Honda and Hitachi to Merge Four Parts Makers

Source: Reuters

TOKYO – Honda Motor Co. and Hitachi Ltd. agreed to merge four of their car-parts businesses to create a components supplier with almost $17 billion in sales, joining a wave of partnerships sweeping the global auto industry.

Honda, Japan’s second-largst carmaker, and Hitachi, one of the country’s biggest industrial conglomerates, said Wednesday they will combine Hitachi Automotive Systems and Honda affiliates Keihin Corp., Showa Corp. and Nissin Kogyo Co. Hitachi will own two-thirds of the new entity, with Honda owning the rest.

Faced with tectonic shifts toward electric vehicles and autonomous driving, automakers and their suppliers have been seeking allies to pool resources and know-how. Overnight, news broke that Fiat Chrysler Automobiles NV and PSA Group (Peugeot) are exploring a combination, and last month Toyota Motor Corp. agreed to boost its position in Subaru Corp. Slumping demand for conventional vehicles and uncertainty over which technologies and businesses will prevail is forcing players in the industry to find partners.

“The car and motorcycle industry is facing a once-in-a-century major shift, with pressure to reduce environmental impact, cut accidents and improve comfort,” the companies said in a statement. “There’s intensifying competition in electrification, autonomous driving and connected cars.”

Hitachi Automotive Systems began testing autonomous and connected cars in North America in 2015 in simulated urban environments and began verification of the systems on ordinary roads in Japan last year. The company makes autonomous driving electronic control units that combine sensors and cameras that work with chassis components. It also supplies more conventional parts like power steering pumps, brake pads and ignition coils to carmakers.

The transaction will take place in two steps, Honda and Hitachi said. First, Honda will make a tender offer for all shares of Nissin Kogyo, Keihin and Showa and Hitachi will make Hitachi Automotive Systems a subsidiary. Then, the four suppliers will merge, with Hitachi owning about 67 percent; Honda the remainder. A timetable for the steps has not been determined, the companies said.

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