“Making the Car a Mobile, Connected Workspace”: An Interview with Carlos Ghosn

Carlos Ghosn has made a career out of handling crises. In the 1990s the celebrated car executive essentially saved first Renault and then Nissan, and for the past 11 years he’s served as CEO of both. A Brazilian-born Lebanese-Frenchman—the very embodiment of globalization—he somehow manages to be a hands-on executive on two continents. He is also among the most recognizable figures in the industry. By restructuring Renault and restoring it to profitability, he earned the nickname “Le Cost Killer.” For his success in overhauling Nissan, which formed an alliance with Renault in 1999, Ghosn won the sobriquet “Mr. Fix-It.” And he is famously portrayed as a superhero in a Japanese comic-book series. But technology can humble even the most successful executives, and Ghosn these days is focused on trying to remain an innovator. Dramatic advances—electric cars, vehicles that operate with significant autonomy, fully self-driving cars—threaten to shake up the industry. Upstarts like Tesla and even Google are now in the automotive business. The transformation is sure to crown new market leaders and ding some incumbents. “We expect major disruptions in technology,” says Ghosn, “which will change the product mix.” The challenge seems to have energized the 62-year-old leader. He has invested billions in electric-vehicle development at both Renault and Nissan. He took a big gamble with the Nissan Leaf back in 2010. But although the Leaf is the industry’s top-selling all-electric car, with more than 200,000 units on the road, its overall sales are at least four years behind initial expectations. The problem, Ghosn says, isn’t with the product but with the slow development of the supporting infrastructure. But it’s a problem nonetheless. And so Ghosn is scrambling to find ways to maintain his track record: tapping into synergies within the alliance, cutting costs, being the public cheerleader for his companies. In May he concluded another big deal, as Nissan invested $2.2 billion for a controlling 34% stake in troubled Mitsubishi Motors. The now-triple alliance presents Ghosn with further opportunities for cost savings—through shared work in engineering, production, and other areas. It’s a complex managerial challenge, and investors have wondered aloud if anyone other than Ghosn could handle it. Renault and Nissan’s combined worldwide car sales last year totaled 8.5 million units. Add in the 1 million that Mitsubishi sold, and Ghosn’s companies are approaching sales of 10 million cars a year—making the alliance the world’s fourth-largest carmaker, after Toyota, Volkswagen, and General Motors. Ghosn took a break from it all recently in New York City to talk with HBR’s editor in chief, Adi Ignatius, about the future of the auto industry. HBR: A lot of the innovation in cars these days is coming from Google and others in Silicon Valley. Is that worrisome for the auto industry? Ghosn: I’m not worried. Sure, it’s interesting to talk about Apple or Google making cars. But we have a long tradition of taking technology from the outside and putting it into our products. Automakers are architects. We assemble parts. We assemble technologies. We assemble know-how—all to make a product and bring it to the consumer. Our big challenge is, How do you put new technologies into a car while continuing to deliver on classic expectations? Do you fear the rise of new manufacturers? If a tech company wants to become a car manufacturer, it will buy an existing automaker and transform it according to its own criteria. But I don’t think that’s what tech firms are looking to do. The fact that new players are developing technologies to help make cars more attractive is good for us, because we never want to become a “commodity.” We want the car to continue to be a high-tech, exciting product that people desire. Today that comes from design, driving performance, and the quality of the materials. Going forward, we want to add more connectivity, along with more autonomous-driving functions. What’s your vision for autonomous drive? We’re introducing sophisticated functions to empower the driver, who can decide when to drive and when not to. And if he or she decides not to drive, we’ll have the technology to ensure that it’s in a safe and low-stress environment where the driver can be doing something else. What does “empower” mean? It means giving you options. I don’t hear anyone say, “I love driving in traffic jams,” or even on highways with miles and miles of road ahead. But people love driving in the countryside, where they can enjoy the car’s performance. In the future, when you’re bored, you can give up the driving. And when you are excited about being behind the wheel, you can take back control. We know that consumers want that. What are some of the most promising of these self-driving features? We already have single-lane autopilot. When your car deviates from the lane, the system brings it back. We have an autonomous braking system. If you get too close to the car in front of you, the car brakes without your intervening. The car is making decisions, for safety reasons, without you. And there’s autoparking. Cars will be able to park themselves. The ultimate step is for cars to be able to handle city driving. How close is the industry to producing these kinds of advanced autonomous vehicles? It’s coming in waves. Cars today already have a lot of autonomous functions. People will really notice it when these functions combine to offer drivers the full possibility of giving up driving. We plan to bring such a car to market in 2020. Will competitors beat you to it? According to their statements, yes. But the reality? We don’t know. We’ve heard a lot of claims. Some carmakers said they’d be mass-marketing