“Going forward, Nissan and Honda will collaborate within the framework of a strategic partnership aimed at the era of intelligence and electrified vehicles, striving to create new value and maximize the corporate value of both companies,” it said.

Nissan and Honda had announced in December that they would begin talks over the following six months on a possible merger, in a deal that would have given them more firepower to compete with growing competition from Chinese carmakers like BYD.

The deal was motivated by the need to combine their resources to remain competitive as the industry transitions to electric vehicles. However, after just a few weeks of talks, negotiations appeared to stall.

During the discussions, various options were considered regarding the structure of the business integration, according to the statement.

Honda proposed changing the structure of the intended merger from a joint holding company, as agreed initially, to a deal with Honda as the parent company and Nissan its subsidiary through a share exchange. Both companies concluded eventually that it was best to “cease discussions,” the statement added.

Nissan has struggled since the collapse of its long-standing alliance with French carmaker Renault. It faces severe financial problems that put it in desperate need of a larger partner. Some analysts had speculated Nissan could face bankruptcy as soon as 2026 when it has a huge amount of debt coming due.

Nissan’s profits in the six months ending in September plunged 94% compared with the same period in 2023, as the company lost money on auto operations and reported only a narrow profit due to its financing business. In response, Nissan announced it would cut its manufacturing output by 20%, laying off 9,000 workers as a result. It also slashed its forecast for full-year operating profit by 70%.

Nissan and Renault agreed in January 2023 to restructure their partnership, with the French company whittling down its stake in the Japanese carmaker to 15%. That move marked a significant milestone in the two-decade-old alliance.

Since 1999, they had worked in tandem, alongside junior partner Mitsubishi Motors. The collaboration has allowed them to share production and technology and ultimately save billions of dollars a year. But the alliance fell apart after the stunning downfall of its former chief Carlos Ghosn in 2018.

This story has been updated with additional information and context.