together in terms of the people, the assets, and of course the culture,” Okamura continued.
Beyond its Monday statement, Nissan declined to comment on this story. A request for comment from CNBC was not immediately answered by Honda.
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