Honda executed early retirement program

Several media reported that more than 2,000 employees at Honda Motor applied for early retirement amid.

Honda’s initiative implies how serious electrification in the automotive industry is. In fact, the company announced in April that it plans to sell only new EVs and fuel-cell vehicles by 2040. Therefore, the Japanese automaker thinks younger workers are more capable of using new technologies. This initiative also means that Honda will move away from the production and sales of internal combustion engines.

The number, more than 2K, accounts for about 5% of Honda’s full-time employees in Japan. The early retirement program is open to employees who are aged between 55 and 63 are a target of the early retirement amid. In fact, employees who apply for it can receive a package of up to three years’ salaries in addition to retirement pay.

Though the company did not set a target, the number of application was over 1K, which exceeded its initial estimation. Honda opened the program from April to July and some have already retired at the end of July.

Thanks to this initiative, Honda expects to accelerate the development of electrification and autonomous driving. In addition, the early retirement program will reduce fixed costs and improve profitability in the long run. In fact, the company will increase its expenses in research and development to develop more electric vehicles.

Who is Honda?

The Honda Motor Company, Ltd. is a Japanese public multinational conglomerate manufacturer of automobiles, motorcycles, and power equipment. Its head office is in Minato, Tokyo, Japan.

Honda has been the world’s largest motorcycle manufacturer since 1959, delivering 400 million products by the end of 2019. What’s more, it is the world’s largest manufacturer of internal combustion engines measured by volume. In fact, the number is incredible, and the company produces more than 14 million internal combustion engines each year

2030 Vision Statement

To overcome the change of business environment, Honda set 2030 Vision Statement. First of all, the company decides two areas where it is going to create new value. One is the advancement of “Mobility” and the other is value creation for people’s daily lives

In these areas, Honda will bring its universal passion to “serve people worldwide with the joy of expanding their life’s potential.” Furthermore, it will “lead the advancement of mobility and enable people everywhere in the world to improve their daily lives.” This is Honda’s 2030 Vision Statement.

Transform Organization

Honda’s early retirement program has more than an implication for the automotive industry. This is because the Japanese automotive giant has its competitive advantage as its gasoline engines. However, the company already announced that it would manufacture not gasoline engine cars but electric vehicles. This might need huge transformation of the company. When we transform an organization, there are two options in general. One is to change current employees, and the other is to hire new employees.

When it comes to feasibility and speed, it without saying that the latter option is much better. However, companies in Japan face the difficulty to lay off their employees due to Japanese labor practice. Thus, they must apply other strategy and early retirement program is one option. In this sense, Honda wants to adapt the rapid and drastic change of its business environment. To transform the prestigious company is really difficult, but it should be done.

Outside Japan, this trend is not new. Mercedes-Benz revealed its plan to execute early retirement and buyout. Global companies including Honda must catch up with the current trend to compete with global rivals. The disruption affects not only original equipment manufacturers but also their entire supply chain. Therefore, Japanese small and medium companies in the automotive industry should take this trend into consideration more seriously.