Once fierce rivals, Japanese car giants Honda and Nissan recently announced their plans to merge in 2026. The deal would create the world’s 3rd largest automaker. WSJ’s Sean McLain reports on why Nissan struggled in recent years and the challenges the merged company would face. Further Listening: -Inside Carlos Ghosn's Escape From Japan -The Future of Self-Driving Cars Is Here Further Reading: -Nissan Needs a Honda Rescue. What Went So Wrong? -Honda, Nissan Plan to Create World’s No. 3 Automaker in 2026 Merger Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What iconic scene from a movie is referenced?
There's an iconic scene from the 2003 action movie Too Fast, Too Furious, a scene beloved by gearheads. And it begins, naturally, with cars rolling up to a starting line.
Of course, it's a street race. Looks like the streets of Miami, if I recall correctly.
That's our colleague Sean McClain. He covers the auto industry.
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.
And these are two of the most iconic vehicles of the street racing circuit from that period.
Honda versus Nissan, locked in a high-octane street race. Kind of like the rivalry they have in real life. Two Japanese car giants selling similar cars to similar customers. Which is why, just before Christmas, some news out of Japan was so surprising.
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Chapter 2: What surprising news came from Japan regarding Honda and Nissan?
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.
If you were to boil down this story into one simple idea, what would that be?
I mean, I would say this boils down to money and pure desperation.
Welcome to The Journal, our show about money, business, and power. I'm Kate Linebaugh. It's Wednesday, January 8th. Coming up on the show... What's behind the proposed merger of Nissan and Honda?
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For decades, Japanese automakers have sold their vehicles to the world. Cars famed for being reliable, no frills, and not too expensive.
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.
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.
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Chapter 3: Why did Nissan struggle in recent years?
Carlos Ghosn.
Automotive titan Carlos Ghosn was put on... Carlos Ghosn became CEO of Nissan in 2001. He was a superstar of the auto industry and had a bold vision for Nissan. He wanted to make it the largest car maker in the world. What was the big bet he made?
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.
And Nissan, more so than other car makers, they wanted to be the first to market for a lot of these countries.
So Ghosn and Nissan spent billions of dollars building factories all over the world. He pushed for drastic sales increases and made big investments in electric cars, robo-taxis, and autonomous vehicles.
And he was betting the substantial portion of that growth on emerging market demand that, frankly, never materialized.
What happened instead?
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.
By 2018, Nissan's profit margins were shrinking. And Ghosn soon found himself accused of financial crimes in Japan. He fled the country and is now a fugitive in Lebanon. He denies wrongdoing and has dismissed the idea that he was responsible for Nissan's current woes. But Nissan was stuck.
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Chapter 4: What was Carlos Ghosn's big bet for Nissan?
Hello.
Thank you for waiting. Thank you for coming to this venue despite your busy schedule and despite the short notice.
In December, Nissan and Honda held a joint press conference. A translator interpreted for the CEOs and for reporters.
Good afternoon, everyone. I am Mibe of Honda Motor. Thank you for joining us on such short notice.
As the CEOs of both companies stood on stage at the press announcement, things got awkward. What did the Honda CEO first say about this deal?
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.
what is the aspect that you like about each other?
And he gave this very long, rambling answer.
That's a tough question.
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Chapter 5: What happened to Nissan's factories under Ghosn's strategy?
Yeah, he is. He's honest in an endearing way for a modern CEO.
The merger, which is planned for next year, would create the third largest automotive group in the world behind Toyota and Volkswagen. The merged company would have sales of 8 million vehicles a year. Honda has said that pooling resources with Nissan will allow for both brands to continue innovating as demand rises for EVs and autonomous technologies.
But if Honda's CEO sounded lukewarm about the deal, that may be because it was a bit of an arranged marriage. Arranged by the Japanese government.
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.
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.
Honda's CEO has rejected suggestions that the company was being pushed to rescue Nissan. So this deal might make sense from, like, a political perspective, but what about the market challenges the deal faces?
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.
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.
There's also concerns about duplication, the idea that both Honda and Nissan currently have similar product lines.
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