The Foreign Invasion

For years, U.S. companies have been expanding overseas with Napoleonic gusto, swallowing up local firms from Stockholm to Singapore. Now a counterthrust is gathering momentum. European and Japanese businessmen are beginning to see the U.S. as a vast market ripe for exploitation; they are rushing to open Stateside banks, factories and distribution centers.

Direct foreign investment in the U.S. is believed to have increased by more than $1 billion in 1972, one of the largest yearly rises ever. Foreign-owned business assets still total only about $15 billion, compared to just over $90 billion in American investments abroad, but the foreign stake in America last year grew in percentage terms as fast as the American presence overseas. More than 500 foreign-owned firms now have holdings in U.S. manufacturing or petroleum companies.

Fear of new U.S. barriers against imports has prompted some foreigners to buy their own share of American business. "Sooner or later we would have run into protectionist action," says Masao Sawano, general affairs director of Japan's Toyo Bearing Manufacturing Co. Ltd., which recently opened a $1,000,000 ball-bearing plant in Chicago. But the major attraction is the size and vigorous expansion of the U.S. economy. And now that the dollar has been devalued twice since late 1971, foreigners can build new U.S. factories more cheaply than before.

Major Japanese companies have piled up millions of greenbacks by exporting consumer goods to the U.S., and are eager to put their treasure to work. