A Melting Pot of Opportunities

Sept. 21, 2010
In the struggle to create jobs and rebuild our industrial base, economic development agencies are courting companies from around the globe.

In July, the state of Alabama announced that Korea-based Hyundai Heavy Industries Co. Ltd. had chosen Montgomery, Ala., as the site of its first U.S. manufacturing facility. The facility, which will make large power transformers when it is up and running in early 2012, is expected to create 1,000 new jobs.

The project is a "tremendous win" for Alabama, says Hollie Pegg, senior project manager for the Alabama Development Office. But it's just one of several recent wins generated by foreign-based manufacturers investing in the state.

Earlier this month, Korean steelmaker Posco opened its McCalla, Ala., steel cutting facility, which will produce parts for automakers in the Southeast. In August, Mercedes-Benz completed a 200,000-square-foot expansion of the body shop at its Vance, Ala., manufacturing plant, where it employs nearly 3,000 people. Meanwhile, another steelmaker-Dusseldorf, Germany-based ThyssenKrupp AG-is in the process of starting operations at a new $4.65 billion carbon and stainless steel manufacturing and processing complex in Calvert, Ala.

In Alabama and Georgia, international investment has had a domino effect, thanks to the presence of Seoul, Korea-based automakers Hyundai Motor Co. and Kia Motors Corp. Hyundai's $1.4 billion plant in Montgomery (which opened in 2005) and Kia's $1 billion facility in West Point, Ga. (which opened in 2009) have been a magnet for automotive suppliers in both states, creating what Georgia Gov. Sonny Perdue has called "a U.S. center of car production for South Korean automakers." In July, the state of Georgia announced that South Korean auto supplier Hanil E-Hwa will invest $8.5 million to start a factory in LaGrange, Ga., creating 173 jobs over the next three years.

Pegg notes that the presence of the Hyundai Motor plant in Montgomery also played a role in securing the Hyundai Heavy Industries investment (although she notes that the two companies, and their supplier bases, are not related). To help attract Hyundai Motor and other Korean manufacturers several years ago, the Montgomery Area Chamber of Commerce established a Saturday school for Korean children and hired a full-time support coordinator to help Korean families relocate to the Montgomery area.

"We think that the Korean infrastructure in place for [Hyundai Motor] is what really made Hyundai Heavy industries feel comfortable in Montgomery," Pegg says. "We had the skilled workforce and the infrastructure needed, but also having the international infrastructure-the Korean Saturday school and the families that were already living there-was a true plus for Alabama and for Montgomery."

Indiana an 'International Hub'

Although much has been made about China ramping up its manufacturing investment in the United States, economic development agencies are courting companies from around the globe.

While Indiana has seen an uptick in Chinese investment, Indiana Secretary of Commerce Mitch Roob notes that China's presence in the state pales in comparison with that of Japan, which employs 45,000-plus Hoosiers in more than 275 organizations. Of the approximately 19,000 jobs created in the Hoosier state in 2009, some 2,500 came from foreign direct investment, according to Roob. Companies from Switzerland, Sweden, Germany and Canada made some of the largest investments, according to data provided by the state.

Indiana Secretary of Commerce Mitch Roob Among the recent investments in the Hoosier State, Saratoga Potato Chips LLC, a Canadian snack maker, announced in July that it plans to spend nearly $5 million to locate its U.S. headquarters in Fort Wayne. The project will create up to 175 new jobs by 2013, according to the state. In March, London-based consumer packaging manufacturer Rexam PLC announced that it plans to expand its Franklin, Ind., operations, creating up to 46 new jobs by the end of the year.

"You wouldn't necessarily think of Indiana as an international hub, but it has become one," Roob says.

It's not by accident. The Indiana Economic Development Corp., which Indiana Gov. Mitch Daniels created in 2005 to replace the former Indiana Department of Commerce, led a trade mission to Germany, Italy and the United Kingdom in April. In September 2009, Daniels led state business and government leaders on a trade mission to China and Japan. Roob also points out that this year's Indiana State Fair featured an exhibit celebrating the state's relationship with Japan, and the state plans to feature a different country each year.

"We've made a big commitment to internationalizing investment here, and it's paid off for us," Roob says.

Much like Indiana, the Fort Worth, Texas, area is working to increase its share of the international investment pie. Its existing international presence includes the U.S. headquarters of Alcon Inc., a Hnenberg, Switzerland-based manufacturer of eye-care products. The company employs nearly 3,200 people at the site, according to David Berzina, executive vice president of the Fort Worth Chamber of Commerce.

