The Long-Term View From the 29th Floor

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Charles de Gaulle imperiously describes it as "a lien weighing heavily on our national patrimony." Britain's Prime Minister Harold Wilson calls it "industrial helotry." West Germany's Finance Minister Franz Josef Strauss uses the word Ausverkauf--meaning sellout. The U.S. Government has frowned on it as a plague on the balance of payments. No matter what it is called, the fact remains that one of the most significant developments of the post-World War II world is the great leap by U.S. corporations into overseas markets--whether by direct investment in plant and equipment or by acquisition of foreign companies. In making that leap, American companies have begun to reshape themselves into global organizations to which national boundaries--and such narrow definitions as domestic or foreign --mean little.

Last year American firms invested $10.2 billion, or about 14% of all their capital spending on plant and equipment, in ventures outside the U.S. This rising annual amount brought their total overseas ante to $64.8 billion, more than the gross national product of many a nation, and eight times the amount foreign businessmen have invested in the U.S. in the 191 years of the Republic. Americans now control 80% of Europe's computer business, 90% of the microcircuit industry, 40% of its automaking, and sizable shares of chemicals, farm machinery and oil. In Britain, U.S. companies own half of all modern industry, employ one of every 17 British workingmen, manufacture 10% of all British goods for home consumption or export. U.S. firms also squeeze out twice as much profit from invested capital as their British competitors. Of this, they ship $225 million a year home, reinvest the rest for the long term abroad.

All this has come about with astonishing rapidity. In 1945, with World War II over and international business reviving, U.S. companies had only a modest $8.4 billion invested around the world. By 1958, this had grown to $27.4 billion. With last year's increase, U.S. private investment abroad has octupled in 20 years. And the move abroad is undiminished, if only because the market is there. Explains Rubberman Raymond C. Firestone: "Sometime in 1968, the number of motor vehicles in use in other nations will outnumber those in the U.S. for the first time. We want to put tires on those vehicles."

Iron Mike's Domain. Few men understand the problems and profit of this kind of U.S. manifest destiny better than the short (5 ft. 8 in.), bald, square-jawed chairman and chief executive of the world's biggest oil company, Standard Oil of New Jersey.*He is 63-year-old Michael Lawrence Haider (rhymes with strider), and he views the world from a 29th-floor office in midtown Manhattan's RCA Building.

It is quite a view. In terms of globalization, few, if any, corporations can match the 85-year experience around the world of Jersey Standard, or its range of activities. With 52% of its vast assets abroad, Jersey is the world's biggest private overseas investor. Thus "Iron Mike" Haider, in the course of a day's work, may be involved in everything from a Middle East coup to whether Jersey should eventually construct a 1,000,000-ton supertanker, or what the President of the U.S. has on his mind.

Jersey Standard is actually a holding company and--thanks in considerable part to Haider--a highly decentralized corporate parent to 300 affiliates that do all its exploring, producing, refining and marketing of petroleum products in more than 100 nations. Out of all this, Jersey's most recent annual earnings were $1.1 billion from well-oiled sales of $13.6 billion.

Everything about Jersey is immense. Its assets of $13.8 billion are greater than the U.S. Government's gold supply. The employees working for it and its affiliates--150,000 people--are equal to the working population of Vermont. Its 750,000 shareholders outnumber the population of Hawaii. Jersey's tanker fleet, including 126 ships sailing under 14 flags, with 19 new supertankers abuilding of mostly 240,000 tons apiece, is bigger than the Greek navy. Jersey's 65,000 service stations, bearing such names as Esso, Enco and Humble (the New Jersey company's exclusive right to the Esso name is presently being fought out in Federal courts), are scattered everywhere around the world, from U.S. turnpikes to the African veld to the guerrilla-infested rural roads of Viet Nam. Jersey companies turn out 4,627,-000 barrels of petroleum products daily, sell one of every seven gallons of fuel marketed in the free world.

Cool Cards. Jersey considers itself an energy company rather than an oil company, but even energy no longer covers the corporate range of activities. Energy does indeed reach from oil for the lamps of India to power generated by a subsidiary in Hong Kong. Affiliates also offer lodging in Esso motels and meals from Esso restaurants. The company could probably topple a few governments and settle some revolutions by selective payment of its oil royalties to one faction or another. "It's fantastic," says a U.S. State Department official, "what powers they have and how coolly they play their cards."

