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A stimulative influence.

A Stimulative Influence

Foreign direct investment in the United States has increased practically fivefold since 1980, from $500 billion to almost $2 trillion today. A decade ago U.S. companies decided not to automate to cut production costs but opted to utilize low-wage, offshore locations. This reduction of demand in the labor-intensive sector of the U.S. set the stage for the beginning of severe unemployment and the erosion of skills in the work force, leaving the U.S. vulnerable and needy.

As West Germany, Japan, Britain, and France began to mature economically and become competitive (with each other and the U.S.), these countries saw the potential of an eager, educated, and underutilized work force in the U.S. They began to take advantage of the vast marketplace, the relatively few barriers to investment, and the comparatively high standard of living. As a result of this competitive environment, the U.S. no longer holds the monopoly on superior technology and management.

Foreign direct investment is a logical extension of free trade, and free trade is a two-way street. Consistently, for over 40 years, U.S. companies have been establishing overseas operations in order to utilize the unique capabilities and areas of expertise that they couldn't otherwise take advantage of in their home market alone.

Today, the U.S. is in a period of duress. It is suffering from a recession, an out-of-control budget, and a trade deficit. The benefits from foreign direct investment can only be a positive influence. Confidence in the U.S. by foreign companies is strong and the jobs that are created by foreign companies should be welcomed, as should their revitalizing foreign dollars.

Many European companies have stepped up their direct investment activities in the U.S. in the past five years. They maintain that there is great promise in the U.S. - if a long-term approach is taken. The interest that foreign companies have in the U.S. in these turbulent times should be seen as a supportive and stabilizing force. As Harvard Professor Robert Reich has noted, "American competitiveness is much more a matter of what we do than what we own. The critical question is how much value Americans add to the global economy. And if Americans can learn to be more productive under the auspices of foreign managers...then we come out ahead."

Sulzer Bros. Inc. currently employs over 4,000 Americans and has generated several hundred of those jobs since 1985. By licensing European technology to the U.S. facilities, Sulzer is able to generate new jobs and make the facilities increasingly competitive in the U.S. markets and abroad. Likewise, many other foreign companies are employing millions of Americans each year. Even in these difficult times they are maintaining a steady hiring stream.

More important is the import/export ratio of foreign companies. In 1940, the year of Sulzer Bros.' incorporation, total U.S. sales were less than $1 million - 100% of which represented imported products or technology. In 1989, total sales were $676 million, of which just 20% - approximately $138 million - represented sales of non-U.S.-made products. Sales of U.S.-made products in non-U.S. markets came to approximately $80 million last year. In many lines of business the materials purchased from the parent company are joined with American-made components prior to sale, so they are not entirely imports in the usual sense.

Foreign-owned corporations can afford to take the long view. They have operations in diversified areas within these industries and in other markets around the globe to offset slow times here.

This will be especially important in the difficult times ahead. Foreign-owned companies will be making substantial investments in research and development and technological progress at these U.S. companies for years to come - and in the process provide stability, a substantial financial commitment, a long-term perspective, and an infusion of new technology, all valuable in today's economy.

Without foreign investment, the U.S. would lose the benefit of much-needed capitalization, and would not enhance its ability to compete in the global marketplace - which is the key to economic success for all developed nations. Especially now with the downturn in our economy, let's look at foreign direct investment such as Sulzer's as a healthy response to today's economic crisis.

MICHEL BALLY / Sulzer Bros. Inc. The importance of foreign direct investment in enhancing U.S. competitiveness is explored by Michel Bally. He is President of Sulzer Bros. Inc., the U.S.-based subsidiary of Sulzer Bros. Ltd., a diversified corporation with revenue in excess of $4 billion that is headquartered in Winterthur, Switzerland. Born in Bucharest, Bally joined Sulzer in 1960 and oversees operations that manufacture a wide array of sophisticated industrial equipment and medical technology products.
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Title Annotation:Special Section: Being a Global Leader; views of Michel Bally, President of Sulzer Brothers Inc.
Publication:Directors & Boards
Date:Sep 22, 1991
Previous Article:Be in harmony with shareholders.
Next Article:Creativity and global service.

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