Sean McLain
Appearances
The Journal.
Will Honda Be Nissan's Ride or Die?
I mean, I would say this boils down to money and pure desperation.
The Journal.
Will Honda Be Nissan's Ride or Die?
I mean, there were three giants of Japanese automaking, all storied companies for different reasons. You obviously have your Toyota, largest carmaker in the world, an engine of profit and efficiency. And then you have Honda, probably Japan's most famous startup. You know, started from Soichiro Honda, who made motorcycles out of bicycles and then had no background in cars and cars.
The Journal.
Will Honda Be Nissan's Ride or Die?
forced his way into the car industry and his current place in the world. Honda's kind of like the engineering weirdo of the triumvirate of Japanese automakers.
The Journal.
Will Honda Be Nissan's Ride or Die?
Of course, it's a street race. Looks like the streets of Miami, if I recall correctly.
The Journal.
Will Honda Be Nissan's Ride or Die?
Nissan, innovation that excites. Nissan, which was always the most storied, I would say, of the Japanese automakers, maybe not the biggest, maybe not the best known, but certainly the most storied. I mean, Nissan's name in Japanese literally means Japanese industry. You know, it was an industrial powerhouse throughout the sort of the mid-century till today.
The Journal.
Will Honda Be Nissan's Ride or Die?
So Nissan of the early 90s was known as a very engineering-driven company that, you know, the cars you bought from them were, in one sense, over-engineered. They were exciting to drive.
The Journal.
Will Honda Be Nissan's Ride or Die?
Nissan was the inventor of the modern electric vehicle.
The Journal.
Will Honda Be Nissan's Ride or Die?
Yeah. Well, if you remember, the Nissan Leaf. At the time, 15 years ago, it was absolutely groundbreaking. Introducing the 100% electric Nissan Leaf. Innovation for the planet. Innovation for all. And Nissan was the first company to bring a sort of mass market EV to the market and proved that they could make a EV... that could be a viable replacement for a gasoline vehicle.
The Journal.
Will Honda Be Nissan's Ride or Die?
And there were very iconic cars from the 1990s and the early 2000s. And two in particular that I think are relevant for our discussions. One is a candy pink convertible made by Honda, an S2000. Whoa. And then we also have the Nissan Skyline GT-R, nicknamed Godzilla, rolling down the street, puffing smoke out of its wheel wells and shooting flames out the tailpipe.
The Journal.
Will Honda Be Nissan's Ride or Die?
Well, Nissan has placed a lot of the blame at the feet of a man named Carlos Ghosn.
The Journal.
Will Honda Be Nissan's Ride or Die?
I don't know if everybody remembers the term BRICS, right? So you had your Brazil, your Russia, your India, your China, your South Africa. Carlos Ghosn's big bet is that there was hundreds of millions of people in these new middle classes emerging in these smaller, poorer countries that were all going to buy Nissans for the first time.
The Journal.
Will Honda Be Nissan's Ride or Die?
And Nissan, more so than other car makers, they wanted to be the first to market for a lot of these countries.
The Journal.
Will Honda Be Nissan's Ride or Die?
And he was betting the substantial portion of that growth on emerging market demand that, frankly, never materialized.
The Journal.
Will Honda Be Nissan's Ride or Die?
Well, instead, Nissan ended up with a bunch of half-filled factories around the world that, instead of being profit engines, just were giant black holes and money furnaces for Nissan's cash.
The Journal.
Will Honda Be Nissan's Ride or Die?
Carlos Ghosn disappears. And that sets about a number of things that change at Nissan, including management overhaul, turmoil, chaos, and infighting within Nissan, but also a broad reset of Nissan's strategic vision for what kind of a company it wants to be. And Nissan goes about trying to shut down all of these factories that Carlos Ghosn has had built around the world.
The Journal.
Will Honda Be Nissan's Ride or Die?
