U.S. Manufacturers Step Up Foreign Investment
Foreign direct investment (FDI) by U.S. manufacturing multinationals increased a staggering 90% from about US$28 billion in 2003 to over US$54 billion in 2004, according to a new study by Deloitte Consulting.
Why? The surge in FDI flows may be explained in part by a rise in outward U.S. manufacturing cross-border M&A activity, which has continued to climb since 2002, first surging 80%, from US$16 billion in 2002 to US$29 billion in 2003, and then increasing to nearly US$31 billion in 2004 — its fourth-highest level over the last decade and a half. FDI growth may have also been fueled by improved corporate profitability and enhanced confidence by manufacturers in global markets.
What does this mean for American communities hoping to lure manufacturing investment? They will have much greater competition for these opportunities from offshore locations.
Where should you focus your attention? In my estimation, we will stand even less of a chance of getting the big manufacturing projects by US corporations. They will go offshore for the most part. Frankly, I do not recommend putting much energy into these efforts. You'll lose.
Focus instead on two categories of manufacturers: 1) small to medium-sized US manufacturers that have proprietary products; and 2) foreign manufacturers looking to put down US production roots (even there don't overfocus on the big projects.)
posted by Don Iannone, D.Div., Ph.D. at
Saturday, July 02, 2005
2 Comments:
You say in #2, invest in the foreign manufacturer that takes up roots, what is the difference between an existing US company or the new roots? Obviously you do not know too much about manufacturing, then why try to say where to invest.
By
Anonymous, at 7:08 PM
Tom,
My job is to advise communities, regions, and states on how to create and organize effective economic development strategies, organizations, and programs. I work with manufacturers across America as members of "strategy teams" to accomplish this objective. I have also worked with manufacturing technology groups, like CAMP, Inc. here in the Cleveland area on advancing manufacturing. From these experiences, I have come to know a great deal about manufacturing.
I'm not sure what your point is. Perhaps it is there is no difference between a US-owned manufacturer operating here and a US operation of a foreign-owned company. They are different in terms of who controls them and where the profits go. That is no small point. In terms of market, you might argue that all manufacturing is global; that is clearly where things are headed.
This article advises ED organizations to: 1) work with small to medium-sized manufacturers, like Titan; and 2) work with in-bound foreign companies trying to get a foothold in the US market. Why these two categories? Because the biggest payoff is there for communities, instead of putting more money into a GM or Ford plant that is headed in the opposite direction (offshore). US multinationals are headed offshore and foreign multinationals (through M&A's and greenfields) are headed on-shore in "global industries.
Hopefully your company has a global mindset and strategy, and hopefully you are seeking international market opportunities. In the machining business, you have all kinds of foreign competition breathing down your neck.
Thanks for commenting.
Don Iannone
By
Don Iannone, D.Div., Ph.D., at 4:47 AM
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