By Nicholas Takahashi
Hon Hai Precision Industry Co., the iPhone maker known as Foxconn, is in talks with Nissan Motor Co.’s biggest shareholder Renault SA about its willingness to sell its shares in the Japanese automaker, Taiwan’s Central News Agency said, citing people it didn’t identify.
Nissan and fellow Japanese carmaker, Honda Motor Co., are exploring a merger, people familiar with the matter said Wednesday, that would create a rival to Toyota Motor Corp. in Japan and better position the combined company to face competitive challenges around the world.
One potential spanner in the works however is Foxconn, which separately is said to have approached Nissan about acquiring a stake. Foxconn has been investing heavily in factories to build electric vehicles and Nissan, which has slashed its earnings forecasts and is culling 9,000 jobs globally, needs a financial rescue.
According to the Central News Agency, Jun Seki, the chief strategy officer for Hon Hai’s EV arm, told Nissan about Foxconn’s interest in buying its shares, but Nissan didn’t respond in a favorable manner. As a result, Seki has started to engage Nissan’s 36 per cent shareholder, Renault.
Seki and his team are currently in talks with Renault in France, the report said. Renault’s stake in Nissan is a holdover from a longstanding alliance between the French automaker, Nissan and Mitsubishi Motors Corp.
Honda, meanwhile, has threatened to end its strategic software partnership with Nissan if it looks to join hands with Foxconn, Nikkei said in an earlier report. Should the approach from Foxconn turn hostile after a rebuff, Honda also offered to protect Nissan as a white knight investor, Nikkei said.
Official talks, including around a possible merger, between the two Japanese companies may start as soon as Dec. 23, Nikkei added.
Honda’s shares fell more than 2.5 per cent in early trading Thursday, while Nissan’s stock was trading down 6.5 per cent after jumping a record 24 per cent on Wednesday.
Honda is weighing several options, according to Executive Vice President Shinji Aoyama, which include a merger, a capital tie-up and even the formation of a holding company. The alliance could also include Mitsubishi Motors.
Representatives for Honda and Nissan didn’t immediately reply to a requests for comment regarding the start date for talks.
A merger of the Japanese car brands would create a bulwark against the Toyota group at home and allow Honda and Nissan to pool resources to compete with Tesla Inc. and Chinese carmakers such as BYD Co. in global markets.
“It’s only natural for the consolidation of major carmakers to become more common as the industry undergoes a shift toward vehicles with sophisticated technology,” Subaru Corp. CEO Atsushi Osaki said during a group interview in Tokyo on Wednesday. “We need to join hands to take on challenges too difficult to overcome alone.”
Renault has indicated it’s open to the idea of a merger between Honda and Nissan, according to people familiar with the situation. Its approval will be key to any deal.
The article originally appeared on Business Standard.