Jersey has a lot of big company on the international scene, including such other U.S. firms as G.M., Ford, Chrysler, General Electric, IBM, ITT, Union Carbide, Du Pont, 3M, Kodak, Texaco, UniRoyal, Mobil, Boeing, Pfizer, Olin Mathieson and Corn Products Co. Together, they are rocking the world. Their globalization is an inevitable showdown between modern technology and old-style nationalism. Technology is an odds-on favorite.

Technology requires the kind of crisp management typical of Jersey Standard. In his 29th floor board room, under a stern portrait of old John D. Rockefeller himself, Mike Haider supervises an empire that John D. would have envied. Though Jersey is huge enough and diffused enough to seem unrulable, the empire functions routinely and well under a system of committees and responsibilities. Jersey has so many committee meetings at so many levels that some outsiders dub it "the Standard Meeting Company." Minutes of the meetings filter upward to key men whom the company calls contact directors--vice presidents whose job is to maintain watch over various regions of the world. Contact directors report day-to-day developments to Jersey President John K. Jamieson, 57. Larger issues and long-range planning are the business of Haider, a summertime yachtsman (power boats, of course), who believes in keeping an easy hand on his corporate helm. "If I ask a question," says Haider, "I'd rather the contact director said, 'I don't know but I'll find out.' If he knows, he's following the situation too closely."

Away from Home. Haider's penchant for decentralization and his determination to equip Jersey for the next 20 years of globalization have radically reshaped the company. One decision, reversing a tradition that dated back to John D., was to add outsiders to Jersey's board of directors. "Their unfamiliarity with the oil business can be useful," says Haider of his decision, "just because they will ask a question to which we think we've known the answer a long time."

More significant, however, was Haider's idea of improving the dialogue between the 29th floor and the 300 affiliates with a series of completely new management companies laced between the two. Set up last year, they include Esso Africa, which oversees Jersey business in Africa and the Eastern Mediterranean from its base in Geneva. Esso Inter-America, set up in Coral Gables, Fla., now handles most of Jersey's investment in South American oil. Esso Standard Eastern, based in New York for better communications, overlooks Australia and the Far East. For Europe and its 17 nations in which Jersey operates, Haider conceived Esso Europe and based it in London.

The reason for Haider's interest in Europe is obvious, since Jersey Standard sells as much gas and oil and chemicals there as it does in the U.S.

More than that, Jersey's European business is growing faster than its U.S. business. The trend holds for other U.S. corporations, too. Colgate-Palmolive, H. J. Heinz, Woolworth, Singer and NCR (National Cash Register) do more business overseas than at home. Such companies use a simple marketing technique abroad: they keep a low corporate silhouette and a high product image. It works so well that many a foreign customer never thinks about them as American. "Oooh," said a British housewife recently, sighting a Woolworth five and ten on her first visit to New York. "I see you have our Woolworth here too."

Along with sophisticated markets in Europe and Canada (which this year for the first time fell slightly behind Europe in the amount of U.S. investment), globalization is also stretching out to developing markets in Africa, Latin America and the Far East. A total of $11.4 billion has been invested in Latin America, where U.S. companies make and sell everything from automobiles to Mexican peanut butter. Another $10 billion has been committed to Africa and Asia. For example, the Gillette Co., which already controls 60% of the European razor-blade market and which last week also took over the big West German appliance firm of Braun, is now moving in on Africa with its Nacet blades. Gillette offers shaves to Africans who have previously trimmed their whiskers with knives, in its advertisements plays up to crocodile-conscious natives its Nacet trademark--a blade slicing through a croc.

In Asia, although markets are slim at the moment, U.S. companies are concentrating on the future, mindful that the population of the region totals 1.8 billion, with the children alone outnumbering the combined populations of Europe and Africa. Jersey Standard is diligently building a civilian market in Viet Nam in spite of the war. Esso installations occasionally get in the way of the combatants; a 10,000-gal. tank burned for three days after it was hit in a Viet Cong attack on Tan Son Nhut Airport. The Cong also bushwhack Esso oil trucks and force the drivers to pay ransom. But overall, says Esso Viet Nam's placid manager, Frederick W. Penn, "the thing unusual about us is the extent to which operations here are so usual." 13,000-Mile Umbilicus. Under Haider, local managers like Penn are getting more autonomy. More and more companies are adopting the same system. "You can't run a day-to-day business with a 13,000-mile umbilicus," says Roland Pierotti, executive vice president of the Bank of America. Like Jersey and its four new companies, U.S. corporations are rejiggering tables of organization to keep up with a fast-moving world of business. Ford established Ford of Europe to supervise all its European automaking, General Electric retailored its international division so that man agers are now responsible for the same product lines abroad as well as at home. Dow Chemical, which pioneered this sort of thinking by setting up an almost autonomous Dow Chemical Europe in Zurich, is now, says President Herbert Doan, "a global company, whose headquarters happen to be in Midland, Mich."

