Honda Motor Co. has laid down strict financial conditions for its planned merger with Nissan Motor Co., requiring its smaller rival to triple its operating profit within two years.
The target emerged from merger documents showing Nissan needs to achieve an operating profit of about 400 billion yen ($2.6 billion) by fiscal 2026, up from its projected 150 billion yen for the current year. The requirement underscores Honda’s dominant position in the negotiations, as it expects to earn 1.42 trillion yen in operating profit this fiscal year.
Nissan’s CEO Makoto Uchida has pledged to meet the challenge through aggressive cost-cutting measures, including eliminating 9,000 jobs and reducing production capacity by 20%. The company aims to slash fixed costs by 300 billion yen and variable costs by 100 billion yen.
However, analysts remain skeptical. SBI Securities analyst Koji Endo suggests Nissan needs deeper structural reforms, noting that cutting sales incentives to reduce costs could further shrink the company’s sales volume, which is already below its targeted break-even point.
The merger talks come as Honda moves to protect shareholder value with a record 1.1 trillion yen share buyback. The final agreement, scheduled for June, hinges on Nissan’s ability to demonstrate a credible path to profitability. If the deal falls through, industry watchers suggest Taiwan’s Foxconn might step in as an alternative partner.
