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TOKYO - Hitachi Ltd and Honda Motor Co said Wednesday they will merge four auto parts suppliers under a new company to boost competitiveness amid a multitude of challenges and opportunities created by the emergence of autonomous and electric vehicles.
The plan is in response to the intensifying race to develop next-generation technologies for so-called CASE -- connectivity, automation, sharing and electrification -- applications.
The merger involves Hitachi Automotive Systems Ltd, a wholly owned subsidiary of the electronics giant, as well as Keihin Corp, Showa Corp and Nissin Kogyo Co, which are under Honda's wing.
The combined sales of the four firms would be around 1.8 trillion yen ($16.5 billion), making the merged company one of the leading auto parts manufacturers in Japan.
"The auto parts maker business is changing," Hitachi Vice President Keiji Kojima said at a joint press conference in Tokyo.
He said the merger would lead to the development of competitive technologies and solutions while taking advantage of the new company's economies of scale in providing its products globally to customers.
"We can lead the auto industry, especially in the field of automation and electrification," Honda Managing Officer Noriya Kaihara said.
In the deal, Hitachi Automotive Systems will absorb Honda's three subsidiaries after the automaker obtains all stocks in the three suppliers through takeover bids. The name of the new company is yet to be decided.
Hitachi will hold a 66.6 percent stake in the merged company, and the rest will be owned by Honda after finishing their merger procedures in about one year, they said.
Hitachi has been streamlining its automotive business to enhance profitability, selling car navigation system maker unit Clarion Co to French car parts maker Faurecia S.A. in March.
Hitachi Automotive Systems, the largest company among the four firms by sales, said in June it aims to expand its annual sales of automotive parts and related products to between 1.2 trillion and 1.7 trillion yen by the business year ending March 2022 from 971 million yen in the year ended March 2019.
The main products made by Honda's Keihin include fuel management and electric motor control units, while Showa makes steering and shock absorber parts among others. Nissin Kogyo is a supplier of brake parts.
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