One reason for such corporate structures as Esso Europe, Ford Europe and Dow Europe, is that the European Common Market--as an inevitable fore runner of other regional trade groups across national borders --demands a regional approach. U.S. businessmen, already accustomed to regionalism in the States, grasped the significance of the Common Market long before the Europeans who had conceived it. "The Americans," says Andre Danzin, director general of the French electronics firm of Csf., "understood immediately what a large market could be. Europeans could not imagine the possibilities a bigger market would give them, and they were too late to realize it."

Using new concepts--and taking advantage of Common Market tariffs--U.S. companies have stopped thinking in terms of borders. General Motors is building a $75 million transmission plant at Strasbourg, France, to provide parts for German Opels as well as British Vauxhalls. Ford's farm tractors are being assembled in Antwerp with parts from Detroit and from Basildon, England. A new $100 million Caterpillar Tractor plant outside Brussels will make parts for other Caterpillar plants in Scotland and France. Honeywell's computer plant at Newhouse, England, will build computers for the Continent as well as for Britain.

Question of Control. Regional operations cause many a U.S. corporation to reconsider how much control it wants of a foreign subsidiary and what kind of local partnerships it should have. G.M. represents one end of a broad range of thinking. "We have no partners in our foreign subsidiaries," states Chairman James M. Rocheflatly. At the other end of the scale is Northrop Corp., which is selling its technology in 37 nations so far. Northrop Chairman Thomas V. Jones makes it a rule to take no more than a 40% interest in a foreign company. "Many American companies," says he, "say 'we need to have control so that we can have the management.' Well, it doesn't give me any comfort to have a guy from California managing a company in France when I know that the problems are French problems."

Most companies prefer complete control where feasible, joint partnerships where practical or where they help to ward off the threat of nationalization.

International Harvester, operating in 143 nations, has 32 subsidiaries and seven joint ventures. Jersey Standard and Royal Dutch/Shell are jointly marketing natural gas from the North Sea's Groningen fields off The Netherlands and will soon begin pumping gas together from newer fields off the English coast. Fast-growing Boise Cascade Corp. devised a plan of management contracts for its ventures. Local partners hold the majority interest in joint ventures, but Boise Cascade as manager runs the operation. Even the U.S. banks that have followed American business abroad are developing partnerships. Bank of America has formed Societe Financiere Europeene along with the Banque Nationale de Paris, the Dresdner Bank, Banca Nazionale del Lavoro, Barclays Bank and the Algemene Bank Nederland N.V., to raise capital and work out mergers on a grand Common Market scale.

Globalization is altering the personnel charts of U.S. corporations as well as the tables of organization. American managers abroad today, remarks a Danish businessman, "rotate like ambassadors." Indeed they must, for the sake of the company and for their own careers. Experience in only one country is no longer sufficient in companies that operate around the world. And where overseas assignments were once considered sentences to Siberia, they are now the route to the top. "I don't think you have a total understanding of world trade unless you've had a fair amount of time overseas," says 3M Chairman Bert S. Cross.

Biq Man from Abroad. Along with rotating ambassadors from home, U.S. firms have taken another step long overdue: they are giving more jobs--and more responsible jobs--to non-American executives. As recently as 1965, according to a survey by University of Manchester Professor Kenneth Simmonds, only 59 Europeans were among the 3,733 executives in Europe for 150 U.S. companies. Now the ratio is changing rapidly. The Earl of Cromer, for instance, until recently governor of the Bank of England, is the new chairman of IBM United Kingdom. Dr. Frederick H. Boland, the man who as United Nations General Assembly President broke a gavel in 1960 trying to silence Nikita Khrushchev, is chairman of Esso Ireland. Though names help, such executives are less and less anxious to be figureheads. "If they want a yes-man," says Managing Director Gian-Carlo Salva of Honeywell Italy, "they can get my doorman for $100 a month."

U.S. companies have even begun to switch their non-Americans around.

