d. Retail
Months ago, I took a drive up Battleground Avenue in Greensboro. Battleground Avenue is a major retail corridor that includes auto dealerships, restaurants, strip center retail and some small offices and residential spaces. It’s not much unlike any four-mile stretch of five-lane commercial development across the United States. Battleground Avenue is just an easily accessible example to illustrate my point. Several new retail buildings (especially on cross streets) have been built recently, providing a reasonable mix of old and new structures.
What I found amazing was the extremely high number of properties for lease and sale, with many spaces never having been occupied after being on the market for months. No doubt there are hundreds of retail opportunities on this stretch (including cross streets), but I counted 60 empty storefronts and buildings along my route. Since that time, several spots have been filled, but inevitably the silent killer that is vacant real estate will take its toll.
At face value it doesn’t look much different than past downturns. Stores have closed before – or spaces never occupied – for a variety of reasons. People have experienced cyclical recessions, and they understand that sometimes unfortunate things happen in tough times.
I contend that we are currently seeing something different. This isn’t about a temporary real estate imbalance. This isn’t about a nice city like Greensboro and a significant business corridor. It isn’t all about poor management (poor stocking, wrong layout), a city in decline, a new transportation corridor rerouting traffic from the area, a shift in the economic or demographic composition of the area, or general economic malaise. But because those are about the only reasons we have ever known for a stretch of empty stores to stand as these do, these old reasons are the only historical vantage points to guide our assessment of the principal cause. And it has changed the business of retail and retail real estate values forever.
The disruptive technology here is simply the growing impact of internet sales on America’s commercial landscape. It took years for online retailers to reach the scale of business they needed to make this new means of retailing viable. A critical mass of Americans needed to be online, online shopping carts had to be developed, shipping costs had to fall, and, probably most importantly, there had to be a trustworthy, secure means of payment that gave shoppers confidence they wouldn’t suffer nightmarish repercussions from their shopping experiences.
Though intellectually people understand that more products are being sold on the internet, it is very difficult to visualize the extended impact that those sales have on real estate. The cause and effect seems somehow clouded, so we throw traditional explanations at the question to provide the answers.
The technologies that made internet sales possible, and a lack of awareness of these trends as they were emerging, have converged to create a retail real estate bubble that the US may not overcome for decades – if ever. Amazon.com currently represents a sales juggernaut that is the online equivalent of Walmart – yet still in a high-growth mode. US retail sales are growing at a 0-2% annual rate. Internet sales are growing at 10%. It’s clear that all of the growth, and a growing percentage of existing sales, are being done online.
Buyers’ abandoning the only means of acquiring things they’ve ever known was no accident. Traffic and parking hassles, poor customer service, and a perceived lack of security are less tolerated in a world where comparative shopping, immense selection and preferred pricing are only a click away.
Pair that with the massive overbuilding of retail spaces in the US, especially big box stores, and there’s a real estate bubble – with the concomitant bust and depression – in the making. In my small world, I have seen malls once filled with department and specialty stores close and even be leveled. Of the four malls that once stood in Guilford County, North Carolina, a county of 500,000 people, one was sold to a church, one to a private college, one has been razed, and one is still in operation. General Growth Properties, the owner of Greensboro’s Four Seasons Mall (the one still there) and nearly 200 other mall properties, filed in 2009 for Chapter 11 bankruptcy protection on over $27 billion of debt, its stock price having fallen 97% from the previous year.
Remember Circuit City? Borders? Ames? Zayre’s? Service Merchandise? Montgomery Ward? Any Kmarts or CompUSAs nearby? Sears? Toys "R" Us? Blockbuster Video? Talbots? Pier 1 Imports? And now Best Buy has announced the closing of 50 stores and its majority stockholder is taking the company private. Think America's buying habits have changed?
All of this is not terribly surprising because not only is America migrating to online purchasing, but the overbuilding reflected in all the preceding is only the tip of a very ominous iceberg. An apples-to-apples comparison of US retail spaces to those of other countries is difficult because the measurements come in “retail space” and “shopping center” formats and are not in a consistent, measurable format.
According to the 2007 Economic Census, there were 1,122,703 retail establishments in the United States, and a total of 14.2 billion square feet of retail space. That equates to approximately 46.6 square feet of retail space per capita in the U.S. Undoubtedly the depressed economy took its toll on the amount of operating retail space and the distinction between retail and shopping center measurement may be in play.
