Nissan CEO Makoto Uchida met with his Honda counterpart Toshihiro Mibe on Thursday to say he wanted to end their merger talks after the larger automaker proposed making Nissan a subsidiary, said a source with knowledge of the matter.

The Japanese automakers in December signed a memorandum of understanding to discuss an integration under a holding company to create the world's third largest automaker and compete in an increasingly tough industry.

But the talks have been complicated by growing differences, multiple people familiar with the matter have told international media, and hit a wall after Honda said it wanted to turn Nissan into a subsidiary.

"A consensus was reached (on Nissan's side) that the talks cannot proceed under that proposal," said the source with knowledge of the discussions.

Nissan will formalise the decision to withdraw from the MOU at a board meeting to be held before the company's third-quarter earnings announcement next week, the source added.

Honda's current stance is it would not accept an integration unless Nissan agrees to become a subsidiary, Japanese public broadcaster NHK reported.

Honda is Japan's second-largest car maker behind Toyota, and Nissan is the third-largest.

Nissan and Honda spokespeople declined to comment on the status of their talks, repeating earlier statements that they aimed to finalise a future direction by mid-February.

A scrapping of the talks raises questions about how Nissan, which is in the middle of a turnaround plan, can ride out its latest crisis without external help. Nissan has already announced plans to cut 9,000 workers and 20 percent of global capacity. (Reuters)