Honda and Hitachi plan to merge four car parts business: Report2 min read . Updated: 30 Oct 2019, 08:42 AM IST
- Honda to make a decision on the deal Wednesday
- The combination would create a parts maker with about $16.5 billion in sales
Tokyo: Japan’s Honda Motor Co. and Hitachi Ltd. are discussing a merger of four of their car parts businesses, a combination that would create a business with almost $17 billion in annual sales at a time when automakers are increasingly seeking tie-ups to grapple with the shift to electric and autonomous vehicles.
Honda, the country’s second-biggest carmaker, will make a decision on the deal Wednesday, while Hitachi, which makes industrial equipment to appliances, said it will discuss the matter at a board meeting. The units to be combined include Hitachi Automotive Systems and Honda affiliates Keihin Corp., Showa Corp. and Nissin Kogyo Co., the Yomiuri newspaper reported earlier.
Japan’s largest carmaker after Toyota Motor Corp. is consolidating suppliers with one of the country’s biggest industrial conglomerates as global car demand slumps and automakers are struggling to adjust to the once-in-a-generation shift toward new technologies. Last month, Toyota boosted its stake in Subaru Corp., the latest tie-up among automakers as they face an uncertain future. At the same time, Hitachi has been been reshaping its group by selling off some non-core assets and merging in others.
The combination would create a parts maker with about 1.8 trillion yen ($16.5 billion) in sales, compared with Japan-based parts making giant Denso Corp., a Toyota affiliate that had sales of 5.3 trillion yen in the year ended March.
Hitachi Automotive Systems had sales of 971 billion yen in the year ended March, while Keihin, Nissin Kogyo and Showa combined had about 825.6 billion yen.
Investors rushed to trade the news, with shares of Nissin Kogyo, Keihin and Showa untraded as buy orders outnumbers sellers as of 9:51 a.m. in Tokyo. Hitachi Automotive Systems is privately held.
Consolidating the parts makers would give the companies scale and help them reduce their dependence on Honda as production shifts toward electric vehicles that require fewer components.
Nissin Kogyo and Showa count on Honda for more than half of their revenue, while also supplying carmakers including Suzuki Motor Corp., Mazda Motor Corp. and Subaru Corp., according to data compiled by Bloomberg. Keihin is more dependent on its affiliate, relying on Honda for 85% of sales, while also supplying some to Volkswagen AG, Ford Motor Co. and Daimler AG, the data show.
Both Honda and Toyota have cut their profit and sales forecasts for the current fiscal year with demand in the US and China, the two biggest export markets, worse than projected.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.