"Why not?" suggests a U.S. executive in Brazil. "Brains are international."

Eastman Kodak Co. has a Swiss man ager in Italy, a Dutchman in Portugal and a Cuban in Venezuela. SGS-Fair-child, European subsidiary of Fairchild Camera & Instrument Corp., advertises its management staff as "an SGS-Fair-child cocktail: one part Italian, four parts British, one part French, one part Swedish, one part German, served with an American olive."

Esso Europe, at Mike Haider's insistence, was concocted in 1966 as an even more diverse mixture. Picked to head it was an American, Nicholas J. Campbell Jr., 52, who had earlier been in Venezuela for Jersey and in Japan as president of Esso Sekiyu, the Japanese affiliate. Choosing as many capable executives as possible from Europe, Campbell ended up with a mix that includes 121 Americans, four Canadians, one Venezuelan, 86 Britons, 21 Germans, 16 Frenchmen, 14 Italians, ten Belgians, ten Norwegians, nine Swedes, eight Dutchmen, two Danes, two Swiss, one Finn and one Maltese, who all work comfortably together with English as their lingua Esso. Jersey resettled them with even a pamphlet of helpful translations: diapers in England are called nappies, and a hot-water heater is a geyser.

Big Suez & Small. Esso Europe's domain and responsibility include 24 refineries, pipelines stretching 3,000 miles, and research laboratories in Britain, Germany, France, Italy and Belgium. So diverse is Jersey that the European company even supervises a nine-acre miniature world near Grenoble, France. There Esso sea captains learn how to handle supertankers that will soon reach 800,000 tons in size by steering 15-ton models around waterways, including a replica of one of the bad bends of the Suez Canal.

The real Suez, closed by war, gave Esso Europe its own shakedown cruise. With Europe cut off from much of its Middle East oil, other sources had to be located rapidly. Campbell diverted Jersey tankers at sea and chartered others, kept the region fueled with a pipeline of ships bringing oil from the Western Hemisphere. At one point Esso's Fawley, England, refinery was handling a mid-American grade of oil called Rocky Mountain Sour that had never before been seen in Europe.

Daring to Be Different. Innovations like Esso Europe fascinate Jersey executives because Haider, as a 38-year veteran of a longtime conservative company, might have been expected to go by the well-thumbed company book. But in the course of his career, Haider has often dared to be different; living in an Oklahoma oil camp in the 1930s, he was the only employee who stubbornly refused to cut his lawn at company orders, and was nearly fired for it.

Haider was born on a North Dakota wheat farm, moved with his family to California as a teenager. He got his chemical-engineering degree at Stanford University ('27), before long was working for a Jersey affiliate called Carter Oil, where one of his early laboratory assignments was to check the quality of helium gas for use in dirigibles. Jersey prefers that its men not put down roots, and Iron Mike never really has. He bounced around the Southwest, moved from New York to Florida to Canada, where in 1947, as Imperial Oil's production boss, he brought in the Leduc oil field that made western Canada independent of oil from Texas and Louisiana.

Haider today is a combination of grit and polish. He hates cold weather from his tours in Canada, speaks acceptable Spanish from his connections with Latin America. He enjoys opera, frequently attends performances in New York with U.S. Steel Chairman Roger Blough, another buff. On business trips, he likes to get up a Cajun card game known as Bouree, a variety of pitch in which pots get increasingly more costly. He seldom loses at Bouree, but he can afford it if he does. For running its global empire, Jersey Standard last year paid him $395,833 in salary and bonuses. He is a devoted family man, but he is so anxious to keep his personal life out of the public eye that he does not even list his wife and daughter in Who's Who.

The Third Power. Haider, and chief executives like him, will be needing all the polish they can muster in the year ahead. The pace of U.S. globalization is so vigorous that other nations are increasingly concerned and cantankerous about it. "Actually," says Csf.'s Danzin, "there is no European government strong enough to prevent an American company from dominating a market." Jean-Jacques Servan Schreiber, whose book The American Challenge describes the problem and has become a runaway bestseller on the Continent, prophesies: "The third industrial power, after the U.S. and the Soviet Union, could easily be in 15 years not Europe but American industry in Europe. Even today, in the ninth year of the Common Market, the organization of this market is essentially American."