But according to The New Rules of Retail by Robin Lewis and Michael Dart, the US contains 22 ft.² per person in operating retail real estate. Number two in the world is Sweden, with 3 ft.² per person. Internet sales are growing; sales at retail sites are not. The U.S. has over seven times the per capita square retail footage of the country in second place. This trend is headed one way – and it's not towards increased retail real estate sites or construction.
Technology has changed the way we buy in other ways, too. Time was, we did our shopping at local stores – the proverbial Main St. retail district with a hardware store, a department store, pharmacy, and so forth. The advent of suburban strip centers and shopping malls shifted where we made the same types of purchases. When there were more options, we did a simple price comparison among a couple of options and tended to make the cheapest choice.
Now, when we consider a purchase, we do what first? Most of us don’t consider even a modest purchase of an unfamiliar item without checking the internet for pricing and availability. The development of this trend has had a huge impact on the retail trade. Once upon a time, we walked into Sears or a local department store and bought what we needed. We were cognizant of the price – certainly looking for the best deal and keeping an eye peeled for sales – but true comparison shopping on a large scale was virtually impossible. Retail margins were much higher under that system, which made retailing a much more profitable industry. Blanket consumer ignorance of the best prices made us less knowledgeable shoppers. Profit margins were boosted by that. The stores listed above, which have now closed or are under duress, used to be “price busters.” When price became the only purchasing decision differential, and people became empowered to find the lowest price, margins fell under siege – and that led to company and store closures. In short, when Walmart beat Kmart on price, Walmart won.
Now, electronic retailers like Best Buy and Fry’s Electronics are regarded as “showrooms,” where shoppers check out the product and pricing at the store, occasionally buying on the spot, but mostly using a smartphone app or internet search to comparison shop for the best price. Store traffic hasn’t dropped considerably, but the percentage of store visitors who leave with a purchase has.
As a futurist, I am trained to look beyond the obvious and search for other possible contributions to any outcome from other sources and must take them into account. From the perspective of local government, there remain calls for increased retail building among town councils and county commissioners (small towns especially like the addition of fast food and chain restaurants). These buildings and their operations provide a bump in property tax revenues and one of the few new sources of sales tax. But a greater desire for more buildings and retail sites to build a tax base will never successfully intersect with declining demand for retail space.
As a Certified Economic Developer (CEcD), having developed Guilford County’s Economic Development Strategic Plan as well as its Economic Development Policy, and having handled dozens of economic development projects involving financial incentives, I have a good handle on what the impact these projects have on local economies. In March of 2009, the Chairman of the Guilford County Board of Commissioners proposed that the County give 100% tax rebates to anyone who built any commercial real estate improvements – new, expanded or upfit. The intent was to invigorate the local economy through investment in real estate development by removing the local property taxes on those structural improvements for the first three years. It was such a sweet gesture for developers and builders – and oh-so-wrong on so many levels.
First, North Carolina, though it allows economic development incentives, statutorily prohibits tax rebates. The Commissioners themselves could possibly have been held personally liable for these rebate payments. Secondly, the incentive went to the builder and developer – not any lessee who might rent any property. So it was no help to the small businesses that it was intended to attract. Thirdly, the concept of subsidizing the development companies who might build the big box stores that put small retailers out of business was abhorrent. Lastly, the glut of office and retail space that exists today already existed then. Piling more office and retail space into an already oversaturated market would drive down rents, push builders, developers, and site owners into bankruptcy because of the lack of tenants and low lease rates, and perhaps even threaten the solvency of local lenders. No legal counsel from any level of government would green-light the proposal, a point I repeated in a guest editorial for the News & Record. The concept died a quiet death.
"The fundamental terror that capitalism exploits is that we might not want anything" – Adam Phillips
One other macroeconomic factor that has been largely overlooked but will meld compatibly with sections later in the book is this: Up to 70% of the US GDP has been based on consumer-based spending. 70%! That is a fundamentally flawed and patently unsustainable economic model. People are now figuring out – outside of a lousy economy – that it just doesn’t make sense to spend money the way we have in the past. Until 2008, savings rates declined for decades as we spent and borrowed our way into acquiring more junk than we could ever use. Families have yard sales every year to cash out on all the stuff they’ve bought, and use the proceeds to take a vacation or simply buy more stuff for next year’s yard sale. Can you imagine your grandparents spending money that way? Hardly. Consumption bling is out; frugality is coming back in. Not good news for retailers.
