Retailers look to cash in on Big 3 bonuses
Brian J. O'Connor/The Detroit News
5 February 2015
The $369 million in autoworker bonuses set to go out in March won't turn southeast Michigan into a boomtown, but they will give a boost to lots of local businesses.
About 57,000 Michigan workers from Detroit's Big Three will qualify for bonuses that range from $2,750 for workers at FCA US, to $6,900 for Ford Motor Co. employees and $9,000 for those at General Motors Co. Checks will start going out in mid-March and are taxable. GM's profit-sharing announcement, the last of the three Detroit automakers, came Wednesday. The bonus checks for 48,400 eligible GM hourly workers would have been smaller, had not the company excluded the costs of its massive vehicle recall programs in the calculation.
Michigan State University economics professor Charley Ballard says that as the money gets spent and re-spent, it will amount to $1 billion in economic activity at best — a very small slice of the region's $200 billion annual personal income.
"But $1 billion out of $200 billion is a half of one percent," Ballard says. "It doesn't mean that we'll be able to solve all our problems, but I'll take it."
Anthony Kotlarczyk, a pipefitter at the GM Detroit-Hamtramck assembly plant, is happy about the payout. He's considering dividing it between paying off his daughter's college loans, saving for a trip and retirement.
"It's a good thing," the Grosse Ile resident said. "Anytime you give someone in the middle class money, they're going to spent the money."
The region's furniture stores, auto customizers, clothiers and other retailers are waiting for that windfall.
"We focus on that very squarely this time of year," says Rachel Tronstein, president of the Gardner White furniture and appliance chain. "We always have the lowest prices of the year. When the money is good in auto, it's good for everyone in Metro Detroit."
Moe Elhady already has plans for his bonus. The body shop team leader Ford's Flat Rock Assembly Plant could average $6,900. He plans to put most in his 401(k), then spend the rest on home projects.
"This is something that we fought for and bargained for and I'm glad we're getting it," he said. "We work hard for our family. … This comes from the sweat of our brow."
In the lean years of the auto industry meltdown and the subsequent Great Recession, auto bonuses were just a memory of better times, along with dependable overtime. A small bonus reemerged at Ford in 2009, followed by windfalls of $4,000 and $5,000 at Ford and GM in 2010; smaller bonuses returned to Fiat Chrysler in 2011. While workers were more likely to save a bonus check or use it for postponed essentials in the first few years, some may be able to loosen up and splurge now.
"I think a lot of people over the last several years have paid attention to the things that we had to forgo during the hard times, so this year looks promising," says Diane Charles, spokeswoman for Art Van Furniture. Now that bonuses have been announced, the store is gearing up, she added.
At Kenny's Lakes Area Auto Experts, owner Kenny Walters expects some of that bonus money to go directly from auto workers into autos, as car enthusiasts upgrade the Corvettes, Mustangs and other vehicles for racing and cruising.
"The auto workers end up bringing their cars in for major upgrades once they get their bonus checks," Walter says.
Even indirect spending will benefit Metro Detroit businesses, as spending at one business spreads to others, said Tom Lias, president of Gorman's Home Furnishings.
"When things like this happen, we definitely see some uptick in business in the following few months," Lias said. "This is just good for the entire economy and everybody will spend their money, and maybe invest it in their homes."
Not everyone thinks spending should be the first choice. A windfall of several thousand dollars can create some big changes in a family's finances, notes Kathryn Moore, a financial counselor in the Detroit office of the credit counseling service GreenPath Financial Wellness.
"The last few years have been particularly hard on folks," Moore says. "Sometimes they've had to make decisions about what bills to pay what bills not to pay, so if there are bills out there that you're past due on, this is a great chance to catch that up."
Even if someone is current on all accounts, paying down credit card, medical or student debt should be a priority, as well as setting money aside in savings so that unexpected events, from needing new tires to a medical emergency, don't end up creating new debt.
"If you've been working hard and it's been a hard couple of years, this windfall makes it tempting to want to treat yourself," Moore says. "But ask yourself some questions about how does your emergency fund look, do you have that three to six months' worth of savings, and what about your retirement or education funds?"
Bonus beneficiaries also should consider using the extra annual cash as padding against annual bills, such as insurance premiums, property tax bills, holidays and back-to-school expenses.
Also remember that a bonus is just that — something extra.
"The first thing is to operate your household as if there were no bonus," says Marilyn Capelli Dimitroff, director of wealth management at Planning Alternatives in Bloomfield Hills.
" Treat this as an opportunity to improve your long-term financial situation."
Dimitroff stresses paying off debt, especially credit card balances, saving in an emergency fund, and investing for a nest egg. "Most of the younger workers don't have pensions, so it's really our own responsibility as workers to accumulate money for our retirement."
All that doesn't rule out a bit of financial frivolity, however.
"We're human beings and we have to play these game with ourselves," Dimitroff says. "Pick a percentage — a minimum of 50 percent but ideally 80 percent — and save that or use it for those larger financial goals."
And for that other 20 percent?
"People have money and they want to treat themselves to something that they normally wouldn't buy, which includes clothing," says Ron Elkus, owner of The Shirt Box, a men's clothier in Farmington Hills.
"People need an excuse to feel good and this is a great excuse because it's also money that they don't count on and it's money they're not budgeting with," Elkus says. "You have to feel good about it."