Nissan Reportedly Seeks U.S. Tech Suitor. Maybe Trump Has Some Ideas?

Nissan Motor NSANY (T:7201) is back in play as a potential takeover target, with its merger talks on the verge of falling apart. Will we hear any further word on its future with Japan’s leader due to meet U.S. President Donald Trump tomorrow?

Nissan is in talks to merge with Honda Motor HMC (T:7267), potentially alongside Nissan affiliate Mitsubishi Motors MMTOY (T:7211). But there are multiple reports that those talks are unraveling.

Nissan is looking for a new partner, and would prefer a U.S.-based company in the technology sector, according to the Japan Times. Part of its problem is a lack of new-energy vehicles. If only there were a tech billionaire who is close to Trump and has an electric car company!

I doubt Tesla TSLA has any interest at all in Nissan, given its whole reason for being has been to subvert what traditional car companies are doing. But North America remains Nissan’s largest market, accounting for 26.6% of its worldwide sales last year. Its 2023 sales of 3.4 million vehicles finally arrested a five-year slide to edge 4.1% higher but are down 40.3% from their 2017 peak.

Nissan shares ended Thursday up 7.3% in Tokyo trade, recovering most of the ground lost earlier this week as it became clear that the talks are troubled between Japan’s No. 2 (Honda) and No. 3 (Nissan) car companies. Honda shares ended Tokyo trade down 4.0% today. Both stocks are down roughly 2.0% since last week’s close.

The two companies inked a memorandum of understanding to explore a business integration between the companies, an MOU that now also includes Mitsubishi Motors.

Nissan told Honda on Tuesday that it intends to halt those talks, according to The Nikkei, which is normally well-informed with leaks. Nissan then held a board meeting on Wednesday to discuss scrapping the MOU. Nissan CEO Makoto Uchida then met with Honda CEO Toshihiro Mibe on Thursday at Honda headquarters in Tokyo, reportedly to tell Honda the deal is off.

Nissan and Honda, traditionally fierce rivals, first partnered last March to work together on electric-vehicle technology, in the face of cheaper Chinese competition. But they confirmed in December that the three Japanese car companies are looking at forming a joint holding company and “business integration.”

Now the discussions appear to have collapsed. Nissan did issue a statement on Wednesday noting media coverage that it has withdrawn from the basic agreement to merge with Honda, “but this matter has not been announced by our company.”

That is hardly a ringing endorsement of the Honda talks. That’s a non-denial denial. Nissan did say it and Honda are “advancing various discussions,” and plan an announcement in the middle of this month.

Honda has pushed for a greater say in the combined entity, even proposing that Nissan become a subsidiary in a full takeover, a suggestion that Nissan has refused. Meanwhile some Honda executives are concerned about Nissan’s financial situation.

Nissan posted shoddy earnings last November, forcing it to slash 9,000 jobs and move to cut 20% of its manufacturing output around the world. It blames a slump in sales in the United States and China, prompting the company to look to cut $2.6 billion in costs this fiscal year, which runs through March.

Nissan only introduced a couple of new models over the course of the last year, but has announced plans to add 27 electrified vehicles to its lineup by 2030. The Honda execs running the rule over Nissan want to see progress on Nissan’s restructuring, reportedly pushing for “strict” conditions for a merger.

Honda and Nissan are due to report earnings next week, which is when we can expect further “official” updates on their talks.

Meanwhile, Japanese Prime Minister Shigeru Ishiba left for the United States today, and is due to meet with President Trump on Friday. The new Japanese leader follows hot on the heels of Israeli Prime Minister Benjamin Netanyahu, who on Tuesday became the first world leader to meet in person with Trump during his second tenure in the White House.

Trump has remained quiet on Japan during his first days in office. He has in the past criticized Japan for not paying enough to host U.S. military bases on its soil, and for not buying enough U.S. automobiles, which are generally far too large for the small streets in tightly packed Japanese cities.

Ishiba, meanwhile, is contending with low approval ratings at home since he took office on Oct. 1. He called a snap election soon after that saw his Liberal Democratic Party lose its parliamentary majority, a crushing defeat that was the LDP’s worst showing in 15 years.

Let’s hope his planning is better for this trip. Ishiba, who turned 68 on Tuesday, has reportedly held multiple “Trump countermeasures meetings” with senior officials in the runup to his visit to Washington. In his first term, Trump implemented a 25% tariff on steel and auto imports, with no exemption for Japan, although the two countries later struck a deal that saw Japan lower tariffs on U.S. farm goods in exchange for lower U.S. tariffs on industrial imports.

I highlighted Nissan in a column in November, when it became clear it was being targeted by activist investors. Nissan stock experienced its biggest leap in 15 years after Effissimo Capital Management, a Singapore hedge fund founded by Japanese activists, had bought a 2.5% stake. Then Hong Kong-based Oasis Management, another activist fund that often targets Japanese companies, acquired a small Nissan stake.

Analysts fault Nissan for a stale product lineup and for missing a step when it comes to developing new-energy vehicles. Nissan sales slumped 9.8% last year in the United States and a whopping 24.1% in China, although they rose in Japan, Europe and the rest of the world.

Nissan, Mitsubishi and the French car company Renault RNLSY have been in a three-way alliance that involves cross-holding of stock. Renault and Nissan have since January 2023, however, been seeking to wind down that “strategic partnership” to give the individual car companies more autonomy.

It seems Nissan cannot stand on its own two feet. Expect the stock to move based on the future prospect of a tie-up, potentially in the tech rather than the auto sector. 

At the time of publication, Alex Frew McMillan had no position in any security mentioned.