Honda Walked Away From a $60B Deal With Nissan… Now It Looks Like the Smartest Move in Years

I don’t know about you, but there have been a few times in my life where I nearly made a truly awful decision… like buying Nvidia and altcoins at all time highs. And when I bailed at the last second and then looked back months later I felt so relieved. That same wave of relief is probably washing over Honda executives right now.

Earlier this year, Honda and Nissan were circling a $60 billion merger that would’ve created the world’s fourth-largest automaker. It was pitched as a power move… one that could combine two aging giants into an EV-fighting machine strong enough to go toe-to-toe with Tesla, BYD, and every Chinese upstart bolting wheels on a battery.

But Honda walked. Not quietly, either. Sources said the deal fell apart because Honda didn’t want to play equal partner with Nissan. They reportedly offered a merger that would have made Nissan a subsidiary, which Nissan didn’t appreciate. Honda said the deal could damage its reputation. At the time, it sounded like posturing. Now, it looks like an amazing decision.

Today, Nissan dropped the kind of financial news that makes you wince even if you don’t own the stock. For context, they previously estimated a loss of just $523 million. So yeah… just a tenfold increase. (Nothing like being off by $4.7 billion to keep things exciting for shareholders.)

The root of the problem is that they had over $3.5 billion in impairment charges. After taking a fresh look at its factories and operations across the U.S., Europe, Japan, and Latin America, Nissan came to a sobering conclusion… a lot of its assets aren’t worth what they thought.Toss in another $420 million in restructuring costs (plant closures, layoffs, and all the other fun stuff accountants dread) and you’ve got yourself the biggest loss in the company’s history.

New CEO Ivan Espinosa, who stepped in this month, inherited this smoldering mess and called the revision a “prudent step.” (Prudent’s a bold word choice when you’re torching five billion bucks, but sure.) He’s now tasked with the impossible… reviving a global automaker that’s hemorrhaging cash and goodwill, while everyone keeps asking what happened to Carlos Ghosn and whether he left anything behind besides a fugitive Netflix documentary that has producers licking their chops.

To pile on, Nissan canceled its full-year dividend (again, big surprise) and cut its operating profit forecast by 30%, now expecting just $596 million instead of the $841 million it had hoped for.

And then there’s China. Once Nissan’s most profitable region, China has become a full-blown problem. Sales in the country dropped to 790,000 units in fiscal year 2023, down 50% from 2018. Last year, they shut down their Changzhou plant, and now they’re trying to reverse the trend by sinking $1.4 billion more into the market. The plan is to roll out the new Frontier Pro plug-in hybrid pickup and strengthen their EV lineup through the Dongfeng partnership.

But the road back is steep. Chinese automakers like BYD are not only winning the EV race… they’re lapping legacy players. Reclaiming market share from BYD now feels less like a likely comeback and more like a hope-and-pray scenario.

Investors have clearly lost patience. Nissan’s stock is already down 25% year-to-date, just four months into 2024. And of course, Analysts aren’t pulling punches. Some have described the outlook as “murky,” citing long-term structural weaknesses in Nissan’s global operations and lagging innovation in the EV space. Others warn that while a reset may be underway, any meaningful turnaround could take years, not quarters.

And yet, through all of this, Nissan is still spending hundreds of millions of dollars to keep its name on Nissan Stadium… home of the Tennessee Titans. I guess when your earnings are falling apart, you might as well sponsor a football team that knows a thing or two about rebuilding seasons.

PS: The headlines are full of panic… inflation’s too high, the Fed’s asleep at the wheel, and Trump never fails to kill any market momentum with more tariffs. On the surface, it looks like the market’s barely breathing.

But underneath all that noise?

We’re seeing some of the fastest stock moves in years… especially in the small-cap space, where low float and high tension can trigger a 100% pop before lunch. Some are up 200% in under 24 hours… and nobody on CNBC is talking about them.

Except us.

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Stock.News has positions in Tesla and Netflix.