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The Honolulu Advertiser
Posted on: Tuesday, February 7, 2006

Nissan to trim benefits for American employees

By John O'Dell
Los Angeles Times

Nissan Motor Co. said it 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 the United States.

The company is the first Japanese automaker to alter its U.S. retirement and health insurance programs in the wake of soaring pension and healthcare bills faced by General Motors Corp. and Ford Motor Co.

Nissan outlined details of its new plan last week to employees in the U.S. and said the changes were made so that it can "remain competitive."

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 here did not open until the 1980s. But Nissan, Toyota Motor Corp. and Honda Motor Co. all have expressed concerns about future healthcare costs.

GM provides benefits for 1.1 million workers, their families and retirees and the automaker has said that its retiree healthcare bill adds $1,600 to the cost of every vehicle in the U.S.

Nissan opened its first U.S. assembly plant in 1983 and has 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. 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, Japanese automakers do not have union contracts, with the exception of a jointly owned GM-Toyota plant in Northern California.

American companies in many industries have cut retiree benefit programs 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 has assembly plants in Tennessee and Mississippi and is moving its North American corporate headquarters from Gardena, Calif., to the Nashville, Tenn., area this summer. The company also has a design center in San Diego and a technical center near Detroit.

Nissan told manufacturing workers that at age 65 retirees and spouses will receive annual stipends so they can 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 in January 2007, a qualifying retired couple could receive $5,000, plus 3 percent annual increases, a Nissan spokeswoman said.

Nissan did not say how much it expects to save, but the 3 percent limit on so-called "gap" insurance increases will offset the company's exposure to soaring health insurance costs.

Workers at Nissan's Torrance, Calif., headquarters also were told that new hires in nonmanufacturing jobs would see their 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 that new workers will not receive a guaranteed monthly pension payment upon retirement. Instead, the company will contribute only to a tax-deferred 401(k) investment plan a defined contribution plan.

Spokesmen at Toyota and Honda said they have 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.

In recent years, 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, with 6.3 percent of the U.S. auto market, sold 1.08 million vehicles last year.