Nissan's CEO on the Auto Industry's Woes

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Kazuhiro Nogi / AFP / Getty

Renault-Nissan chief Carlos Ghosn.

Nissan CEO Carlos Ghosn, the charismatic leader of Japan's number three automaker, sat down with TIME to discuss the auto industry's current crisis, how to make electric cars a reality, and what we'll drive 10 years from now. Though better off than its American counterparts, Nissan recently reported a 39% drop in second-quarter profit, has seen its stock price plummet, and plans to halt production of nearly 300,000 vehicles through March of next year.

Ghosn, who was born in Brazil to Lebanese parents (and speaks six languages), enjoys rock star popularity in Japan for turning the flailing company around nearly a decade ago. But not even a champion CEO is safe from the current crisis, which he calls "unchartered territory" that could stretch anywhere from six months to three years. (See the history of the electric car.)

Here are some highlights from the discussion, which took place on Nov. 14 at TIME's New York City offices.

TIME: How do you see the auto industry's current problems playing out?
Carlos Ghosn: We are expecting year 2008 to show a very significant decline compared to 2007. We are preparing ourselves for a couple of very tough years, not only in the U.S., but particularly in the U.S. The only good news that may come will come from emerging markets, because the number of cars per inhabitants is very, very low. There are 50 cars per 1000 inhabitants in China... compare that to 600 per 1000 on average in most Western countries and 800 in the U.S., and you know that there is demand coming.

Should the U.S. government bail out the big three automakers?
Nobody likes to see a competitor in this position because usually it messes up the whole market. When a big player is in trouble, the whole market is in trouble. Some people may think that competitors would be happy to see one car manufacturer go bankrupt, but I don't think so. Frankly, we are looking at it with a lot of anxiety.

What will be the global impact of how the U.S. auto industry's woes are handled?
The U.S. will be setting the tone for the global industry. Any [government] support that will happen will be mirrored in other regions. This is not only a U.S. problem.

Can you tell us a little about Nissan's relationship with Chrysler?
They needed a small car. We developed a small car for them on the existing platform of a Nissan. Same thing for our large pickup truck. Instead of renewing our own large pickup truck, we can use a derivative of their platform. We cut our investment by 75%. These are not small savings. These are massive savings.

Can you describe to me the car I will be driving in 10 years?
You have to tell me who you are. Then I can tell you what car you will be driving. I don't think people are all going to go for one type of car. As for our company, we are taking leadership into mass-marketing electric cars. In 2012, we are going to be in the main markets in the world with electric cars — both from Nissan and Renault — and it is not going to be one car, we are going to have a product lineup. You are going to have a small car for the city, and a family car, and you're going to have a 4-by-4. We don't want to have one model. We want to have bricks of technology that we can assemble in different ways.

The incentives will be so big for zero emission cars that it will be an easy choice for the consumer. I don't think it is going to be the majority of cars, but it is a direction that makes a lot of sense. This is a core element of our strategy.

What are you doing to make electric cars a reality?
You are going to have a collaboration between cities, government and car manufacturers toward making it easy for the consumer to go for zero emission cars. We have been very surprised by the very positive collaboration we have seen from many governments — we've signed Portugal, Denmark, Israel, France. We're working with the Chinese. The overwhelming response from public officials is amazing. When zero emission cars are on the market, all the others are going to look really obsolete.

There are different ways of getting there. In Israel, for example, you don't buy the battery. You buy the car, but you lease the battery. You pay a fee per month. We are working on quick charges where you can get the battery mostly charged in 25 minutes.

Are falling gas prices going to hurt interest in electric cars?
I don't think so. I don't think that anybody thinks this [low gas prices] is going to last. Today we are in a recession, so oil prices are going to go down. We have to imagine the future when we make investments. You also have an environmental concern that is independent of oil price concerns.

How much will electric cars cost, including operating costs?
Not very different from the price of a normal car. The battery cost plus the cost of electricity is lower [than gasoline] for the consumer. There is absolutely no reason for the consumer to feel the pinch. Obviously, incentives are going to help.

What do you think of the all-electric Tesla roadster?
You are going to see a lot of products coming from different car manufacturers because this is perceived as the technology of the future. But the mass-marketization of this technology is going to start with: is it affordable, is it reliable and how easy is it for consumers to charge the car, maintain it, resell it?

Has the global financial crisis changed how your manage your business?
The biggest challenge of CEOs today is how can you maintain your long-term strategy and at the same face short-term obligations. Short-term, everybody is paying a lot of attention to cash. If you optimize cash, that doesn't mean you're optimizing profit. So you have to make choices about what is most important. You have to continue to prepare for the future. At the same time, if you want to be able to see the future, you need to make sure you are doing the right thing to preserve your company through this period.

What are Nissan's hottest markets now?
China. We think China is going to be very resilient. Obviously we are not going to have the 25% growth that we had for the last years, but 6 or 7% growth, at least. We think South America is going to come back. Brazil is suffering now, but it has long-term potential. Russia, too. I come back to fundamentals. The number of cars per inhabitants in these countries is very, very low. Even if you are going to have a disruption in the rate of growth, there is fundamental demand, which is very strong. I think in emerging markets, the car is still the aspirational object that people most want to buy. It symbolizes change in our lives.

Fifty years from now, will we stop using oil altogether?
You'll still have the gasoline engine as well as electric. Oil is a very rich and important resource, but we are wasting it by using it in ways where you can have cheaper substitutes or substitutes that are more respectful of the environment. The correction is happening now. Where you can substitute oil with something much more environmentally friendly, it is going to have to happen. You are going to have more nuclear, solar and hydroelectric power being used.

This doesn't mean the end of oil. I don't believe it. On the contrary, I think this is going to preserve oil for chemical industries and other industries where you cannot substitute [anything else]. But when you see that you can drive an electric car and it is as pleasant as a normal car, what are you going to use oil for?

See the history of the electric car.

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