Metro Detroit firms hope auto bonuses boost sales

Posted on February 10, 2014

The Michigan economy is about ring up a windfall, as autoworkers across the state spend thousands of dollars in bonus checks.

General Motors Co. on Thursday became the latest Detroit automaker to announce profit-sharing for its 19,600 hourly Michigan workers. They’ll get up to $7,500 each, before taxes, in March. That news comes on top of earlier bonus announcements by Ford Motor Co. of $8,800 for its hourly workers, and Fiat-Chrysler Automobiles with $2,500 bonuses, plus up to $1,000 extra if plants meet certain targets.

In all, that’s some 61,000 Michigan workers with discretionary cash in hand by the end of March. Add the numbers up — even after taxes — and that’s an injection of tens of millions of dollars into the state economy.

“It’s a windfall. It’s not money they were planning on, so it can be used for some discretionary spending,” said David Kudla, CEO and chief investment strategist of Mainstay Capital Management in Grand Blanc. “It affects the local and national economy. We’re talking about a lot of dollars going out at once to these folks.”

Overall, the Detroit automakers are handing out about $800 million in bonuses to about 130,000 workers across the country. Once commonplace, bonus checks became largely nonexistent during the Great Recession as GM and Chrysler battled bankruptcy, and Ford nearly did the same.

This marks the fourth-straight year all three automakers have paid out bonuses to hourly workers.

While workers are likely to stash some of the money into savings and retirement plans, they’re as likely to spend on long-delayed purchases, including appliances, furniture, big-screen TVs and toys like boats and motorcycles.

Local furniture stores, marinas and motorcycle shops from Fenton to Ferndale are anticipating sales bumps. Some are offering promotions to woo autoworkers to their stores.

“It comes at a good time of year,” said Birmingham-based retail analyst Ed Nakfoor. “I definitely think there will be some very satisfied merchants.”

About a half-dozen autoworkers have already popped into Detroit Motorcycle in Center Line to look at upgrades for their bikes, said owner Dale Archambault.

Kevin Watkins, a sales associate at White’s Landing and Marina in Fenton, said he normally sees a bump in sales when autoworkers receive bonuses. The marina is about 15 miles from GM’s Flint Assembly plant, where workers make the GMC Sierra and Chevy Silverado pickups.

“Over the past year or two I’ve seen more and more (workers) come in,” he said. “A lot of the business is related to the auto industry again.”

Autoworkers are expected to stream into Warren-based Art Van Furniture stores, too. Big sellers include anything from couches and mattresses to TVs, said spokeswoman Diane Charles.

The retailer has special worker discounts and deals to help draw them into the store. “Everyone in Metro Detroit shares in the windfall,” Charles said.

The profit-sharing formula, created in 2011, acts as a pseudo annual raise for longtime hourly workers who haven’t received a yearly pay raise in a decade. Younger, less-experienced workers see small wage increases based on tenure at their respective automakers.

Eric Fields, 37, an assembly worker at Chrysler’s Warren Truck plant, is looking to buy a stove and shoes, and to pay off bills.

“I really appreciate it,” the Riverview resident said. “Any free money is good money.”

Not everyone advocates spending the bonus money, however.

Kudla said he’s already talked with a number of autoworkers about how to save their newfound wealth.

“This is a perfect opportunity to take this and roll it into their workplace savings plan at work and defer income taxes on it,” Kudla said. “Don’t immediately think about how you can spend it, maybe think about how you can pay down debt.”

The bonus check amounts are higher this year. GM’s checks increased about $750 from a year ago; Chrysler’s increased about $250 and Ford’s checks increased about $500.

Watkins, at White’s Landing, said those figures are more reflective of the years before the recessions, when the boat business was especially helped by the local auto industry.

“I remember the days when it was always like that,” Watkins said. “You go down to a boat show and that’s what guys wanted to do — spend their checks.”