Nissan Motor Looking for New Partners as its Deal with Honda is Set to Fail

Nissan Motor Co. is looking for new partners as it prepares to end talks to form a joint holding company with Honda Motor Co., according to reports.

The Japanese automaker is looking for a partner, ideally from the technology sector and based in the United States. North America is Nissan's most important market, and the global shift toward electrification and automation has pushed automakers to form alliances with other industries.

Nissan shares rose as much as 8.7% in early afternoon trading in Tokyo on Thursday. Nissan spokesperson Shiro Nagai declined to comment, saying that any details about talks with Honda would be announced a planned around mid Feb.

The automakers confirmed yesterday that they are still discussing various options, including the possibility of ending negotiations. Honda had proposed acquiring Nissan and converting it into a subsidiary, but this was met with strong opposition within Nissan. Honda had also made the restructuring of Nissan's operations a condition for any transaction to proceed. However, aside from reducing jobs and output, Nissan's current plans do not include plant closures.

Ending exclusive discussions with Honda would allow either side to walk away from the deal without paying a hefty cancellation fee of ¥100 billion ($657 million), according to their memorandum of understanding on December 23.

Nissan's board is urging Chief Executive Officer Makoto Uchida and other executives to develop a more comprehensive restructuring plan in parallel with any discussions with a potential new partner. The goal is to complete a more extensive redesign by February 13, when the manufacturer of Altimas and Pathfinders is scheduled to report quarterly results. The board will also meet at this time to formalize its decision.

The scope of Nissan's financial crisis became clear in November, when a 94% drop in net income prompted plans to cut 9,000 jobs, reduce production capacity by 20%, and cut its annual profit forecast by 70%. "Further earnings deterioration is possible at Nissan," Citigroup Inc. analyst Arifumi Yoshida warned. "Additional restructuring measures are vital."

Hon Hai Precision Industry Co., the iPhone maker known as Foxconn, which is attempting to establish a foothold in outsourced manufacturing of electric vehicles, put its pursuit of Nissan on hold last year when it became clear that the Japanese automaker was in talks with Honda about a potential merger. The electronics contract manufacturer, however, did not give up entirely; instead, they chose to wait and see if they could legitimately move closer to a deal before making a decision.