fuel-cell cars this year. Come on! Selling 500 cars is not mass-marketing. I assume these innovations will create tricky new liability issues. Not with autonomous cars. Because at the end of the day, the driver is responsible for the vehicle, even as he or she has more ability to give up the driving. There is a robust and important dialogue taking place about this, but ultimately drivers must understand their legal responsibilities while behind the wheel. At the same time, automakers must take steps to educate customers about how much control they can cede to the vehicle. The manufacturer is responsible if the car malfunctions. The confusion starts with driverless cars, like Google’s, where you have no one inside calling the shots. Hardware and Software It seems that you now have to manage a couple of cycles: the car-design cycle and the technology cycle, which I presume turns over more quickly. Yes, but it’s manageable. It’s like the smartphone. You have hardware, which can last for a while, and software, which adjusts all the time. The car is going to last five or six years, while the software inside can be updated far more rapidly and from a distance. You can’t afford people who are doing just OK. You need high performers. Does that suggest there will be a convergence whereby competing auto manufacturers all use the same operating systems within their cars? I’m not sure about that. At this point we want to figure out how we can get the most up-to-date technology without losing control of the content within our systems. If we lose that, the car becomes just hardware, and somebody else is going to develop all the apps. So we need to be very prudent and make sure that no matter what gets put into the car, we maintain control of our product. So you view the interior electronics as an enduring competitive advantage. Sure we do. Getting Beyond Oil How does the low cost of oil affect the pace of innovation in your business? It’s good for the industry overall. We’ve had low interest rates, cheap oil, cheap raw materials—and it’s all been favorable. Last year was great for the industry as a whole, and I think 2016 overall will be the same. Of course, there is a downside. Fuel efficiency is less of a concern for consumers, because at these prices it’s not economically penalizing to have an inefficient car. But I don’t think the pace of innovation has slowed. For one thing, nobody believes the price of oil will stay low forever. For another, people are concerned not just about fuel efficiency, but also about emissions. That picture is getting better thanks to regulations on CO2 and other emissions. As a manufacturer, do you welcome governments’ setting industry standards on emissions? Does that level the playing field in a good way, or does it take away competitive advantage? Consumers care about emissions. They worry about global warming and about which technologies are sustainable and which aren’t. This is where you need governments, because they have the authority and credibility to say, “This is the level that we consider acceptable.” So it’s very important to have regulations. Let’s talk about your top electric model, the Nissan Leaf. What have you learned about the electric-car market so far? In terms of the technology, the Leaf has been a big success. People worried that it wouldn’t be reliable, that the batteries wouldn’t work. But it’s a great car. In our customer surveys, Leaf owners report the highest levels of satisfaction. We’ve sold more than 200,000 units. The problem is that sales are below what we thought we could achieve. The reasons are becoming clear. People complain about the recharging infrastructure and the range. The Leaf can go 100 miles on battery power, but that’s not enough for many people. They want 200 or 400 miles. And this complaint is linked to the still small number of charging stations, which makes drivers anxious. Had you expected that this market would develop more quickly? Yes. The recharging infrastructure is developing very slowly, and that’s keeping a lot of people from buying an electric car. We’re working, among other things, on enhancing the battery to extend the car’s range, but the problem won’t be solved until there is a larger network of charging stations. Nissan is focused on this as well and is working closely with public- and private-sector partners to further develop the global recharging infrastructure. The Leaf is at the low end of this market. When you look at Tesla, do you think about getting into the high end? We are about mass-marketing electric cars. If you want to make a difference for the environment, you need to produce a lot of these cars. Putting out 100,000 electric cars frankly isn’t going to make a big difference. You have to have millions of electric cars on the roads, which means you have to invest in the mass market. We won’t enter the premium space until we have a full range of cars for the mass market. What will the auto industry look like in five years? We expect major disruptions in technology, which will change the product mix. You’ll see more electric cars, more autonomous drive, and more connectivity. But it’s hard to speculate, because much of the change will depend on governments’ willingness to legislate on emissions and put in basic recharging infrastructure. Who should build that infrastructure? You? Governments? Entrepreneurs who see an opportunity? It’s up to governments to create the conditions in which somebody can make a business out of it. It’s like gasoline stations in the old days. The government didn’t build them, but it created an environment in which it made sense for people to make them a business. Capitalizing on Digital Innovation Connectivity could make converts out of folks who are not car people and create a way for them to love their