The Zhitong Finance App learned that Nissan is currently negotiating a merger with Honda Motor (HMC.US). This move will help Nissan, which is in poor condition, survive. At the same time, it will also create the world's third-largest automobile manufacturer and increase its ability to withstand turbulence in the automobile industry. A person familiar with the matter said that at **** iPhone manufacturer Hon Hai Precision Industry Co., Ltd. (Foxconn for short) negotiations between the two companies seem to have accelerated after getting in touch with Nissan regarding the shareholding, which reflects Nissan's fragility. Foxconn has been investing heavily in the construction of electric vehicle factories.

After the news was released, Nissan's stock price rose 24% to a record high, while Honda's stock price fell 3%.

At the beginning of November, Nissan drastically lowered its profit expectations and stated that it would have to lay off 9,000 employees worldwide. The company's plight once became the focus of the market. Furthermore, due to consumer interest in its lackluster product line, Nissan models were dusted at dealers, and the company also announced a 20% reduction in global production.

Since then, a number of entities have shown interest in the troubled automaker, and activist investors have increased their holdings. Although Honda's automobile production is slightly higher than Nissan's, its market value is more than four times that of Nissan, so it has the upper hand in merger negotiations. Merger negotiations may have to deal with difficult issues, such as the prospects for layoffs in Japan.

Based on the remaining shares of the long-standing alliance between Renault (Renault), Nissan, and Mitsubishi Motors Corp. (Mitsubishi Motors Corp.), Renault owns 36% of Nissan's shares, and the French automaker is bound to have a say in the deal. Renault Chairman Jean-Dominique Senard (Jean-Dominique Senard) said earlier this year that he would welcome a new partnership to make the automaker group stronger.

It is unclear whether Nissan is also in negotiations with Foxconn or if it has rejected Foxconn's proposal. A Nissan spokesperson declined to comment. A Foxconn representative also did not comment.

Honda's executive vice president Shinji Aoyama said the company is considering several options, which could involve capital cooperation or the establishment of a holding company. A person familiar with the matter said that the plan being considered is to establish a new holding company to be operated by the merger of Honda and Nissan. The deal could also be extended to Mitsubishi Motors, which has already established a capital relationship with Nissan.

Japanese media reported on Wednesday that Honda and Nissan may announce this news as early as December 23. According to earlier reports, the two companies plan to sign a memorandum of understanding to discuss sharing shares in a new holding company.

Overseas takeover threats

Japanese media believe that the **** company's interest in Nissan has accelerated the merger between Honda and Nissan due to concerns that Nissan may receive a takeover threat from Foxconn.

A similar situation also occurred at Seven & i Holdings Co., one of Japan's largest consumer brands. On (SVNDY.US). The company's founding family is leading a consortium to privatize it to counter Canada's proposed acquisition of Alimentation Coucher - ?$#@$ Inc.

It is worth mentioning that the merger between Honda and Nissan will effectively integrate the Japanese automobile industry into two major camps: one controlled by Honda, Nissan, and Mitsubishi, and the other composed of various companies under Toyota Motor Corporation (TMC.US).

Currently, both Nissan and Honda are facing challenges from around the world, particularly in the Chinese market. In the world's largest automobile market, both companies have been impacted by strong local brands such as BYD and Tesla (TSLA.US). At the same time, electrification transformation is occurring at different rates in different markets, and is disrupting manufacturing and business models that have existed for decades.

In the first six months of this year, Honda, Nissan, and Mitsubishi sold a total of about 4 million cars worldwide, far less than the 5.2 million sold by Toyota alone.

The merger of the two companies will enable it to compete with Toyota, the world's largest automobile manufacturer, at home and abroad. Toyota acquires Subaru Corp. , Suzuki Motor Corp. (Suzuki Motor Corp.), and Mazda Motor Corp. (Mazda Motor Corp.) shares have created a brand giant with first-class credit ratings.

Hiroki Ihara, an analyst at Tachibana Securities Co. (Tachibana Securities Co.), said, “There are too many Japanese car manufacturers, and mergers are becoming increasingly necessary in order to improve competitiveness on a global scale.”

For Foxconn, the acquisition of a controlling interest in a Japanese company is not unprecedented. In 2016, it acquired two-thirds of the shares of electronics manufacturer Sharp Corp. (Sharp Corp.) and reaped many benefits, including a well-known consumer electronics brand, LCD production capacity, and intellectual property rights. Foxconn has been slowly reducing its holdings over time, but it is still the largest shareholder.

For Nissan, one thing is certain: it needs help to rebuild a stronger financial foundation. Stagnant revenue growth, declining profits, and an intimidating debt burden have caused credit markets to doubt their investment grade ratings.