As I said before, on-site retail sales are not growing. Except for neighborhood pockets of need or opportunity, only in rare cases have new stores not meant the demise of others. Open one; close one.
Another new frugality mindset is going to land in other industries as well. Somewhere along the line, Americans fell into the emotional trap of keeping up with the Joneses, for example owning automobiles that far exceeded basic, reliable transportation needs. In one of the greatest behavior-changing value-system-altering marketing perversions in history, we bought into a mindset that ignored common sense – going into debt to make purchases in the second largest category of expenditures in our lives, financing a household asset that we know ahead of time will depreciate rapidly, lose utility, and, in time, become worthless.
Financing a high-priced new automobile knowing full well it will depreciate to near worthlessness is the near-equivalent of planning a $15,000 funeral and fretting over the style, quality, and price of a casket – gotta have the satin lining. But funerals at least have a huge emotional investment and deep personal attachment associated with them, and for that we may somewhat forgive the extravagance. But cars? A commodity that loses $5,000-$10,000 in value the minute you drive it off the lot? And $2,000-$5,000 lost in depreciation every year? And two or three of them in every driveway? For mostly casual use of less than two hours per day? In the new world of frugality, we’ll bury this concept and regain our financial senses –because we’ll need to.
One off-topic observation: Has anyone else noticed that where there were once two to four gas stations at every major intersection, there are now two to four chain drugstores?
Lower sales on an absolute basis, causing regular store closures, in a low-growth/lower-wealth local economy where purchasing decisions are shifting to the internet is not a formula for success on retail properties or investment.
A concept has evolved that dovetails nicely with this more frugal era we're entering. It is the idea of "enoughness." Enoughness represents the thinking that once I have achieved what I need to support my family and myself, when I am happy in absolute terms with that things I have, when I’ve provided for what I believe is a reasonable retirement nest egg, I don't need to make myself miserable to get more. I don't need that 15th sweater or 40th pair of shoes. I don't need to keep up with the Joneses for a larger house, a second house, two new cars sitting in the driveway, and the bragging rights of belonging to more clubs than I could ever visit. Enoughness means I can spend time with my family and do the things that are really important rather than work 18 hours a day to acquire things that truly aren’t important.
Enoughness, a new era of frugality, and a large, steady migration away from fixed-site stores in an over-built environment will continue to put severe stress on retail sales and retail real estate.
Real Estate Extra: Just because the near future of retail real estate doesn't look very cheery doesn't mean that migrating to another area of real estate development will be any more profitable. The Great Recession also brought about the Great Homecoming. Elderly parents who were being challenged by health and aging issues, and finding their financial resources had dwindled in stock market drops, pension challenges, and increased healthcare and retirement costs, are increasingly moving back in with their kids. The recession also brought to light that huge numbers of Millennials, unable to find work, are moving back in with their parents. Today’s re-entanglement of the nuclear family took three households and melded them into one. Increased apartment construction to handle those displaced by the Great Recession itself has been a hot market in some places, but at some point the risk of building more units appropriately diminishes the willingness to do it. With all that said, the outlook for single-family housing on a broad scale is not great.
Office space will be equally challenged. Time Warner Cable ran a series of ads not long ago that said "you don't need an office." And in many cases, they are right. Small companies without great need for storefront exposure are making money the old-fashioned way: by significantly reducing costs, in this case by moving the office home.
Next we’ll cover industrial space, but suffice it to say that new projects following the old industrial footprint model with plants exceeding 200,000 ft.² are going to become a rarity.
e. Manufacturing
In 1976, 36% of all jobs in America were in manufacturing. America led the world in the production of steel, automobiles, and textiles. Since then, America’s stature in world manufacturing has taken a beating. Though still number one, the US is maintaining its ranking with a much smaller labor force. Only 9% of the American workforce now is engaged in manufacturing.
We understand the nature of job cuts that have been prevalent over the last twenty-five years. Institutional changes in certain industries like textiles, apparel, and furniture have had a direct impact on jobs in those industries. Trade agreements on the federal level, such as NAFTA and CAFTA, arguably contributed to the outcome. Industries that go through fundamental changes due to product evolution or those that must make significant changes due to external factors like additional EPA regulations sometimes have to make significant job cuts. Cigarette manufacturing and some heavy industries have had this experience. Economic recessions like the one we’ve experienced recently are never pleasant, but by and large people understand why jobs were cut.
