Nissan Will Cut Benefits for Retirees

In a first for a Japanese automaker, Nissan Motor Co. is curtailing its retiree health insurance and pension programs in the U.S., saying it needs to cut costs to “remain competitive.”

The move comes as concerns mount that such expenses are crippling the competitive efforts of U.S. automakers, particularly General Motors Corp. and Ford Motor Co. GM, for example, provides benefits for 1.1 million workers, their families and retirees. The beleaguered Detroit automaker has said its retiree healthcare bill alone adds $1,600 to the cost of every GM vehicle made in the U.S.

American companies in many industries have cut retiree benefits for more than a decade, but “Nissan is leading the automotive industry with such changes,” said Paul Fronstin, director of the health research program at the Employee Benefit Research Institute in Washington.

Nissan will limit healthcare coverage for retirees from its U.S. manufacturing plants and will no longer pay a guaranteed monthly pension to new hires in this country, the company said in a note to employees last week.

Greg Kelly, vice president for human resources, said in an e-mail to employees at Nissan’s North American headquarters in Gardena that the plan for new hires “will support Nissan’s aim to provide long-term job security for all employees.”

Nissan told manufacturing workers that at age 65, retirees and their spouses would receive annual stipends so they could buy their own insurance to help supplement the U.S. government’s Medicare plan, instead of receiving supplemental health coverage from the company.

When the new plan takes effect next January, a qualifying retired couple could receive $5,000, plus 3% annual increases, a Nissan spokeswoman said.

Nissan didn’t say how much it expected to save, but the 3% limit on so-called gap insurance increases would limit the company’s exposure to soaring health insurance costs.

Workers at Nissan’s North American headquarters also were told that new hires in non-manufacturing jobs would see their retiree health coverage end at age 65, with no stipends to help pay for gap policies.

In addition to changes in retiree health coverage, Nissan said new workers wouldn’t receive a guaranteed monthly pension payment upon retirement. Instead, the company will contribute to employees’ tax-deferred 401(k) investment plans.

Initially, Nissan’s plan won’t affect many workers. None of the Japanese automakers has a large number of retirees in the U.S. because their first assembly plants did not open here until the 1980s. But Nissan, Toyota Motor Corp. and Honda Motor Co. all have expressed concerns about future healthcare costs.

Nissan opened its first U.S. assembly plant in 1983 and has only about 500 retirees from its manufacturing division. But the automaker has expanded rapidly and now has 12,200 manufacturing employees in the U.S., plus 3,000 in sales, engineering, administration and design. As a result, Nissan expects its U.S. retiree population to top 4,000 in the next decade.

Although GM and Ford must negotiate changes in benefits for hourly workers with the United Auto Workers, the Japanese automakers don’t have union contracts, with the exception of a jointly owned GM-Toyota plant in Northern California.

GM and Ford “have begun shifting some healthcare costs onto retirees, but in terms of what some would see as such a drastic step, Nissan is leading the way,” Fronstin said.

Nissan now has assembly plants in Tennessee and Mississippi and is moving its North American headquarters to the Nashville area this summer. The company also has a design center in La Jolla and a technical center near Detroit.

Spokesmen at Toyota and Honda said Monday that they had no plans to alter their benefit programs. Both automakers provide pension and 401(k) plans and retiree health coverage to workers in the U.S., including Medicare gap plans.

Nissan has been one of the big automotive sales success stories, rising from near bankruptcy in 1999 to become one of the most profitable automakers. Nissan sold 1.08 million vehicles in the U.S. last year and has 6.3% of the U.S. auto market.

Nissan shares fell 14 cents Monday to $21.81.