Why Would Honda Buy Nissan?

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There are rumors afoot that Honda – which is healthy – is considering buying Nissan. Which isn’t. Just a couple of weeks ago, a senior person within Nissan’s hierarchy said the company had “12 or 14 months to survive.” That’s not healthy.

That’s just shy of dead.

Honda is not in that position. So why would Honda put itself in that position – by doing what amounts to chaining itself to a dead man walking?

Honda has been very smart so far in that it has avoided the malinvestment in battery powered devices that has left companies such as Nissan – that didn’t avoid it – with months at most to survive. It currently sells only two devices – and they are Honda-rebadged versions of another company’s devices. The “Honda” Prologue (and its Acura-badged stablemate) being in fact Chevrolet devices that General  Motors mailinvested in. This means Honda won’t lose nearly as much money on the other-brand-devices it is reselling under its own brand (and for compliance reasons only). GM spent the money designing and proofing out the device that Honda tweaked a little bit cosmetically. The expensive stuff was paid for by GM.

Nissan has destroyed its brand in part by malinvesting in devices such as the Leaf and the Ariya – including the money wasted on the checks sent to the actress Brie Larsen to try to sex up these devices.

It hasn’t worked.

Just as it hasn’t worked for any car company that thought it was a good idea to stop making cars and switch over to peddling devices. The ones that did are all in trouble – even VW, which was once one of the most successful brands around. It is teetering on the precipice of bankruptcy and dissolution.

Nissan also gave up on the Maxima – and soon, the Altima. On cars, as a class. Instead, it became a crossover brand, just the same as pretty much everyone else. Trying to sell the same thing as everyone else is often a hard sell. Especially when the things you’re selling are generally regarded as being not as well-made as the same things sold by others.

Nissan also turned the compact-sized Frontier it used to sell in huge numbers – because the little truck was cheap and rugged and so exactly what lots of people wanted in a truck – into a big, expensive truck that lots of people don’t want or can’t afford, which ends up amounting to the same thing.

The brand’s Infiniti division is as dead in the water as Titanic was after she hit the berg. We all know what happened soon thereafter.

So – again – what’s in it for Honda?

There’s not much to scavenge – as was also the case after the Dodge, Chrysler, Jeep and Ram truck brands were acquired from Daimler (parent company of Mercedes-Benz) for pennies on the dollar by Cerberus back in 2007. Remember that? Everything worth anything had already been exploited by Daimler prior to the sell-off like a $20-per-hour Vegas escort – and the sloppy thirty-thirds kicked to the curb afterward. Dodge and Chrysler did surprisingly well in spite of that by leveraging the platform – or underlying architecture – of the Mercedes E-Class sedan they were left with to create the very successful Charger and Challenger that had a production run of more than 15 years. Of course, that’s all over now – and probably for Dodge and Chrysler, too.

So what’s to be gained here?

According to the summary blurb that precedes a CNBC article published the other day, “Top Japanese carmakers Nissan Motor and Honda Motor are understood to be exploring a blockbuster merger, as the two rival companies seek to stay competitive on the road to full electrification.”

Italics added.

What do they think think lies down “the road to full electrification”? Has Honda’s management lost its ever-loving mind? The company has so far steered clear of “the road to full electrification.” Why would its management now decide the time has come to steer onto it?

Well, because China is why.

The car business is a global business and China is a much bigger market than the North American and European markets – both of which are in decline due to an aging and impoverished population that increasingly cannot afford new vehicles. But China is bursting at the seams with young people and in China, there is a huge market for battery-powered devices because the Chinese government allows the sale of inexpensive battery powered devices that cannot legally be sold in North America or Europe – irrespective of the “threat” of the “climate” that we are told is “changing.”

The prospective tie-up could create the world’s third-largest auto group by vehicle sales, with 8 million sales annually, according to Citi. That would place Nissan-Honda-Mitsubishi behind fellow Japanese automaker Toyota Motor and Germany’s crisis-stricken Volkswagen, respectively.”

Italics added.

Does anyone ask why VW is “crisis stricken?” Could it be – assume the voice of the Church Lady from Saturday Night Live’s better days – on account of VW’s decision (made under duress, granted) to take “the road to full electrification”?

And now Honda seems to be wanting to ride shotgun with Nissan and head down that same road.

The acrid electric smell of death is in the air.

. . .

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5 COMMENTS

  1. The ChiComs will use every angle to protect their own EV manufacturers. Honda/Nissan may get a toehold on the mainland but that’ll be about it. With respect to EVs tho, I’m assuming China is unafraid of coal and nuclear energy & lack the environazi resistance we face here. That is, they’ll have the generating capacity and distribution to support gazillions of watts of energy required by eeeeveeees.

  2. The EV issue aside, Maximum Bob Lutz predicted years ago that there would be consolidation in the industry because the world doesn’t need a dozen different companies building the ubiquitous, compliance 2.0T engine.
    I believe he indicated the likelihood of manufacturers merging regionally (i.e. Ford & GM, BMW & MB) to accomplish this.
    Sounds like the same result but for slightly different reasons.

    To hear the media champion what the Chinese have as an “auto industry” sounds more like they’ve simply cornered the market on oversized, HIGHLY flammable golf carts.
    And that’s the phony market that all manufacturers except Toyota (and their alliance with Subaru & Mazda) seem to still believe is the future?

  3. The China play hasn’t really worked out. Neither has India. The overly optimistic view from 20 thousand feet is that there are ~two billion people emerging from poverty and they’re going to want to buy stuff. In China what they bought was US debt (the CCP at least), unprocessed food and real estate. Not US real estate, but Chinese. Turns out the CCP wouldn’t let the people invest in US companies, so they invested in their own. Same thing with India.

    Worked out great for the federal government though. They exported all those dollars that came back as new t-bills and debt. Kept the economy going far longer than any of the naysayers predicted.

    But now that the world (Europe) is once again choosing up sides, I wonder if the mary-go-round of money will continue? When it stops it won’t be pretty, that’s certain. And that’s why Trump won in a landslide. The establishment has been kicking that can since 2008. That can is about to run out of road, and like the flat earth there’s nothing past the edge.

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