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Ghosn overruling electric engineers
The crowd of 600 falls silent as an employee asks Chief Executive Officer Carlos Ghosn if he’s staking too much of Nissan Motor Co’s future on electric cars and not enough on green alternatives like Toyota Motor Corp’s Prius gas-electric hybrid. - Nissan to export components worth $20 million from India - Competition to heat up as biggies gear up for small-car launch - Asian stocks advance on BOJ speculation - India Eco Summit: Strengthening public transport - Renault-Nissan finally signs ultra-low-cost deal with Bajaj - What went wrong with Logan Ghosn steps to the edge of the stage at Nissan’s Yokohama headquarters and smiles, lightening the mood on a rainy October afternoon. Hybrids, diesels and gas engines aren’t enough, Ghosn responds. In a world where oil prices may triple and political upheaval and climate change are intensifying, governments are promoting all-electric cars. Consumers will embrace them as soon as the price is right, he says. “This is about preserving the planet,” Ghosn says, Bloomberg Markets magazine reported in its February issue. “If we start being skeptical, nothing is going to happen.” A few minutes later, sitting sideways with his arm across the back of a chair in a conference room, Ghosn shifts from evangelist to micromanager. A Nissan ad that touts zero-emission motoring for future generations is vague, he tells a dozen executives. “We should say specifically ‘young people, first-new-car buyer,’” he says. Ghosn, 55, who turned Nissan into the most profitable of the world’s seven biggest automakers in 2005 and made Ghosn-san a Japanese household name, is placing the auto industry’s biggest bet yet on electric vehicles, or EVs. Ghosn is facing an abundance of challenges. It may take until 2030 for automotive batteries to be cheap enough for widespread commercial use, the National Research Council said in December. Before then, governments may tire of propping up the EV industry with tax breaks and buyer incentives. Ghosn’s first electric car, the Leaf, can travel only 100 miles (160 kilometers) without recharging — putting him in competition with hybrid vehicles that have no such limits. The biggest stumbling block may be out of Ghosn’s control: the price of gasoline. His success — or that of anyone who builds EVs — hinges on whether car buyers get fed up paying increasingly higher prices at the pump, says Jerome York, the former Chrysler Corp chief financial officer, who has advised billionaire investor Kirk Kerkorian. On January 6, gasoline averaged $2.68 a gallon in the US. “If gas is $2 a gallon, this whole regulatory effort to promote EVs is going to be an ugly train wreck,” York says. Ghosn has won supporters. “We look very positively on the fact that they’re being innovative and have a plan for EVs that it looks like they’ll be able to achieve,” says Gilles Michel, assistant director of the New Jersey Division of Investment, which began buying its 6.6 million Nissan shares in March 2009. Since then, the stock price has more than doubled. The division, which manages investments for the state’s $68.5 billion pension fund, also owns 500,000 Renault SA shares. Renault started buying what’s now a 44 per cent stake in Nissan in 1999, when Ghosn was the French company’s executive vice president. Renault shares rose 59 per cent in six months to ¤39.25 on January 6. Ghosn has been CEO of both Nissan and Renault since 2005. Michel also likes that Nissan and Renault shares were beaten down, because he expects a recovery in US auto sales. From its 18-year high in January 2007, Nissan stock tumbled 82 per cent in two years. In February 2009, Ghosn cut 20,000 jobs, or one in 12. In December, US sales rose 15 per cent from the year-ago period. On January 6, Nissan shares traded at ¥799, up 38 per cent in six months. Ghosn needs a bold move to restore his brands’ luster. Nissan’s net income peaked in 2005 at $4.8 billion. Since that year, U.S. dealers have reported a sales drop of more than 75 percent for the Titan pickup. The truck was a centerpiece of the effort by Ghosn, a Brazilian of Lebanese descent who speaks four languages, to revive Nissan and challenge Detroit. Ghosn expects Nissan to lose $445 million in the fiscal year ending in March 2010, adding to a $2.3 billion loss the previous year. Renault lost $3.6 billion during the first half of 2009. As profit sank, analysts began questioning whether Nissan had an enduring identity, especially among young people, says Andy Palmer, Nissan senior vice president for product planning. “You need to be a rebel with a cause, and we didn’t have a cause,” Palmer says. Ghosn has found his calling. He’s going all out to populate the planet