The chamber's international investment initiatives include a bilateral trade mission with the Hannover region of Lower Saxony, the second largest state in Germany. In late October, Fort Worth will host representatives from as many as 40 companies from Lower Saxony in an effort to help the German companies identify potential business opportunities in Fort Worth.

The four-day visit will include a trade show in which the German companies will be able to network with Fort Worth-area companies that are in similar industries. As part of the visit, the chamber has arranged for local financial institutions and accounting and law firms to provide information about the financial, legal and other requirements for doing business in Fort Worth, according to Berzina.

"The primary purpose of the trade mission with Hannover is to match American companies with potential vendors and/or suppliers in Germany, and for German companies to do the same with Fort Worth businesses," Berzina said in an e-mail. "It will also allow businesses to find new customers in a foreign country, which is a great way to expand their respective business models."

It's the Market

With the explosive growth of China's economy, and what seems like a mass exodus of U.S. manufacturing operations to China and other "low-cost" countries, it's easy to forget that the United States still is an attractive place to do business for many companies. The appeal for many foreign-based companies is simple, explains Mark Foster, a San Jose-Calif.-based attorney who practices domestic and international commercial law.

Silicon Valley business attorney Mark Foster"The American market, for all of its shortcoming, still is the biggest market in the world," explains Foster, who is a member of the federal Industry Trade Advisory Committee on Information and Communications Technologies, Services and Electronic Commerce. " ... The American market is nirvana, and this is where you have to be in every sector."

That is certainly the case for Alstom Power, a division of the Paris-based Alstom Group. In May, the company broke ground on a 115,000-square-foot facility in Amarillo, Texas, that will assembly nacelles for wind turbines. When the plant is at full capacity, it will create 275 jobs, according to the company.

"The key word you mentioned is 'market,'" says Alstom U.S. Country President Pierre Gauthier. " ... We see a big existing market in wind power-there's already close to 8 gigawatts of wind turbines being installed in any given year [in the United States]. It's increased tremendously, and we want to be a part of that."

In June, Alstom opened a 350,000-square-foot facility in Chattanooga, Tenn., that will manufacture turbines and other power-generation equipment for coal, gas, nuclear and hydropower plants in North America. The $300 million facility is expected to create 350 jobs.

Gauthier notes that proximity to customers, the market and the labor pool "are three of the very critical factors that we look at" when siting a plant. Considering that the Chattanooga plant will manufacture the largest nuclear steam turbines in the world, according to the company, the facility's location in the United States-and Tennessee-makes sense.

"These steam turbine machines that we will be producing have a capacity of upwards of 1,700 megawatts each, and they weigh between 500 and 600 tons each," Gauthier says. "You don't move these things easily around the world."

Alstom U.S. Country President Pierre Gauthier
The allure of the world's largest market isn't the only attraction for foreign-based companies. Foster notes that America's political stability, its abundance of relatively low-priced land-even compared with China-and its "cheap and reliable" electric power are among the reasons that foreign-based companies choose to establish a footprint in the United States.

As more and more companies have set up manufacturing operations in China, Foster has seen firsthand that the United States offers another key advantage for doing business here: its legal system, "and in particular the patent and trademark and intellectual property protection regime, which is clear and straightforward and enforced."

"Many of my clients have retained me to try to disentangle them from a Chinese venture, or to try to assert rights that they should have legally but they don't have from an enforcement standpoint," Foster says. "That's how I spend a lot of my time with regard to my clients that are operating in China."

For more on foreign investment in the United States, read "Coming to America" from the September issue of IndustryWeek.

About the Author

Josh Cable | Former Senior Editor

Former Senior Editor Josh Cable covered innovation issues -- including trends and best practices in R&D, process improvement and product development. He also reported on the best practices of the most successful companies and executives in the world of transportation manufacturing, which encompasses the aerospace, automotive, rail and shipbuilding sectors. 

Josh also led the IndustryWeek Manufacturing Hall of Fame, IW’s annual tribute to the most influential executives and thought leaders in U.S. manufacturing history.

Before joining IndustryWeek, Josh was the editor-in-chief of Penton Media’s Government Product News and Government Procurement. He also was an award-winning beat reporter for several small newspapers in Northeast Ohio.

Josh received his BFA in creative writing from Bowling Green University, and continued his professional development through course-work at Ohio University and Cuyahoga Community College.

A lifelong resident of the Buckeye State, Josh currently lives in the Tremont neighborhood of Cleveland. When the weather cooperates, you’ll find him riding his bike to work, exercising his green thumb in the backyard or playing ultimate Frisbee.  

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