Nissan could face a cost-cutting “difference” from the Honda merger

Nissan will fall victim to a cost-cutting “massacre” if it joins forces with its Japanese counterpart HondaFormer Nissan CEO Carlos Ghosn told CNBC on Tuesday.

“I think without any doubt Honda will be at the wheel, which is very sad to see after leading Nissan for 19 years (and) brought Nissan to the forefront of the industry to see them become victims of carnage because there is complete duplication between Nissan and Honda,” he told CNBC “Squawk Box Europe.”

Ghosn, who once ran three automakers in the Nissan-Renault-Mitsubishi alliance, after becoming arrested in Japan in November 2018 and absconding from court on charges of financial crimes. He denies wrongdoing.

“There is virtually no complementarity here, which means that if they want to create synergies, it will be done perhaps through cost reduction, duplication of plan, duplication of technology, and we know exactly who is going to pay for it. to be a secondary partner and that would be Nissan,” Ghosn said.

Nissan had more complementarity with the French Renoassessed Ghosn with reference to a a long-standing partnership that has largely been dissolved.

Speculation about a potential merger between Honda and Nissan began earlier this month, and the two companies confirmed the official start of negotiations on business integration during a news conference on Monday. Under the current proposals, the holding company would act as the parent company of both firms and be listed on the Tokyo Stock Exchange, with Honda, which has a market capitalization of about four times that of Nissan, nominating a majority of the new entity’s board of directors. A strategic partner of Nissan Mitsubishi is also in talks to join the group.

The $54 billion Nissan-Honda group would dwarf the South Korean one Hyundai to become the world’s third largest automaker after Japan Toyota and Germany Volkswagen. The integrated group would also mark a milestone in the consolidation of the auto industry, which has long been expected in Japan and around the world as companies grapple with the costs of developing electric vehicles and autonomous driving technologies.

Honda and Nissan executives on Monday he stressed that the combined company will be able to share the intelligence and resources needed to compete in the transition to electric vehicles and deliver economies of scale, boosting operating profit to a projected 3 trillion yen ($19.1 billion) over the long term.

Nissan is embarking on an ambitious merger while taking deep steps to restructure it announced in November that it would cut global manufacturing capacity by a fifth and cut 9,000 jobs.

Honda CEO Toshihiro Mibe acknowledged on Monday that some shareholders may feel his company will support Nissan is struggling as part of the agreement, but stressed that business integration talks “will not bear fruit” if the two automakers cannot stand on their own.

However, Ghosn told CNBC that the merger plan implies that “Nissan is in panic mode, looking for someone to bail them out because they are unable to find a solution on their own.”

He expressed “great doubt” that the turnaround at Nissan would be successful, without giving details.

Kei Okamura, senior vice president and portfolio manager at Neuberger Berman, echoed the view that the details of the merger plan have yet to be finalized.

“If you’re an investor, you’re going to think about a three- to five-year earnings forecast. What was announced (on Monday) was for the near term, so the timing and the long term vision. The only problem is how this combined entity will achieve that, and there’s a lot of uncertainty ahead,” Okamura told CNBC “Street signs of Asia“on Tuesday.

“Post-merger integration is going to be absolutely critical … unless these companies can fully come together in terms of people, assets and, of course, culture, these deals have the potential to spin out, and we have to take into account that this deal may not happen unless (Nissan) follows through on its rehabilitation program,” Okamura added.

Nissan declined to comment further for this story your statement comes out on Monday. Honda did not immediately respond to CNBC’s request for comment.