Organization for International Investment

The U.S. is Green with Insourcing Innovation

Tue, 29 Sep 2009 17:51:57 -0500

Some of the longest strides in green innovation in the United States are being made by insourcingfirms. Fuel-efficient cars, energy-generating wind farms, sun-absorbing solar panels, and community-connecting commuter rails are all at work in the American market because of investment from foreign firms.

Insourcing is when companies based abroad invest in the United States and create jobs for Americans. Why the United States? Why now? Driving the influx of innovation is the rising cost of crude oil along with demand for less carbon and more environmental responsibility from corporations. Insourcing firms are finding the United States is ready to transform to a green economy; in response, firms are generating green options for the American consumer.

In Greensburg, Indiana, Honda is producing "America's Greenest Car," the Civic GX natural gas vehicle; EPA rated it 90% cleaner than the average gasoline-powered car. The American Council for an Energy-Efficient Economy agrees, awarding accolades to Honda for five consecutive years.

Honda, a Japanese-based company with over 50 years in the United States, has long been an environmental leader: first mass-produced hybrid, the Honda Insight; first vehicle to meet California's low emission vehicle standards; and first government-certified fuel-cell electric vehicle.

Insourcing companies' contributions to better environmental stewardship are not limited to the auto industry. Top energy leaders in the United States, operating manufacturing and R&D facilities here, are foreign companies.

SCHOTT Solar, part of the German specialty glass manufacturer, dedicated its $100 million solar equipment manufacturing facility in Albuquerque, New Mexico, in May of this year. When fully operational, the facility will provide 1,500 new jobs and serve as the hub of SCHOTT's U.S. operations.

In 2008, Vestas, a wind-power company based in Denmark, opened its first U.S. manufacturing facility in Windsor, Colorado. This initial facility was followed quickly by two more investments, demonstrating Vestas' confidence in U.S. wind energy potential. Vestas is helping to establish the state as a hub of the "New Energy Economy." Combining Vestas' facilities in Windsor, Pueblo, and its soon-to-be-built Brighton plant, the company will be employing over 2,500 Coloradans, resulting in a $700 million capital investment in the state. Colorado Governor Bill Ritter said the investment was an "important economic reinforcement to Colorado."

Whether it is Indiana, New Mexico, or where you are living, foreign direct investment will continue to be a driver of the American economy. FDI into the United States set a record in 2008 at $325 billion, which continued to rise in the first quarter of 2009, but at a slower rate. Overall, Insourcingcompanies make up a large slice of U.S. business activity. According to the latest government data,insourcing companies wrote $364 billion in U.S. paychecks, manufacture almost 19 percent of U.S. exports, spend 14 percent of total American-based

R&D, and pay 14 percent of total corporate taxes.

The United States continues to be a prime location for worldwide investment and the American economy is starving for new capital. Green investment is an opportunity for insourcers to expand their economic footprint. New capital and investment leads to new facilities, equipment purchases, new product developments, and most important, jobs. That is an economic combination that makes any community green with envy.

Originally posted at www.locationusa.com

All Foreign Investment Isn't Through Acquisitions

Tue, 15 Jul 2008 14:56:01 -0500

Despite all the excitement over the just-approved foreign acquisition of Anheuser-Busch by Belgium-based Inbev, all foreign investment doesn't come through acquisitions. A healthy chunk of it is through Greenfield investments - spending to build a plant or factory from the ground up. Witness the just-announced decision by Volkswagen of Germany to build a plant in Chattanooga, Tennessee. The facility is to begin production in early 2011 and will initially build a midsized sedan developed for the U.S. market. Volkswagen is expected to invest around $1 billion and create 2,000 jobs when its assembly plant is up and running. OFII has done a summary of the top job-creating foreign investment Greenfield announcements in the United States for 2007 (and those states that got the most of it), in a new report, "The Impact on the U.S. Economy of Greenfield Project by U.S. Subsidiaries of Foreign Companies."

