Friday, January 1, 2010

Electric Cars Are Alive and Well, Says Carlos Ghosn

The electric car, a vehicle that was practically gone before it arrived, is anything but dead, Carlos Ghosn, the widely celebrated CEO of both Nissan and Renault, told a Stanford Graduate School of Business audience.

STANFORD GRADUATE SCHOOL OF BUSINESS -- The electric car, a vehicle that was practically gone before it arrived, is anything but dead, Carlos Ghosn, the widely celebrated CEO of both Nissan and Renault, told a Stanford Graduate School of Business audience

By the end of 2010, we can expect to see the Nissan Leaf, an affordable auto that runs on a lithium ion battery and boasts zero emissions, at dealers. "No longer," said Ghosn, "will people have to feel guilty about melting the ice caps as a result of driving their car."

The effervescent and entertaining Ghosn shared his company's mission -- to be the leader in zero-emissions cars -- as well as his wisdom about management, at a student-led question-and-answer session January 12, cosponsored by the school's View from the Top program and its Global Speaker Series.

Reporting that Nissan has invested billions in the development of the electric car, he acknowledged the risk the company is taking in light of skeptics and media naysayers, particularly given the ignominious defeat of the previous generation of such vehicles. Explaining the company's business logic, he asked the audience three questions: "Do you think there is more chance that oil prices will go up or down? Do you think environmental regulations will become stricter or looser? And how long do you think the superpowers will accept dependence on oil?"

Nissan, he said, is betting oil will only get more expensive, regulations will only get tighter, and superpowers will only get more nervous about their vulnerability to the oil-producing countries. All such scenarios point toward the marketability of the electric vehicle. "The only way to disconnect from oil dependency is to bring electricity to the car, which can be generated from many sources -- coal, wind, solar, and others. If one becomes unavailable, you can switch to another. Any kind of environmental disaster, energy crisis, or war in country that produces oil -- all of which are likely scenarios in the next 10 years -- will create demand for electric vehicles."

Ghosn also observed that the automobile industry is "moving from north to south and west to east." While demand in Japan, the United States, and Europe will continue, he predicted that the most growth will come from new markets such as China, India, and "the next wave" of countries such as Indonesia, Mexico, and Vietnam. "The more a country has been mismanaged, the more potential it has, especially if it has natural resources," he said. "Some of those countries will fix their problems. We're therefore trying to establish a presence in those places now."

Auto companies can also expect to be shaken up by the emergence of at least one significant carmaker in China and India each over the next 10 years. He warned that by looking the other way, established companies will only fuel the silent growth of such disruptors, and instead suggested a strategy of subduing such competition through alliances.

Turning to the topic of leadership, Ghosn reflected on how he has managed to head not one, but two car companies on opposite sides of the globe. Renault beckoned him when he was not quite finished with the turnaround at Nissan and was thus reluctant to leave, Ghosn said. He has been able to tend to both by having reliable COOs in place who can answer for him in his absence.

He also emphasized that the Nissan-Renault alliance has been the only one of its kind to work in the automobile industry precisely because the two companies never tried to formally merge. "We took the alliance as a marriage between two people. Nobody wants to 'become' the other," Ghosn said. "Keeping diversity within uniformity is very important because having a specific identity is the basis of performance and is what motivates people. It's the way the world works. So we try to make sure that we don't violate common sense."

Sharing strategies he used to rescue Nissan from the brink of disaster a decade ago, he quipped, "My job is to make people do what they don't want to do." When he took the helm in 1999, no one wanted to restructure, sell assets, shut down plants, or do any of the things that should have been done five years earlier. Believing that the answers "were already buried inside the company," he solicited managers for what they could do in their own areas to solve the company's problems. He then helped them prioritize their activities by rallying around a common goal: to return to profitability within the first year.

Finally, reflecting on his long career, Ghosn also offered sage advice to MBA students. "First, don't plan your path too carefully. Stay flexible or you may miss opportunities," he said. "Second, know that if you really put your heart into what you're doing, you'll always do well. It's a question of time, patience, and drive. And third, don't look for outside recognition. It's an illusion, and it will always leave you disappointed."