Echoing Hub’s recovery, Charlotte seeks to diversify
CHARLOTTE, N.C.— Slowly, Wall Street South is starting to rise again.
Charlotte, which gained the nickname for its large cluster of financial firms, was slammed by the global credit crisis and recession. Its unemployment rate more than doubled, to the double-digits. Two stalwarts of its economy were battered: Wachovia Corp. was taken over by a San Francisco bank, while Bank of America Corp. was forced to seek a bailout and picked an out-of-state lawyer to succeed longtime chief executive and local resident Ken Lewis, raising fears about the bank’s future in Charlotte.
Though the damage remains, the banking sector has since stabilized. More important, Charlotte’s economy, as Boston’s did nearly two decades ago, has begun to diversify so it is no longer so dependent on a single industry.
Just in the past few months, Electrolux, a Swedish maker of consumer products including Eureka and Frigidaire appliances, said it would move its North American headquarters from Georgia to Charlotte, adding 750 new jobs. German industrial conglomerate Siemens said it would relocate a factory for electric-power turbines from Canada to Charlotte, adding 825 jobs to its existing operations there. And city officials hope the opening earlier this month of the $200 million NASCAR Hall of Fame will attract more tourists.
“Things seem to be moving in the right direction,” said Charlotte Mayor Anthony Foxx, who can see the Bank of America and former Wachovia towers, as well as the new NASCAR museum, from his office overlooking downtown.
“If we’ve seen the worst already, then we are in good shape going forward.”
Charlotte’s struggles mirror the challenges Massachusetts faced in the late 1980s, when it was hit hard by its heavy reliance on defense and technology when the Cold War ended and the minicomputer industry collapsed. Though Boston remains a key center for the financial sector, its strength in other sectors — life sciences, health care, and higher education — helped to soften the blow of the latest economic downturn.
The financial crisis provided a similar wake-up call for Charlotte, pushing city leaders to broaden the local economy so it won’t be as vulnerable in the next downturn. And in another parallel to Massachusetts, Charlotte wants to be as big a hub for the alternative energy industry as it is for banking.
In addition to the Siemens plant, which will make turbines for natural gas, nuclear, and steam power plants, Charlotte has Celgard, a maker of batteries for electric vehicles. The company, a unit of Polypore International Inc., received a $49 million grant from the US Department of Energy for the battery development, and is both expanding its Charlotte facility and building a new plant nearby, adding more than 200 jobs.
Indeed, when President Obama last visited the city, in March, he toured Celgard, not one of Charlotte’s financial powers.
Another telling detail: The tower that Wachovia built to be its headquarters has since been renamed the Duke Energy Center. One of the nation’s largest power companies, Duke Energy is based here, and is positioned to capitalize on the strong nuclear training programs at nearby universities. Duke operates three nuclear plants in the Carolinas and is proposing to build a fourth 60 miles southwest of Charlotte. Duke is also investing heavily in wind power and other new energy sources.
“Charlotte is not just a financial center,” said James L. Turner, chief operating officer for Duke Energy, the Fortune 500 utility that anchors Charlotte’s energy sector. “We are one of the largest [energy centers] in the country.”
While the energy sector employs 22,000 workers, local leaders acknowledge Charlotte faces competition from other cities, including Boston, to broaden its base by attracting more clean energy companies.
“I would make the transition tomorrow if I could,” said Foxx. “But it takes time.”
As with many other cities around the country, the recovery remains uneven in Charlotte.
Dee Petersen, managing partner of Roosters Wood-Fire Kitchen in Charlotte, said mid-priced restaurants such as hers are thriving, despite a small dip in business last year. “Things are rocking,” she said.
But at more expensive locales, such as the upscale establishment Petersen’s company runs, Noble’s, business has suffered.
“People are not spending money like they did before,” Petersen said.
In the wake of the credit crisis, many of the highest paid financial executives in Charlotte lost their jobs or saw their incomes shrink — forcing them to cut back on discretionary spending and affecting countless other businesses.
Artem Mouradkhanian, general manager of Metal & Stone Elite Jewelers in Charlotte, said last Christmas was the worst holiday shopping season in memory.
“People are definitely buying cheaper things,” said Mouradkhanian, whose shop supplies 15 other area jewelers. “They don’t spend as much as they do in a good economy.”
Still, the hits from the downturn weren’t as bad as many in Charlotte were bracing for. Many worried Wells Fargo & Co. would dismantle much of Wachovia’s local operations after buying the Charlotte bank in late 2008. Another local drama was the future of once-troubled Bank of America with the retirement of longtime chief executive Ken Lewis. Two of the leading candidates to replace him were from New York and Massachusetts, where Bank of America also has major operations, raising concerns the bank would move north.
“There was fear about the banks’ future,” said Charlotte Chamber of Commerce president Bob Morgan, who added the strain was evident on the faces of employees streaming out of the bank buildings every day.
Both Wells Fargo and Bank of America did end up cutting jobs — just not as many as feared. Wells Fargo plans to keep most of the Wachovia Charlotte operations and said it hopes to eventually have even more employees here.
And a Bank of America spokesman said its overall local employment remains around 15,000, despite the loss of some high-paying jobs after its acquisition of Merrill Lynch. Its new chief executive, Wellesley, Mass., resident Brian Moynihan, vowed to keep the bank’s headquarters in Charlotte, though his family remains in Massachusetts. The bank is also reporting profits again, raising hopes that it will eventually start adding jobs.
Already, local unemployment has fallen a steep 1.7 percentage points in just the last two months to 11.1 percent. But Charlotte’s jobless rate still remains higher than the national average of 9.9 percent and the Massachusetts rate of 9.2 percent.
“This was ground zero for the financial crisis in the United States,” said D. Anthony Plath, an associate professor of finance for the University of North Carolina-Charlotte who follows the local economy.
Plath said Charlotte’s economy has improved over the past year. But he predicted it could take another year or two for unemployment to return to normal. And even then, it probably won’t be as low as it was in the boom years when Wachovia and Bank of America were expanding wildly — growing from regional banks to two of the nation’s biggest economic powerhouses.
“Charlotte’s got some work to do,” Plath said.
Todd Wallack can be reached at email@example.com.