Nissan Motor Company Limited and Honda Motor Company Limited signed a Memorandum of Understanding (MoU) on December 23 to initiate discussions and consideration for a business integration between the two businesses through the formation of a joint holding business. could The report noted that Nissan would benefit the most from a credit perspective, while Honda faces more risks due to its strong credit profile.
said Dan Enjo, VP-Senior Analyst, Moody’s Ratings.
He said the merger would allow automakers to share research and development (R&D) costs, which would be beneficial for introducing new electrified powertrain models in regions such as China. Adding further, the merger could help mitigate the potential impact of increased tariffs on imports into the US and increase product diversification for Nissan given Honda’s high-margin motorcycle business.
Enjo said that since Honda’s margins in its automobile business are lower than in its motorcycle industry, the execution risk is particularly acute. As a result, it has less freedom to acquire Nissan’s auto division, which is currently undergoing significant restructuring and suffering from losses.
“The JPY1.1 trillion buyback announced by Honda for its own shares is credit negative for Honda as it will erode its liquidity or credit metrics depending on whether it is able to fund the buyback. How much money or debt is used for this,” he added. Backing up its analysis, the report added that Nissan would benefit more from the merger than Honda.
Because of its better track record of consistent profitability and cash flow, management approach, and diversification into motorcycles besides cars, Honda has better credit. The margin of a motorcycle is much higher than the margin of a car.
Additionally, the motorcycle industry is larger in fast-growing emerging markets such as ASEAN and India compared to established car markets that Nissan relies on. The report added that there is little danger to motorcycles from lightning.