More Red Herrings

Thu, 26 Jun 2008 14:05:23 -0500

Anheuser-Busch is trying to drum up public concern over Belgium-based InBev's $46.3 billion takeover offer based on the American beer company falling into foreign hands. It's unfortunately become far too commonplace for a domestic company to whip up fear of foreigners as a means to undo what's happening in the marketplace. Despite InBev's promise not to close any of Anheuser-Busch's existing breweries in the U.S. and its commitment to keep Busch's base in St. Louis by making the city the North American headquarters of the combined company -- those trying to stop the deal keep throwing up concerns of job losses due to InBev being based abroad. A recent Wall Street Journal editorial, "This Bud's for Whom?" does an excellent job of sorting out the facts.

Then there's French defense electronics maker Safran, which submitted an unsolicited bid for Digimarc, a U.S. maker of identification cards. In this case, we have a domestic rival, L-1 Solutions doing the muckraking. According to a recent Financial Times piece, Robert LaPenta, chairman and chief executive of L-1 Identity said, "Placing the credentialing of US citizens in the hands of a foreign entity calls to question many potential dangers, including concerns of national security." Further, he stated, "I am certain that the federal government . . . will not prefer to place US citizens' personal information . . . in the hands of a company outside our national borders." All this about a company that has operated in the United States for 30 years and is based in an ally country? Did I mention that Safran's biggest customer is U.S.-based Boeing? And according to the FT, its technology is already being used by the US air force, navy and army.

Foreign Investors & the Environment

Wed, 04 Jun 2008 16:14:27 -0500

June 5 is World Environment Day -- a United Nation's effort to whip up enthusiasm for protecting the environment. In honor of this day, I thought it would be appropriate to point out the many GREEN companies based abroad with operations in the United States. These investments are a significant part of the U.S.'s overall contribution to caring for the environment. Take a listen to a recent interview on an agricultural radio network with Doug Badger, CEO of the Trade Policy Group, talking on the important role that foreign direct investment plays in the U.S. renewable energy industry and its subsequent impact on rural economies.

Toyota - Building Here to Ship Abroad

Thu, 22 May 2008 16:28:32 -0500

Ran across an interesting globalization story today on forbes.com, "Toyota Wants to Export SUVs, From America," by Shu-Ching Jean Chen. It seems Toyota is gearing up to export its American-made Sequoia SUV to the Middle East sometime this year. Further, it's thinking about selling U.S.-made Sienna minivans in China. Turns out the low value of the dollar, plus shrinking demand in the U.S. for larger vehicles (high gas prices!), is spurring the company to make things in the U.S. to ship abroad -- what some may have thought was the unimaginable 20 years ago. Actually, having the U.S. as a manufacturing platform for worldwide consumption is not a new idea. As of now, U.S. subsidiaries of foreign companies already account for almost 20 percent of total U.S. exports (almost $170 billion worth of goods).

The Next Hallmark Greeting Card: "Happy Invest in America Week"?

Thu, 15 May 2008 16:21:09 -0500

Last week, the Commerce Department launched its first ever, "Invest in America" week, highlighting the benefits of foreign investment in the United States. Although the series of events, which took place in 18 states, didn't garner huge media attention, I'm fairly impressed it was organized and executed to begin with. It wasn't that long ago that the U.S. was buried in the DP World controversy [remember, this was when many were fretting over a UAE-based company acquiring several U.S. ports] and foreign investment in the U.S. became highly suspect. The Administration now is trying hard to reverse the world-wide reputational damage the U.S. suffered from that fiasco. Quoting Commerce Secretary Carlos M.Gutierrez, "Invest in America Week highlights our commitment to open investment policies that are key drivers of economic growth. Millions of Americans are employed by foreign companies, with better than average wages. We need to continue attracting investment that promotes economic growth and produces jobs." So, while it isn't likely that Hallmark will begin printing up imaginative greeting cards to commemorate this newly created celebration, it's a helpful effort nonetheless.