with electric vehicles, starting in December 2010 with the Leaf. “We aim to be the global leader in zero-emission mobility,” Ghosn told employees in October. The five-person car, which he’ll roll out first in the US and Japan, will cost as much to buy and operate as comparable gasoline models, Ghosn says. These include Honda Motor Co’s $24,000 Civic Si Drivers will have to recharge the Leaf’s £475 (215-kilogram) lithium-ion battery pack after 100 miles. Ghosn is upending a century of automotive tradition by selling the Leaf without a battery. Instead, owners will rent the battery pack and pay for the miles used, like a cellular phone plan. Drivers will recharge at home or at public plug-in stations, hitching to 3-foot-high (0.9-meter-high) metal posts. Or they may swap the batteries, like exchanging an empty propane tank for a full one. The price: about $120 a month in the US for battery rental and electricity. “I’ll be very surprised if there isn’t a large community of buyers,” says Daniel Kammen, director of the Renewable and Appropriate Energy Laboratory at the University of California, Berkeley, who helped the state design its low-carbon-fuel standards. Ghosn is so sure the vision will work that he’s building factories to assemble 500,000 EVs a year — 10 times more units than General Motors Co is planning to make of its Volt hybrid. The Volt, which GM says will go on sale in November, has a small gasoline engine that runs a generator to recharge the battery as needed. For Nissan, Ghosn is planning a delivery van, sports model and two-seat urban commuter after the Leaf; for Renault, he’s looking at four EVs, including a one-seater similar to a motorcycle. Ghosn predicts that EVs will grab 10 per cent of worldwide industry sales by 2020. He has pledged to spend $6 billion on EV technology from 2007 to 2011 — an amount equal to the combined annual research and development budgets at Nissan and Renault. As for his companies’ recent losses, “has it been fun for anybody, you think, for the last two years?” Ghosn asks, referring to the financial crisis during a November interview at the Council on Foreign Relations in New York. Worldwide auto sales were forecast to be 55.2 million in 2009, 23 per cent below a mid-2008 forecast from research firm R L Polk & Co. Investor Harris Kempner isn’t waiting to see whether Ghosn’s EV push derails. The CEO of Kempner Capital Management Inc in Galveston, Texas, sold his 404,296 Nissan American depositary receipts in the quarter ended on September 30. “There’s plenty of room for improvement in gas engines that don’t require new infrastructure,” Kempner says. For Rod Lache, a Deutsche Bank AG analyst in New York, the cost of electric vehicles’ battery packs is a major constraint. A pack as big as the Leaf’s costs $15,600, Lache says. That compares with about $30 for a gas tank in conventional cars that travel four times farther. Eric Noble, president of research firm The CarLab in Orange, California, says the metals used in batteries are getting more expensive. In 2009, lithium carbonate cost $6,500 a metric ton, almost triple 2006 prices, according to the US Geological Survey. “The result will be massive losses,” Noble says of Ghosn’s EV effort. Bill Reinert, Toyota’s US manager for advanced technology who helped design the Prius, says range is a major detraction for electric vehicles. “One hundred miles covers most daily trips but not all,” he says. “How many people can afford a specialised car that can’t be used on vacation?” Toyota’s planned all-electric car, set to make its debut in 2012, is a four-seater designed for commuting. It will go at least 50 miles without recharging. Ghosn says the Leaf’s range will satisfy most drivers. He’s signed agreements with 41 governments and utilities — from Portugal to Portland, Oregon, to the prefecture of Kanagawa near Tokyo — to build recharging stations as part of their plans to curb greenhouse gases and cut dependence on petroleum. Even so, EVs may not provide the same environmental benefits in all countries. US reliance on coal, a polluting fossil fuel, for half of its electricity needs taints EVs’ green credentials, says Jan Kreider, an engineering professor at the University of Colorado, Boulder. An EV with a 40-mile range will emit 110,000 pounds of carbon dioxide equivalents during its lifetime because it relies partly on coal as the original energy source, Kreider says. Toyota’s Prius will emit £97,000, and Nissan’s gas-powered Sentra compact will put out £140,000. Ghosn says that once EVs arrive in showrooms, companies will invest in nuclear, wind and solar energy to create cleaner electricity. For now, his success turns on batteries. Ghosn plans to build them through Automotive Energy Supply Corp,Pages: [1] 2