On Thursday, Honda and Nissan publicly announced the termination of their merger talks, instantly dissolving speculation around the fate of what could have been a monumental $60 billion dealHad it been successful, the merger would have forged a new automotive giant, positioning it as the third-largest car manufacturer globally, a development with significant implications for the industry at large.

Looking back at the journey of these merger negotiations, it was fraught with twists and unexpected turnsBoth companies expressed that they had considered "various options" during their discussionsOne particularly controversial suggestion from Honda was to shift the proposed structure from a joint venture to a model where Honda would function as the parent company with Nissan as its subsidiary, facilitated through a stock swapThis proposition not only implied a significant alteration to the corporate governance structure but also posed critical questions regarding their future strategies and influence in the global automotive landscape

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However, this proposal did not gain favorable traction from Nissan, adding further complexity to an already intricate negotiation process.

By February 6, signals seemed to indicate Nissan was prepared to exit the merger discussions, which sparked concerns in the market about the feasibility of the dealUltimately, the termination was confirmed on ThursdayFollowing this announcement, the capital markets reacted swiftly: Honda's share price surged by 2.14%, likely reflecting the market's approval of Honda's decision to steer clear of what could have been a risky merger, thereby preserving its independenceConversely, Nissan's stock dipped by 0.34%, indicating investor anxiety over the company missing out on a significant growth opportunity.

The failure of the merger can be attributed to several interwoven factorsFirstly, Nissan's "pride and denial of reality," coupled with its refusal to close underperforming plants, acted as significant roadblocksIn a rapidly evolving global automotive industry that is increasingly leaning towards smart and electric vehicles, many manufacturers are streamlining their operations by closing inefficient factories to enhance competitivenessHowever, Nissan's steadfastness on this matter complicated vital issues of resource integration and cost management for the potential mergerFurthermore, Honda’s idea of positioning Nissan as a subsidiary exacerbated the complexities, presenting formidable challenges for Nissan's management and workforce, potentially inciting internal upheaval and transformationReports also suggested Honda was pushing for further layoffs at Nissan, escalating tensions and disagreements between the two parties.

Reflecting upon December when Honda and Nissan first initiated talks, expectations were high

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During that period, the companies announced their intentions to share intelligence and resources, aiming for economies of scale while safeguarding the distinctiveness of both brandsIn an increasingly competitive global automotive market, mergers are seen as a strategic avenue for resource consolidation and complementary advantagesIf finalized, the new company would have become the third-largest automotive producer based on sales figures, which held substantial implications for bolstering the status of the Japanese automotive industry globally.

At a press conference held in December, Honda CEO Toshihiro Mibe spoke confidently about the strategic significance of the deal, instilling a sense of commitment from both companiesFollowing the media’s coverage of the merger talks on December 18, Nissan’s share price spiked by 24%, marking the best single-day performance since at least 1985. This vigorous market reaction evidenced investors' optimism regarding the merger's prospects, as they anticipated new growth prospects and an uplift in Nissan's market valuation.

However, the reality proved to be less favorableJust a month before the merger announcement, Nissan revealed underwhelming quarterly results, announcing plans to lay off approximately 9,000 workers and reduce global production capacity by 20%. These decisions highlighted the considerable pressures the company faced, necessitating transformations to ameliorate its circumstancesInitially seen as a panacea, the merger with Honda is now scuttled, leaving Nissan to navigate its path forward.

In addition, on the same Thursday, Honda reported its third-quarter earnings, showcasing revenues of 5.53 trillion yen (approximately $36.4 billion), which represented a year-on-year increase of 1.4%. Operating profit rose to 397.8 billion yen, up 4.6% from the previous year

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