But times have changed, and the changes are being reflected in job cuts for a variety of different reasons – including some new ones. Shifting production elsewhere and cyclical slowdowns are easily comprehended, even if they aren't appreciated. This time it’s different, though, because companies in businesses with lower-skill and lower-wage production are seeing the benefits of cutting people from their payrolls. They’re finding solutions to 20% health care costs increases, and are hiring the cheapest acceptably productive labor forces they can. Cutting workforces below the threshold of optimum productivity has become commonplace. What this means is that most of those jobs as we knew them are gone and aren’t coming back. Best to accept this and move on.
Oh, and because companies have cut payroll expenses, they’re collectively bringing home their best profitability numbers in years, driving earnings per share to new heights, and giving the stock markets a huge shot in the arm.
This recession gave companies – even those who were only modestly impacted by the slower economy – the opportunity to unburden their payrolls of unprofitable divisions or unnecessary labor costs. Some of these job cuts were recession-related and some were simple cost-cutting. When the economy does recover – three months or years in the future – the mindset of potential employers will likely be very different from those employers in 2006.
Like the industries listed above, the biggest danger to employment in manufacturing is not easily explained based on past economic cycles. Record stores didn't go out of business only because of uncompetitive pricing; retail vacancies are not at historic highs only because of the slowdown in consumer spending. Employment manufacturing is not down only because of the global recession. Bigger, systemic changes are in play that are causing a longer-term impact.
f. Money, Energy and Automotive Changes
Another technology-impacted area of the economy that has largely been the domain of governments and is going through some revolutionary developments is currency itself. Uncertainty in the economy, including fears of inflation, paired with a wide range of national currency manipulations (the Chinese yuan, for example) and a well-deserved unease about the future of the Euro over unresolved sovereign debt issues, have created a window for alternative currencies. Though not a perfect solution in every respect (yet), the Bitcoin seems to be markedly ahead of the field in creating a universal currency that is secure, low-cost, and safe from manipulation by central banks (including devaluation by printing money or decree). Recent, wild fluctuations in value have raised questions about the bitcoin as a universal currency, but the general concept appears to have been judged meritorious and gained traction.
From the Bitcoin Wiki:
Q. What is Bitcoin?
A. Bitcoin is a peer-to-peer currency. Peer-to-peer means that no central authority issues new money or tracks transactions. These tasks are managed collectively by the network.
Q. How does Bitcoin work?
A. Bitcoin uses public-key cryptography, peer-to-peer networking, and the Hashcash proof-of-work to process and verify payments. Bitcoins are sent (or signed over) from one address to another with each user potentially having many, many addresses. Each payment transaction is broadcast to the network and included in the blockchain so that the included bitcoins cannot be spent twice. After an hour or two, each transaction is locked in time by the massive amount of processing power that continues to extend the blockchain.
The unrelenting march of technology is about to call our idea of free will into question. All the technical issues that have been raised in this book follow a very similar pattern. People go about their daily activities making numerous assumptions as to how the world works. Then, in an instant, a sudden technological breakthrough renders their assumptions either wrong, obsolete, or irrelevant. The common reaction of many to change of this magnitude is fear, contempt for what they do not understand, even outright hostility. One term for those who react this way is, as we’ve already discussed, “Luddite.” These folks see the destruction of their way of life, or their current employment, without understanding that new doors are simultaneously being opened to a greater future.
In the 1700s we burned wood in boilers to make steam. It worked for a while, until we realized we were going to have to clear-cut the entire planet Earth to meet our energy needs as we approached the 1800s. It was then that we made the move to coal. You can imagine the reaction of the timber industry when we stopped using wood as a primary fuel source. I have it on good authority that lumberjacks assembled in front of the White House during the presidential election that year screaming, “Chop, baby, chop.”
Coal served us well for nearly 100 years. Our insatiable need for power forced us to look at new alternatives in the late 1800s. We then went from burning coal to create steam to burning oil and gasoline. The internal combustion engine replaced steam power. You can imagine the reaction of the coal industry when we replaced coal as our main fuel source. I have it on good authority that coal miners assembled in front of the White House during the presidential election that year screaming, “Dig, baby, dig.”
Oil served us well for 110 years. Our insatiable need for power forced us to look at new alternatives in the late 1900s. We then went from burning oil and gasoline to create power to generating electricity from a mix of wind, solar, and nuclear energies. Green technologies began to replace the internal combustion engine. You can imagine the reaction of the oil industry when people demanded we stop burning oil and gasoline as a main fuel source. I have it on good authority that oilfield workers assembled in front of the White House during the presidential election in 2008 screaming, “Drill, baby, drill.”
