Shares of Japan's automaker Nissan plunged on Wednesday as media reports indicated the company, struggling with falling profits, was walking away from merger talks with rival Honda.
The Nikkei and other local media reported that Honda had proposed making Nissan its subsidiary instead of the previous plan to integrate under a new holding company.
"Strong opposition" within Nissan to this proposal was behind its decision to withdraw from the talks, the Nikkei said.
Discussions on setting up a holding company were launched in December but faltered as the two companies disagreed on the integration ratio and other conditions, the newspaper added.
Private broadcaster TBS published a similar report, but Nissan did not immediately respond to a request to comment from Agence France-Presse (AFP).
Nissan shares plunged 4.8%, but the Tokyo Stock Exchange suspended their trading, saying that the media reports on the merger's cancellation needed to be verified.
However, Honda shares closed 8.2% higher, having soared nearly 12% during the session.
In December, Nissan and Honda agreed to start talks on joining forces to create the world's third-largest automaker, which was seen as a bid to catch up with Tesla and Chinese electric vehicle firms.
Honda's CEO insisted at the time that it was not a bailout for Nissan, which announced thousands of job cuts last year after reporting a 93% plunge in first-half net profit.
Business has been tough for foreign brands in China, where electric vehicle manufacturers such as BYD are leading the way as demand grows for less polluting vehicles.
China overtook Japan as the biggest vehicle exporter last year, thanks to government support for EVs.
Honda and Nissan are Japan's No. 2 and No. 3 automakers after Toyota.
They agreed last year to explore a partnership on EV software and components, among other technologies. Mitsubishi Motors joined this initiative in August.
But the smaller automaker's chief said this week it would decide whether to join the Honda-Nissan merger talks in mid-February or later.
In December, reports said Taiwanese electronics behemoth Foxconn had unsuccessfully approached Nissan to acquire a majority share.
It then reportedly asked Renault to sell its 35% stake in Nissan – a pursuit that was put on hold before the merger talks were announced.
Nissan has weathered a turbulent decade, including the 2018 arrest of former boss Carlos Ghosn, who later jumped bail and fled Japan concealed in a music equipment box.
The company also has billions of dollars of debt that will reportedly mature over the next two years.