The Blurring Line Between 'Foreign' and 'Domestic' Companies

Thu, 08 May 2008 17:08:01 -0500

More examples why it's not possible, practical or necessary to put a flag on a company. In one of his blogs in the International Herald Tribune, "When profits come from abroad," Daniel Altman points to America-based Yum Brands, which will soon have its primary source of profit come from China. For those that don't know, Yum Brands is Kentucky Fried Chicken! He then flips his point when referring to European pharmaceutical companies that make some of their biggest profits in the United States. While Altman focuses on the comparison with KFC in terms of reaping large profits outside of a company's 'home' market, there's an even larger point I think he misses. Many of these companies don't just sell here, they actually have significant research facilities in the United States. Swiss-based Novartis, for example, moved the headquarters of its world wide R&D facility from Switzerland to Cambridge, Massachusetts! What do these two examples tell us? That the U.S. economy is best served by focusing on developing a strong, qualified employment base, rather than on the success of companies deemed 'American' by an arbitrary standard like, where the CEO of a company is based. If I thought about it, I care much more about the U.S. attracting companies that support jobs at research facilities here, than whether a fast food giant sells more drumsticks in China than they do in Kentucky.

Project "Runway": Airline Industry Consolidation

Thu, 01 May 2008 13:22:13 -0500

The drama in the airline industry continues apace. Listening to the speculation about which airline is combining with another is like watching the corporate equivalent of reality TV. It's all about who is hooking-up, who thinks it's a good idea (airline execs), who is dissing the people that are hooking-up (unions) and who is the really nice person that is left out (consumers). This week's episode sees a new turn in the plot: U.S. executives finally turning to stronger international airlines for possible tie ups. This makes a lot of sense: deep pocketed, well run airlines like BA, Lufthansa and Virgin would make able suitors for one of the U.S. carriers. Problem is that the unions, some Members of Congress and some airlines have opposed changing U.S. law to allow "foreign" ownership of U.S. airlines. These folks are just opposed to change. They are pining for the days of Pan Am. It's 2008 people. It's a global economy. The airline industry is ABOUT international connections. In the words of Project Runway's Tim Gunn, policy makers need to look at the mess that is the U.S. airline industry and "Make it work!"
For more on this international angle, read this excellent piece in the FT by Justin Baer and Kevin Done: "BA tests ground for tie-ups with large US rivals".

Roadmap for National Security Reviews of Foreign Investment

Thu, 24 Apr 2008 13:18:47 -0500

Treasury issued proposed regulations on Monday of this week implementing the Foreign Investment and National Security Act of 2007 (FINSA). The regs were very well done and provide investors from abroad a clear roadmap as to when, if and how they may need to submit a transaction for review by the Committee on Foreign Investment in the U.S. They also debunked a myth furthered by some in the media that investments under 10% enjoyed some sort of safe harbor from review in the past. 10% was never and is not now a magic number in regard to CFIUS reviews. Investments under 10% with some level of control (rights not otherwise granted to other shareholders) were always subject to CFIUS review. Passive investments under 10%, with no special rights other than similarly situated shareholders, should not have to seek review from CFIUS under FINSA. Kudos to Treasury for implementing one of the few pieces of bipartisan legislation passed by this Congress. And for getting rid of a few red herrings...

"Insourcing" Employment Rises

Thu, 17 Apr 2008 16:04:39 -0500

Although some recent political debates have focused on ways the U.S. does NOT benefit from the global economy, today the Commerce Department released some numbers illustrating how we DO benefit. According to the latest stats, in 2006 U.S. employment at American subsidiaries of companies based abroad rose to 5.3 million workers, an increase of almost 2 percent from the year before. What's more, these companies spent $141 billion on capital expenditures on equipment, plants and property in the United States, a rise of over 20 percent from the previous year - which fueled a significant amount of much needed U.S. economic activity. For the Commerce Department press release click here.

And, the Survey Says -- Foreign Investors Worry About U.S. Business Climate

Thu, 10 Apr 2008 11:33:39 -0500

OK, so looks like all the scare tactics are working. In a survey of CEOs of U.S. subsidiaries of foreign companies, 61% say that the business climate for investing in the United States is falling behind other countries. And, 43% say that the investment climate in the United States is getting specifically worse for foreign-based companies. Although, OFII's Annual CEO Insourcing Survey doesn't represent all foreign investors, it does present an interesting snapshot at how companies based abroad perceive the current investment climate in the United States. (Hint, we call them "insourcing" companies, because they insource jobs HERE, to the United States, supporting millions of middle class American families.) With all of the rhetoric over the last few years aimed at foreign investors -- DP World, Sovereign Wealth Funds and most recently the 'foreign' red herring that Boeing is using to sabotage the Northrop Grumman/EADS win to build airborne-refueling planes for the Air Force -- maybe this result isn't surprising. Those creating the drama should definitely be careful what they wish for...sometimes wishes come true.