Europeans, and others, often resent what they consider American arrogance. "However much I like the Americans," says a Dane, "I must admit that they suffer from a kind of superman mentality." Europeans also resent the fact that U.S. firms deal brusquely or not at all with trade unions, discontinue such traditions as the German breakfast break on company time or the Spanish siesta, and, unlike paternalistic European firms, lay off workers in recessions. When ITT recently considered buying Belgium's second best football team in order to get its stadium for employee recreation, cynical Belgians quickly predicted that ITT would undoubtedly cut the team from eleven players to nine.

The major complaint against U.S. firms, however, is that they have an overwhelming lead in technology and are often reluctant to share it. The pace of U.S. research and development stuns and frightens other nations. In the U.S., 700,000 people work at R & D for industry v. 187,000 in next-most-active Japan. U.S. corporations allot $21 billion to research, six times what the Common Market spends. Americans can also be terrifyingly ingenious. Ford, creating Ford Europe, linked engineering centers at Dunton, England, and Cologne to Detroit by telephone cable in order that designers abroad could use the Dearborn computer.

Sympathetic to such protests, U.S. companies have begun to share technology. IBM has assigned two important projects to its European laboratories, a cheaper, faster computer memory system and a more flexible programming language, in order to develop their skills. Jersey's Esso Research recently opened a 50-acre center in Brussels where scientists from eleven nations will work together. "We won't have done our job," says President Erving Arundale, "until American consumers are using products that we have developed here in our European labs."

Americans also feel that other nations could do more to pull up their technological socks. "It surprises us in the U.S.," Chase Manhattan Chairman David Rockefeller bluntly told a Paris meeting of businessmen, "that you pay relatively little attention to management training and to training in some of the newer scientific disciplines. The American advantage comes not so much from the discovery of new ideas and methods as from their application. It has to do basically with capabilities in management, engineering and marketing, in short, the willingness to take risks and to accept the change."

If Europeans find Americans efficiently cold, Americans for their part often find Europeans dismayingly disorganized. Says ITT Executive Vice President Tim Dunleavy: "To counteract the long, lean, hungry guys coming in, a European company tries to merge with another European company. But that only adds to the difficulty. You get two overstaffed, overweight companies getting together, and you're making the problem twice as serious as it was in the first place. That sort of action makes them more prey than ever to American companies, but a lot of businessmen and politicians still don't recognize this."

Marks, Rupees, Eurodollars. One criticism U.S. businessmen do listen to--if not always sympathetically--is Washington's complaint about the effect of globalization on the U.S. balance of payments. "The European splurge," says Assistant Commerce Secretary for International Business Lawrence Mc-Quade, "was an example of American businessmen losing their heads about a market. Their massive investment triggered the voluntary payments program." Under this voluntary program, 625 U.S. corporations, including Jersey Standard, are making "special efforts" to repatriate income from abroad more rapidly and to borrow more money abroad.

Most corporations chafe under the Government's voluntary program, especially since private investment is one area in which the balance of payments is in fairly good shape. Last year, while business sent $3.14 billion out in investments, it returned $4 billion in profits, for a net gain of $600 million. Corporations are doing more and more borrowing overseas. Jersey's long-term debt includes $65 million repayable in German marks, $16 million in Belgian francs and $11 million in Norwegian kroner. Ironically, although Europeans predictably complained that borrowing abroad would wipe out their meager capital markets, the reverse has proved true. Making Eurodollar loans in Europe on U.S. money that never comes home, or floating Eurobonds pegged to such dollars, global Americans have developed a new $2 billion capital market in Europe. Of that amount, U.S. companies have so far utilized only about 40%, leaving more than $1 billion for Europeans to borrow.

Discord and disenchantment have caused a handful of U.S. companies to pull out and come home, and diminishing profits are causing others to rest and regroup. But in the long-term view that Mike Haider takes from his 29th-floor windows, the future is crystal-clear. "I see no limit to the globalization of American business," he says. With the experience of his oil-field days, he sees American companies as doing the exploration work. After that, countries around the world will reap the benefits. And the U.S. balance of payments will some time feel a favorable weight as profits come rolling home.

*Standard Oil Co. (New Jersey) is one of 33 oil companies that the U.S. Government, in a 1911 antitrust suit, spun out of John D. Rockefeller's original Standard Oil trust. Among others are Standard companies of Ohio, Indiana, California, New York and Kentucky. Apart from the valuable name, they have no connection with each other, with one exception: the California company in 1961 bought a controlling interest in Standard Oil (Kentucky).

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