Our current energy problems are not the result of new technologies on the horizon. Mostly, they’re the result of old technologies that have overstayed their welcome. Oil and the internal combustion engine came about in the late 1800s. They created much of the wealth we have today. For over 100 years our society has run on gasoline. Our life expectancy went from 30 years to 85 years during oil’s reign. That said, it is now time for oil to gracefully leave the stage. Pollution, overcrowding, scarcity, and war have become the byproducts of an oil-reliant world economy.
It is time to pursue solar power with a vengeance – and this may prove one of the most disruptive technologies ever seen. Once the panels are up, your electricity is free for life. With a battery-operated car you would have no need of oil whatsoever. Heating, air conditioning, and transportation will all come down to you from the sky. So what’s the hold up? Big Oil has smugly asserted that we’ll have solar when it can compete with the price of fossil fuels.
These are the same companies that get tax subsidies for drilling and have to shoulder none of the defense costs associated with keeping their lines of transportation open. The United States government regularly parked aircraft carriers in the Strait of Hormuz from 2000 to 2006 to keep Iran from choking off our oil supply. This cost the American taxpayer approximately $56 billion. This and many other corporate subsidies borne by the American taxpayer don’t show themselves at the gas pump. While this Ponzi scheme may have bought the industry an additional decade or two, it’s inevitable that, at some point, clean, reliable, inexhaustible solar will disrupt the entire industry.
Of all the renewable, non- (or low-) polluting energy sources available, solar truly does carry the greatest promise to dramatically reduce the amount of fossil fuels and coal in the world’s energy mix, perhaps reversing (or at least halting the worsening of) man’s contribution to climate change. According to Peter Diamandis and Stephen Kotler in Abundance: “The amount of solar energy that hits our atmosphere has been well established at 174 petawatts (1.740 x 10^17 watts), plus or minus 3.5%. Out of this total flux, approximately half reaches the Earth’s surface. Since humanity currently consumes about 16 terawatts annually (going by 2008 numbers), there’s over five thousand times more solar energy falling on the planet’s surface than we use in a year. Once again, it’s not an issue of scarcity; it’s an issue of accessibility.”
Engagement with solar energy seems to have succeeded nearly everywhere but in the U.S. For instance, when Germany began providing extensive, long-term tax credits for investment in solar power, German companies and citizens participated in a huge way. Solar panels sprouted up along highways; rooftops were commonly adorned with their telltale gleam. Even as German panel manufacturers and installers were going out of business after the tax credits ended, economists and politicians were extolling the virtues of having cut the long-term cost of electricity and provided a vast source of renewable energy. In June 2012, Germany had two days where over 50% of their electricity was derived from the sun; the U.S. does well to reach 2%.
While the price of solar panels has dropped precipitously in the last four years, only Chinese solar panel manufacturers seem to have profited. Germany’s solar manufacturing industry has diminished sharply since the end of the tax credits; efforts by U.S. solar manufacturers to compete have a checkered history, perhaps due to an uneven playing field.
The drilling for shale oil and the proposed expansion of “fracking” to reach untapped natural gas deposits have both an upside and a downside. The good news is that America’s traditional oil and gas supply chain is more reliable and the cost should certainly be below that of imported oil. There is even revived talk of the U.S. gaining energy independence by 2020. The bad news is that by staying with these energy sources, U.S. policymakers create little incentive to economize and continue our slow, but sure, move toward renewable energy. As such the U.S. reverts to its old, wasteful habits. It was just ten years ago that a coalition of Michigan auto industry Democrats and Texas oil Republicans worked together with President George W. Bush to design massive tax credits for the worst gas-guzzling vehicles in a generation. Ninety pound mommies were taking their 25 pound toddlers to Mother’s Morning Out in three-ton Chevy Suburbans. Already, the new Ford Raptor is out on the market with a whopping 11 miles to the gallon.
Retaining our focus on outmoded, high-pollution energy sources is simply not the path to averting catastrophic, human-assisted climate change. We can do better. Solar and other renewables are the answers.
If we can put the right long-term plan into place with proper tax incentives to make renewable energy more competitive with the subsidized oil and gas industries, solar energy will take off. Our prediction: Solar Power in the USA will comprise 16% of energy production by 2020. It has become an information technology, and Moore’s Law suggests that production will double every two years. It will go from 1% in 2012 to 2% in 2014, 4% in 2016, 8% in 2018 and 16% by 2020. The one wild card that may prevent this is fracking. Exceptionally cheap hydrocarbons may slow us on the road to solar.
