Honda faces a sudden transition as a high number of the company's most-senior Ohio employees are likely to take early retirement this month, ahead of changes that will make some benefits less generous. The retirements are expected to lead to hundreds of job openings.
Honda faces a sudden transition as a high number of the company’s most-senior Ohio employees are likely to take early retirement this month, ahead of changes that will make some benefits less generous.
The retirements are expected to lead to hundreds of job openings.
The departing employees will include many people who have been with the automaker for 25 to 30 years, a group that was among the first few rounds of hiring when Honda started building cars in Marysville in the early 1980s.
Employees interviewed for this story speculate that the total will be more than 750 workers in the state, with the potential that it will be many more.
The company, which employs 13,700 in Ohio, is confirming that “a large number of associates” are exploring their retirement options in Ohio and across North America. A spokesman declined to specify how many there are, or say whether the number is unexpectedly high.
Workers are responding to a unique overlap of circumstances, including:
• For the first time, Honda is offering a lump-sum buyout of an employee’s pension, which means a retiring worker can get a check for hundreds of thousands of dollars instead of monthly payments.
• People who retire this month will get a larger lump sum than they would if they wait, because of annual adjustments that are based on expectations for future returns.
• Honda is also reducing its retiree health-insurance benefit for spouses of employees. People who retire before the change takes effect can receive the higher benefit.
This follows Honda’s decision last year to discontinue its pension for new employees and reduce the growth of pension benefits for existing employees. New employees now have a 401(k) savings plan; that follows the lead of most other automakers.
The departures will create opportunities for potential new employees.
“Right now, we’re in a pretty stable market, so I would expect to see some backfill hire for those positions,” said Kristin Dziczek, a labor expert at the Center for Automotive Research in Ann Arbor, Mich.
She doesn’t expect all the positions to be filled because of a larger trend in the auto industry that has automakers continuing to develop ways to maintain output with fewer people.
Honda declined to say how many openings it has, but the company tweeted a picture on Monday of a rack of white uniforms for that day’s orientation class.
“The scene today before orientation finished. 99 new associates start this week! You can too!” it said.
It includes a link to a Honda website at which people can apply for jobs.
“It’s all coming to a head at once,” said Jim Cox, a certified financial planner and co-owner of McCarthy & Cox, a Marysville financial-planning firm. He has seen at least 100 new clients in the past two months who work at Honda and want help in making retirement decisions.
His clients have told him that about 800 people probably will retire.
“People are running for the exits,” said a longtime Honda employee who spoke on the condition he not be named. “It’s like the place is on fire.”
Large employers, including several other automakers, have been using lump-sum payments to reduce their pension liability, said Olivia Mitchell, director of the pension-research center at the University of Pennsylvania’s Wharton School.
Recent examples include Ford last year and General Motors two years ago. Unlike Honda, the two U.S. automakers offered the lump sum to people who already were retired.
By paying lump sums, employers have “just bought themselves less volatility in their future payment streams,” Mitchell said.
Volatility declines because the cost to the company is clear, while the obligation to send monthly pension checks will last for decades and be subject to changes in the market.
A lump sum also can be appealing to an employee who is a sophisticated investor or has other reliable sources of retirement income, said Paul Dolce, a certified financial planner and owner of Paul Dolce Financial Solutions in Dublin. He has several clients who work for Honda.
By getting one big check, someone can pay off a house and other debt, reducing monthly expenses.
But people also might be tempted into unwise and unsustainable spending.
“What would be really destructive is to take the lump sum and blow it,” Dolce said.
Cox has concerns that some Honda employees might make rash decisions because of the rapidly approaching deadline. “I’ve told a number of folks that, not only should they not take the lump sum, but they shouldn’t retire because they aren’t financially ready,” he said.
Honda issued a statement in response to questions from The Dispatch, listing two reasons that employees are looking at early retirement: the new availability of a lump-sum payout, and a March 1 deadline to file for retirement before updated interest rates will lead to a decrease in the amounts of lump-sum payouts.
“As a result, a large number of associates have requested retirement packets containing their individual pension information and options,” the company said.
“Honda is adding resources as quickly as possible to respond to requests for the retirement packets, so associates can make informed decisions regarding their pensions, and to ensure a smooth transition to retirement.”