This photo taken on Dec. 23, 2024 shows a Honda dealer in Tokyo, Japan. [Photo/Xinhua]

Honda Motor Co. and Nissan Motor Co. on Thursday announced the decision to terminate discussions on a potential merger, bringing an end to the restructuring attempt that could have created one of the world's largest automotive group.

Both companies held board meetings on Thursday, where they agreed to withdraw the basic agreement signed in December 2024 and officially end merger discussions.

In the rapidly changing market environment in the age of electrification, prioritizing decision-making speed and the execution of management measures would make it more appropriate to forgo the merger at this time, Nissan said in a statement on its website.

Despite the end of merger talks, the companies will continue to collaborate within the framework of the strategic partnership memorandum, the two companies said in separate statements.

This photo taken on Dec. 23, 2024 shows a Nissan dealer in Tokyo, Japan. [Photo/Xinhua]

The two automakers initially focused on forming a holding company that would oversee both brands, but negotiations stalled over the shareholding structure as tensions escalated when Honda proposed making Nissan its subsidiary, an idea Nissan strongly opposed.

According to local media, Honda has been pushing Nissan to accelerate its restructuring efforts. In November 2024, Nissan announced plans to cut 9,000 jobs worldwide and reduce its global production capacity by 20 percent after reporting a more than 90 percent drop in net profit for the April-September period.

The integration, if materialized, was expected to enhance development capabilities for electric vehicles (EVs) and software while reducing costs through cooperation. However, with the negotiations terminated, both companies must now reassess their strategic direction.

On Thursday, Nissan revised its financial outlook for the fiscal year, estimating a net loss of 80 billion yen (about 520 million U.S. dollars). The company cited rising costs for restructuring its struggling U.S. operations, along with expenses related to workforce reductions.

Revenue projections were also lowered, while operating income, which indicates profit from core business, is expected to be 120 billion yen, 30 billion yen less than the previous forecast.

At a press conference, Nissan's CEO Makoto Uchida acknowledged the challenges of continuing as an independent entity but ultimately believed that a holding company structure, rather than full acquisition, would have been the best way for Nissan to compete globally.

He also signaled Nissan's intention to seek partnerships in various fields to ensure future sustainability.

Honda's CEO Toshihiro Mibe expressed deep regret that both companies could not reach a consensus and take a step forward toward the merger.

However, through these discussions, Honda and Nissan recognized the potential synergy effects of collaboration, he noted. Honda stated that they would leverage this understanding in their ongoing strategic partnership with Mitsubishi Motors, which was announced in August last year.

The focus moving forward will be on intelligent and electrified mobility solutions, with plans to put these ideas into practice, Honda stressed.

Honda said Thursday that it booked a net profit of 805.26 billion yen in the nine months through December, down 7.4 percent from the previous year.