The other field that has changed dramatically over the last thirty years and is due for another overhaul due to the disruption provided from unrelated technological advances is the automotive industry. Social changes may be affecting the automotive industry in ways that may have more significant long term impacts than many realize.
In an article in the Globe and Mail from 2009, Anita Elash asks “Are we Reaching Peak Car?” Americans have been simply driving less. Miles driven fell for six years since 2000 and now U.S. drivers are now driving the same miles that they were in 1998. And it is among young people that the decline in driving is steepest. The traditional rite of passage of getting one driver’s license at the very stroke of turning 16 appears to be ending. According to Kurzweilai.net, “Only 28.7 percent of 16-year-olds got their licenses in 2010, down from 44.7 percent in 1988.”
24/7wallst.com chimed in: “As recently as 1998, 64.4% of potential drivers ages 19 and younger had driver’s licenses, according to the Federal Highway Administration. As of 2008, that amount had dropped to 46.3%. People are also waiting longer to get their licenses. According to the University of Michigan’s Transportation Research Institute, in 1983 one-third of all licensed drivers in U.S. were under 30. Today, only 22% of drivers are under 30.”
OK, so young potential drivers aren’t getting their driver’s licenses at the rate they once did. And some aren’t getting their licenses at all. These facts manifest themselves in fewer new cars being bought by young adults. The Atlantic reported in September 2012: “In 2010, adults between the ages of 21 and 34 bought just 27 percent of all new vehicles sold in America, down from the peak of 38 percent in 1985.”
Certainly population growth in (and migration to) urban centers and an increase in mass transit options contribute to this trend. Younger drivers in urban (and, more and more, suburban) areas are also increasingly joining the car-share movement. Zipcar is the most established company, allowing drivers to rent by the day or even the hour. Getaround, a TechCrunch Award winner, has a different format that is based on peer-to-peer rentals. Citing the fact that 250 million cars in the U.S. are used for two hours or less a day, they promote removing cars from the road by allowing drivers to do a structured rental from a neighbor – or vice versa. This method of rental supports both conservation and sustainability – and frugality and enoughness.
The newest trend in automobile shares that I believe shows great promise is ride-share by regular drivers. Unlike taxis and Uber (which is more like an upscale taxi with a private driver at a modestly higher price), hourly on-street rental services like car2go, and services like SideCar and Lyft offer peer-to-peer ride-sharing services that allow private drivers and wannabe riders to get together over a smartphone app and enjoy a less expensive ride with a private citizen. Although all of these are challenged by restrictions on taxi services, I believe they are the wave of the future for people who understand the true cost of automobile ownership. And none of this is good news for new car sales.
But beyond transportation options, younger drivers have developed other preferences beyond cruising Main St. on a Friday night. 24/7wallst.com quotes the Gartner research firm: “46% of drivers aged 18 to 24 report that they would choose Internet access over owning a car.”
Not unlike other economic development groups across the U.S., the Piedmont Triad Partnership, covering a 12-county region in north-central North Carolina, has their eye on the economic benefits of auto manufacturing. The region was considered the runner-up in 1993 for the new Mercedes plant that ultimately went to Alabama. It has suffered auto-manufacturing envy ever since. The organization has spent the last three years focused on putting together a land “mega-site” capable of accommodating an auto plant complex. They consider it a “game changer” for the economy of the region.
The trends, however, are not in their favor. Auto use is down, potential young drivers are delaying or even ignoring the opportunity to get a license, and more and more people are finding car-share and ride-share options. Add to that the fact that the auto manufacturing industry has gone through a complete overhaul. The bankruptcy of General Motors and Chrysler in 2008 was due in part to an unsustainable wage and benefit structure. New auto manufacturing is a different game. Volkswagen opened a plant in Chattanooga in 2011 to build its Passat model. One condition of the ample incentives they received was that they were to pay “market” wages in the auto industry. They complied by paying $14.50 an hour in wages, plus benefits. Upon opening, they contracted with Aerotek to provide contract labor, with wages starting at $12.00/hour.
The Piedmont Triad region has already lost tens of thousands of textile, apparel, tobacco, and furniture jobs. $12.00 an hour in an industry showing signs of decline no longer rates as a “game changer.”