They lay off about 10% of their workforce. They say they need to shrink to regrow their profits. Nissan shrinks from selling about 6 million cars a year. to three and a half today. Whoa. So Nissan has become a much smaller company as they shut down factories and produce fewer vehicles. However, profits have not really rebounded. It's just today a much smaller company with much less cash.
The Journal.
Will Honda Be Nissan's Ride or Die?
With the advent of all these electric vehicles coming out, you are starting to see that market share being taken away. Chinese car companies, especially when it comes to electric vehicles, are really eating the lunch of the global car industry.
The Journal.
Will Honda Be Nissan's Ride or Die?
Well, Nissan decided that it could use a helping hand and reached out to crosstown rival Honda about a potential partnership specifically on electric vehicles, but has since blossomed into a potential marriage.
The Journal.
Will Honda Be Nissan's Ride or Die?
It's a matter of survival for Nissan. Everybody sees this as Honda bailing out Nissan and Nissan receiving a much needed lifeline.
The Journal.
Will Honda Be Nissan's Ride or Die?
And these are two of the most iconic vehicles of the street racing circuit from that period.
The Journal.
Will Honda Be Nissan's Ride or Die?
I mean, OK, first of all, you have to understand Mibe, the Honda CEO, a little bit. He wears his heart on his sleeve. He was asked what he saw in Nissan.
The Journal.
Will Honda Be Nissan's Ride or Die?
It was a very simple question, which you would think have a very simple answer, but this is stereotypical Mibe.
The Journal.
Will Honda Be Nissan's Ride or Die?
Yeah, he is. He's honest in an endearing way for a modern CEO.
The Journal.
Will Honda Be Nissan's Ride or Die?
So the Japanese government is one of the biggest architects pushing this deal for one very big reason. Jobs in Japan that directly work for these two companies and are reliant on these two companies having manufacturing and research facilities in Japan.
The Journal.
Will Honda Be Nissan's Ride or Die?
And so the hope is that by combining together, they might together produce enough vehicles and sell enough vehicles in Japan to sort of justify their continued existence.
The Journal.
Will Honda Be Nissan's Ride or Die?
Well, the number one challenge is culture. These are two extremely different companies. Nissan historically has had its top management picked from the University of Tokyo, the sort of the Harvard of Japan, Keio University, the sort of blue-blooded patrician elite of Japanese education. And their leadership tends to be people who come up through the sales side of the business.
The Journal.
Will Honda Be Nissan's Ride or Die?
Whereas Honda has always been an engineering company. And Honda's leaders have typically come up through their research and development arm. People whose engineering chops have propelled them to the top of the company. So these are two very different corporate cultures. And frankly, even the way that they operate internally are very different.
The Journal.
Will Honda Be Nissan's Ride or Die?
You have your Honda Accord, which competes with your Nissan Altima, your Civic competes with your Sentra, your CR-V that competes with your Rogue. There's very little difference in the lineups of these companies. And so where do you find efficiencies that aren't just simple cuts?
The Journal.
Will Honda Be Nissan's Ride or Die?
Maybe he already has. But I think that's certainly the concern of a lot of these car makers, that they're going to lose that niche in the market and that sort of place in the sort of automotive pantheon to these Chinese companies that are cooler, younger, and more innovative.
The Journal.
Will Honda Be Nissan's Ride or Die?
We are following some breaking news this morning. Japanese automakers Honda and Nissan have announced that they plan to merge. If the deal goes through, this would make the companies the third largest automakers in the world.
The Journal.
Will Honda Be Nissan's Ride or Die?
Look, I think this is absolutely emblematic of the strain on carmakers today. Carmakers from GM to Ford to Toyota to Honda and Nissan are struggling to spend enough money to compete with the likes of Tesla and particularly Chinese carmakers. I would not be surprised if we see more of these mergers and partnerships,
The Journal.
Will Honda Be Nissan's Ride or Die?
If enough markets around the world still push electric vehicles, that is going to strain the budgets and the finances of these carmakers and something will break. And in the case of Honda and Nissan, we're seeing it starting to crack, but they will not be the last.