Ed Wallace

We’ve Been Uber’d

It was just a small article at Bloomberg on July 30 and ignored by most everyone. But that column pointed out Tesla had agreed to pay a $323 million annual property tax on the land where it is building its first factory in China. True, Tesla has until 2023 to start making those tax payments, but that agreement also states the financially troubled electric car company must spend $2 billion on that factory over the next five years. To contrast that story, New York State gave Tesla $750 million to build a solar panel factory in Buffalo, and the media calls it an abject failure already. Hmm; the communists make you pay corporate taxes, but our capitalists practice corporate socialism. Strange days indeed.

Just a week later Uber announced its quarterly losses, totaling a stunning $5.2 billion, calling $3.9 billion of that loss a one-time cost related to the IPO’s creation. Great: Paying out $3.9 billion to early investors in a company that’s accrued losses of $14 –$16 billion, proving it’s a Silicon Valley version of Yellow Cab that doesn’t work financially as well as, say, Yellow Cab. Almost immediately, to prove that it’s getting its financial house in order, Uber announced 400 individuals in its marketing staff would be dismissed and then froze hiring on new engineers— causing The Week to write, “Not a good sign for the future of an organization.”

But of course, that was not the end of the discussion. Patrick Sisson at Curbed promptly pointed out that companies like Uber and Lyft have long claimed they would revolutionize how we get around, reduce traffic and cut emissions — and said Uber has admitted that the biggest impediment to its success is personal car ownership. Further, he points out, Uber’s own studies show they make traffic worse, not to mention making their claims about lowering pollution suspect.

Still, just over a week later everyone seemed to have forgotten Uber’s brutal $5.2 billion 90-day loss, forgotten that it fired 400 workers and froze hiring on new engineers just to prove how fiscally responsible it is becoming. Nobody howled when we discovered that Uber is ... opening a new major office in Dallas, one that will employ 3,000 individuals.

Bummer. I had hoped that Uber would become the anchor tenant on Panther Island, just so we could have two things in Fort Worth that could sink together.

Big Tex’s Deep Pockets

Of course, moving to Texas with a dicey business venture requires lots of capital; and Texas typically can’t wait to roll out the red carpet revealing millions in taxpayers’ money to give a Big Tex welcome to these firms. In Uber’s case, it’s estimated that the company may receive $36 million in total economic incentives, or as Jalopnik put it, “kickbacks” — which should help dry tears caused by its losses. The majority of those funds will come from the Texas Enterprise Fund; but D magazine made an issue of the fact that North Texas Council of Governments’ Michael Morris, apparently ecstatic about the news, has proposed $10 – 15 million to improve transportation in and around Uber’s future Dallas offices.

Huh?

Instead, how about a real world test of the company’s plans for viability when it moves here? The claim is that they will take over 450,000 square feet for those 3,000 workers — but shouldn’t their employees all use Ubers to go to work and return home? Then they won’t need any parking lots for that office space, and we don’t have to improve the roads to handle that traffic either. Nope, just a 3,000-car traffic jam at 8:00 every morning as those workers arrive at Uber in Ubers to start their Deep Ellum workday. And the 3,000 Uber drivers can start queueing up at 5:00 every day to take everybody home.

Think of it. If it practices what it is selling, not only can foundering Uber prove its vision of the future, it can demonstrate the world would be better without personal car ownership.

And, since it takes an average of one acre of land to park 242 vehicles, developers would have another 12+ acres in a prime location to sell to someone else. Maybe we can get WeWork to relocate to Dallas, too; that company doesn’t make money either. Then if we could get other money losers like Spotify, Lyft, and Tesla to build on the same block, then it could be renamed Dreamland Blvd.

On the Uber 2020 Mission Statement website, where it shows off the new headquarters in San Francisco, you will find the line, “Whether arriving by bus, ferry, the new Muni Central Subway, Caltrain, bikeshare, [or] by requesting an Uber trip, advanced curb design will efficiently welcome Uber employees and the general public to the area.” That’s right, even Uber places taking an Uber to work, behind taking a ferry or bike-sharing.

The question is, why do we get so worked up about these things to begin with? This is not like American Airlines’ coming home to Fort Worth from New York 40 years ago. Nor is it like Boeing’s considering Dallas Fort Worth before choosing Chicago. (Come to think of it, why didn’t we go pitch Boeing again after it suffered through its first Chicago winter?) No, we are falling all over ourselves over a company that has lost $16 billion in the past two and a half years and claims its biggest threat and competitor is that we own cars. Its dream of ending car ownership in Texas is a major problem, too, since taxes from the sales of new and used cars is the top revenue stream for Austin. Texas new car dealers don’t get money from the Texas Enterprise Fund to open new dealerships, regardless of how many jobs they create — but their business success is how we have the monies to put in to the Texas Enterprise Fund.

Drive any commercial street in Dallas Fort Worth and you will see business after business, each employing people and contributing to the Metroplex’s dynamic growth. All those businesses started with normal financing, found a niche that customers liked, turned a profit, paid their taxes and employed fellow Texans. And they did it without any fanfare or funding out of Austin.

Oh, there’s another thing to consider. Uber should have its own show on HGTV on corporate buying and selling of commercial real estate. Again, on its Mission 2020 website, Uber brags that just two years ago [2015] it purchased a former Sears building in Oakland, calling it “a steal at just $125.5 million.” Although it doesn’t explain what the steal was — a bankrupt Sears’ getting that kind of money for an old building in Oakland, or Uber’s thinking that amount was cheap. The original plan was to put 2,000 to 3,000 employees in Oakland, but then Uber purchased a large part of the Chase Center in Mission Bay; it concludes with, “…Uber is approaching Oakland with caution, while here in SF, it’s taking its usual full speed ahead approach. “

It is a great irony that money-losing Uber wanted to locate in a failed Sears building, calling it a steal, then decided the all-new Chase Center in Mission Bay was better. One wonders who is in charge of executive impulse control at Uber.

Do the Math

Years ago when Uber first broke out nationally, I used their posted fees, commissions, and real costs of being an Uber driver to calculate in this column that if the driver really took the job seriously, they might net around $30,000. At the time Uber claimed their drivers were making $70,000 in the biggest cities. Recode magazine last October gave the number at $31,000 in gross earnings not including vehicle expenses — and said half of their drivers earned less than $10 an hour.

Not long ago we did the math on getting rid of your private car and taking an Uber from a home in Aledo to work at the Star-Telegram. The cost per Uber’s website, for its cheapest transportation, would set you back $12,755 per year — $19,800 if you took 15,000 miles in Uber trips like the average motorist puts on their car annually. You could lease, insure, and put gasoline into four new Honda Civics for that price. Here’s the problem. It’s wildly expensive to use Uber for all of one’s transportation needs, and yet even at that sky-high price its drivers don’t make any money, and Uber doesn’t make any money. How is that a business model? It’s not,for any sane business person. And it never will be.

My suggestion is that the North Texas Council of Governments use those millions to fix the potholes in all the streets where real Texans live and work. That would create real goodwill with the people who already make the Metroplex one of the greatest success stories in America. Even better, it would give me the luxury of not having to write a column in a few years about how much money Texas wasted on Uber before it went out of business. Just like journalists are writing about Tesla’s waste of $750 million in New York taxpayers’ money this week.

Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA, and hosts the top-rated talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. Email: edwallace570@gmail.com

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