cars. Oh, yeah. I see a lot of advantages—for improving quality of life and productivity—that will come from making the car a mobile, connected workspace. But you’ll need to ensure that when people buy a new car, just as when they get a new phone, all their personal data is easily transferable. Exactly. We’re at the very beginning of connectivity. But we’re excited about it, because it’s going to make the car an indispensable personal space. A bit like your house or your office. Speaking of digital innovation, are we at the beginning of the post-dealership era in car sales? I don’t buy that. People get a lot of information from the net, but they always complete the deal with a dealer. They want to see the real product. They want to touch it. They want to feel it. And they want to negotiate the price and conclude the deal. Are you worried that Uber and other car-sharing apps will cut into new car sales? I’m not worried. By our estimates, the industry sold 85 million cars worldwide in 2015 and is moving toward 87 million this year—both industry records. And we still have a reservoir of growth in emerging markets. One CEO, Two Companies Shifting gears, I want to ask how you have been able to run two companies. I mean, literally, how do you do it? About half of my time is predetermined, with board meetings, executive committee meetings, product meetings, design meetings, and so on—for two separate companies. One week a month all of the key Nissan people are with me in Tokyo. We compress everything into that week and make most of the big decisions. And then our top managers are free the rest of the month to be out with their teams. I do the same thing with the Renault team for one week a month in Paris. What do you do with your unscheduled time? That’s when I’m in operations, visiting specific markets, researching the latest technologies, spending time with suppliers and buyers. That is my time to look for the next opportunity, the next frontier. Have you developed a philosophy on what makes a great CEO? In my case, heading two companies, I realize more than most that you have to empower the people around you. And that also means strict organization and accountability for everyone’s performance. You can’t afford to have somebody who’s doing just OK. You need high performers. As CEO, what do you need to concentrate on most? The most important thing is selecting the right people. And that includes preparing the younger generation, who will eventually take on key roles. If you miss on that, it’s a pain. Having the wrong guy at the top is like shutting down an engine on your airplane. The other crucial thing is strategy. What products are priorities? What technology will we introduce? Where will we invest? What are we going to do? What are we not going to do? The best response to a problem is to be transparent. How important is it for a CEO to be out there in front of the public? I’m not the only one who needs to be out there. The people heading our country operations are also out there a lot. But if we’re doing something like launching a global car, the CEO needs to be visible, because then the media will think it’s important. But I don’t do a lot of that. I prefer to concentrate on strategic matters. You’ve been at Nissan for 17 years. What are the pluses and minuses of such a long tenure in the CEO slot? It depends on the industry and the CEO, but the ultimate questions will always be, Is the company growing? Is it profitable? And is the shareholder return growing? If not, no one is going to stay in a job like this. If so, it’s probably better to keep the devil you know than try the one you don’t. How would you describe the contrasting culture of the CEO in Japan, Western Europe, and the U.S.? It’s hard to generalize about Europe because things vary so much from country to country. But I can talk about Japan and the U.S. In Japan the president is the equivalent of the CEO and the guardian of the integrity and sustainability of the company. The president is the face of the company but not always the most competent and active person in the organization. He or she needs to be the most reassuring person, the one who is entrusted to preserve the company and its values. What about in the U.S.? In the U.S. you have to perform—or that’s it. There’s more focus on short-term financial results. You are worth as much as your last quarter or your last year. It’s transactional: You deliver, you get paid. If you’re looking for recognition, buy yourself a dog. Have the problems at Volkswagen and Takata affected the auto industry broadly? Sure. Every time you have such a situation, there is suspicion: Is it a wider issue? Is it an industry problem? The best response is to be transparent, to get out there as soon as possible to reestablish trust. That’s why you see so many recalls these days. It’s not because there are more problems but because carmakers understand that it’s better to act before the issue gets bigger. What do you still hope to accomplish in your roles? I want to make sure the Nissan-Renault Alliance continues to be solid, with good performance and good governance. I don’t want people to say, “Oh, it’s working only because Carlos Ghosn is there.” Is that viewpoint fair? I don’t think so. But I hope the next two to three years will show that more clearly, with strong growth and profit for Renault that matches Nissan’s. You’ve had great nicknames in the past—“Le Cost Killer,” “The Icebreaker,” “Mr. Fix-It.” What should we call you now? I don’t know. I don’t make these names up; I just read them in the newspaper. You should come up with one for me. I’ll work on it and run it by you. You shouldn’t be the last to know. OK!

“Making the Car a Mobile, Connected Workspace”: An Interview with Carlos Ghosn

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