Nissan CEO Makoto Uchida notified Honda CEO Toshihiro Mibe about Nissan's intention to end merger talks after Honda proposed turning Nissan into an affiliated company according to an individual source who was apprised of the situation. A crucial change in talks between these two Japanese automakers occurred on Thursday during their meeting.

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The December MoU between Nissan and Honda established their goals to develop integration through a holding company framework. The alliance sought to establish a position as the world's third-largest automobile manufacturer while improving the companies' competitive edge against rising industry competitors. The negotiations faced difficulties because Honda demanded to establish Nissan as its own subsidiary. Multiple sources confirmed the talks regressed during this point.

The source inside Nissan confirmed that throughout the company everyone agreed the talks would end with this proposal on the table. Nissan plans to formalise its decision to break away from the Memorandum of Understanding in a board meeting prior to announcing its third-quarter financial results next week.

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Honda maintains its stance that any possible merger would require Nissan to be transformed into a subsidiary based on reports from NHK Japanese public broadcaster. Nissan operates as Japan's third-biggest car manufacturer yet faces future uncertainties because of industry changes while deciding what to do next.

Both Nissan and Honda refused to discuss their ongoing talks while standing by their February 15 deadline to decide on the partnership. The failed merger negotiations present serious questions about Nissan's upcoming business plan. The company implements a turnaround program that requires layoffs of 9,000 workers together with a global manufacturing capacity reduction of 20%.

Nissan's stock soared by 7.6% during the afternoon trading session of Thursday after the news broke but Honda's shares declined by 3.5%.

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