Clinton Borrows "Insourcing?"

Thu, 03 Apr 2008 15:24:16 -0500

They say imitation is the sincerest form of flattery, but it was an odd sensation yesterday to read that Senator Hillary Clinton had borrowed the term "insourcing" to headline a package of positive and punitive tax measures around a new "Insourcing Agenda". We here at OFII coined the term "insourcing" in 2003 to describe companies based abroad bringing jobs INTO the U.S. such as Toyota, Nestle and Siemens. These companies employ 5.1 million Americans; pay 34 percent higher wages; pay $18 billion in U.S. taxes and are responsible for 20% of U.S. exports. But "U.S. subsidiaries of foreign companies" was a gangly phrase and the f-word is always a negative in politics. Hence, insourcing. While Clinton's Insourcing Agenda is not aimed at attracting more foreign investment to the U.S., I assume its benefits would be available to Sony, Michelin and Nortel because they have substantial investment and employment in the U.S. In my view, anything that makes the U.S. a more attractive location for investment is positive. I have some significant heartburn about the punitive revenue raisers in the proposal though - closing loopholes is often just a euphemism for raising someone's taxes. But, the fact that a leading Presidential candidate borrowed our term and emphasized our message that "insourcing = jobs coming into the U.S." is, in fact, very flattering.

Insourcing Jobs by State

Fri, 28 Mar 2008 12:46:07 -0500

Interested in how many people work for U.S. subsidiaries of foreign companies in your state? U.S. subsidiaries support jobs in every state across the country. Go to OFII's "Insourcing Jobs by State" report to find yours.

According to the OFII study, U.S. subsidiaries of companies headquartered abroad support 5.1 million American jobs, with an annual payroll of close to $336 billion. The study, based on the latest available data released by the Department of Commerce, shows that insourced jobs continue to be an integral part of the U.S. economy, representing 4.4 percent of the entire private industry workforce. The latest numbers also show that U.S. subsidiaries are heavily concentrated in the manufacturing sector, supporting about 11 percent of total U.S. manufacturing jobs.

The following are the top five states with the most jobs supported by U.S. subsidiaries: California (542,600 insourced jobs), New York ( 378,000 insourced jobs), Texas (344,600 insourced jobs), Pennsylvania (233,200 insourced jobs) and Illinois (226,400 insourced jobs).

To see who made the list of top 20 states with the most insourced jobs, click here.

CNBC's "Street Signs" with Erin Burnett: Foreigners & U.S. Infrastructure

Fri, 14 Mar 2008 12:59:20 -0500

Discussing the state of U.S. infrastructure, with John Adler, Seiu Private Equity director; Todd Malan, Organization for International Investment; and CNBC's Erin Burnett

Pot, Kettle, Boeing....

Thu, 13 Mar 2008 11:39:20 -0500

Earlier this month, the international consortium of Northrup-Gruman, EADS and GE beat the international consortium of Boeing, Alenia and Pratt & Whitney for the Air Force's $40 billion tanker contract. Unfortunately, the understandably disappointed Boeing led team seems to be engaging in and promoting political rhetoric that belies the realities of the aerospace industry: anyone making an airplane platform buys a significant amount of parts from suppliers around the world. Boeing's web site outlines how much the company sources from China across all its major products. Additionally, you can't be in that business and not have significant customers in the rest of the world - Boeing derives 70% of its revenue outside the U.S. and is America's largest exporter. As a global company (not a U.S. company) it seems really dangerous for Boeing to fan the flames of isolationist rhetoric in their advocacy regarding the tanker deal. Do they really want Congress to overturn the procurement? Boeing lobbyists would be camped out at the U.S. Trade Representatives office if another countries parliament overturned a fair procurement for political reasons. Congress created our procurement process to ensure the U.S. government buys the best products at the best value. It's not a jobs program. Boeing and their supporters need to temper their disappointment and realize they are playing with a double edged sword....