Recounting the rise and fall of Nissan: Can a Honda merger revive its fortunes?

The once-mighty Nissan may have caused many an automotive analyst to choke on their morning cappuccino in late November, when an unnamed executive reportedly told the Financial Times that the company may have just “12 to 14 months” to survive.

Seeking financial backing from another partner, the Japanese carmaker announced earlier that month that it would cut its global production capacity by 20% and reduce its workforce by 9,000 staff members in a bid to mitigate a steep downturn in profits and sales. Its CEO Makoto Uchida and other senior executives nobly agreed to take a 50% pay cut.

But where did it all go wrong?

Nissan Motor Corporation was officially founded in 1933, but can trace its origins all the way back to the first DAT car of 1914, whose name combined the initials of three men who invested in it. 

Branded under Datsun, the company gradually expanded its global footprint through the 20th century.

By the 1980s, when Nissan became the badge of choice, it had become a formidable global player, with cumulative production having surpassed the 40 million mark in 1985.

Yet by the end of the 1990s, as many faced the new millennium with a sense of excitement and optimism, Nissan found itself on the brink of financial collapse, facing heavy debt after seven loss-making years. Sound familiar?

It had become a large and bloated company, and although the brand had produced some iconic cars over the years, such as the Nissan Fairlady Z of 1969 and the magical trio of Skyline GT-Rs of the 1990s, to name just a few, most of its products at the turn of the millennium were boring sedans with little to set them apart from the competition.

Many industry analysts felt the brand had lost touch with the market. “It became very conservative. Instead of being entrepreneurial, Nissan went into a shell,” former Nissan exec George Peterson told the LA Times back then.

Thankfully its fortunes turned swiftly with the formation of the Renault-Nissan Alliance in March 1999, which saw the French carmaker take a 36.8% stake in Nissan, increasing to 44.4% in 2002. And in stepped the world renowned and now infamous ‘Le Cost Killer’ Carlos Ghosn. 

Some painful rationalisation and cost-cutting ensued, with numerous factory closures and a 14% staff reduction. But the new, leaner Nissan enjoyed something of a renaissance, highlighted by a record profit of 489 billion yen (R58bn) in the 2001 fiscal year. 

The products became sexier, OK not the Tiida or Livina, but there were some interesting new creations like the 350Z, Murano, Navara and Qashqai.

Although Nissan never quite regained its footing after the 2008 recession, it soldiered through with relative success in the decade that followed, but storm clouds started gathering as tensions brewed with Alliance partner Renault, and then the penny dropped when Mr Ghosn was arrested in Japan in 2018 on suspicion of financial misconduct, including the under-reporting of his salary.

Many saw his arrest as a conspiracy, following Ghosn’s efforts to move Nissan closer to Renault and presumably more under French control. The fact that Renault had a 43% stake in Nissan, with the latter owning just 15% of the former despite producing fewer cars, was a great source of consternation.

Nonetheless, Ghosn, under house arrest, managed to flee to Lebanon, his country of descent, after sneaking out of Japan in a large musical box with breathing holes drilled into it.

But just as Ghosn revived Nissan in the early 2000s, the company has also found itself in a downward spiral in his absence, whether this is coincidental or not. In 2017, the year Ghosn stepped down as CEO while retaining Chairmanship for a gradual leadership change, Nissan achieved a global sales record of 5.77 million units. By the 2022 financial year, sales had sunk to just 3.31 million units, increasing marginally to 3.44 million in 2023.

Nissan has seen a similar downturn on the South African market. As recently as the 2017 financial year it boasted a 10% market share, its highest since 1981. The Rosslyn-based manufacturer sold 51,825 vehicles in South Africa in the 2017 calendar year and 55,439 in 2018, allowing it to rank in a comfortable 4th position behind Ford, Volkswagen and Toyota. Sadly, Nissan SA sold just 22,286 vehicles in 2024, ranking seventh.

There are a number of reasons for this, mostly beyond its control. The local division was forced to discontinue its popular NP200 half-tonne bakkie in 2024 after its replacement - which had been primarily designed for Russia - was cancelled after the Ukraine invasion. This sadly also led to retrenchments at the Rosslyn plant.

What’s more, the locally-produced Navara is hardly setting the sales charts alight, with average monthly sales of 405 units in the second half of 2024, although the export picture is at least improving, with an average of 499 units shipped throughout Africa during the same period.

Nissan’s one silver lining is the budget-beating Magnite, which was South Africa’s fourth best-selling SUV last year. The company plans to introduce two more products from India by 2026, which are speculated to be Nissan versions of the Renault Triber and Duster. Nissan SA also desperately needs a second product for its Gauteng factory, something that local representatives are trying to secure.

But given Nissan’s current international state of affairs, it appears that much is up in the air at present. Renault has signalled its intention to reduce its 35% stake but this appears to have been put on hold for the time being as in the wake of tech Giant Foxconn having unsuccessfully attempted to acquire a majority stake in Nissan, AFP reported.

Yet the writing is on the wall: Renault and Nissan are unlikely to be as closely connected in the coming years.

How will a merge with Honda work?

This comes as Nissan, together with its smaller Alliance partner Mitsubishi Motors, agreed in late December to launch talks on a potential merger, which would see their business units integrated into a new holding company.

This is seen by all three as a necessary move, in order to pool resources in the development of electric vehicles (EVs) and self-driving tech in the face of formidable competition from Chinese rivals as well as Tesla.

However, Honda’s CEO Toshihiro Mibe has insisted that this would not constitute a “bailout”, stressing that one condition for the merger would be Nissan’s successful completion of its “turnaround plan”, AFP reported.

It wouldn’t be a marriage of equals either, with the new holding company’s board set to be made up mostly of Honda executives. Honda will also get to nominate the President.

A merger would result in the three companies sharing technologies as well as manufacturing resources, and this could become complicated in the coming years given how technologically entwined Nissan is with Renault at present. It’s likely that the Japanese trio will take a clean slate approach to electric vehicles, but how they manage their internal combustion line-ups, and how quickly these are integrated, remains to be seen.

Nissan was a big pioneer on the electric vehicle front, with its Leaf being the world’s first mass produced EV, but it has since fallen behind in that game while also missing the mark on hybrid sales, despite its innovative but unconventional e-power system, which sees the wheels driven purely by electric motors, with the combustion engine generating power.

However the cookie may crumble, it makes a great deal of sense for Honda, Nissan and Mitsubishi to pool resources and maximise efficiency of scale in the process - after all, the new entity is set to become the world’s third largest car company by sales.

The fact that all three companies are Japanese could also reduce cultural clashes of the kind that characterised the alliance with Renault, although the separate corporate cultures would need to be integrated with due care. 

What could emerge is a Japanese automotive titan in the face of a rapidly changing world where legacy manufacturers from Europe and the US are stumbling and intense competition from China is the new normal.

The three brands will have the necessary scale to succeed in the electric car market. Hydrogen power remains a possibility too, given Honda's experience and expertise in that field.

Honda's hybrid tech could also give Nissan access to more affordable hybrids and its high-quality road-biased SUVs such as the HR-V and CR-V could well spawn replacements for the Juke, Qashqai and X-Trail with a more sophisticated and luxurious feel. Nissan, meanwhile, has more experience in building rugged body-on-frame SUVs and bakkies, such as the Patrol and Navara, which would well give Honda a better footing in the adventure vehicle market.

The possibilities are seemingly endless (could we even one day see Hondas being built in South Africa again?) but for now we’ll simply fantasise about a revived Honda S2000 built around the Nissan Z architecture.

IOL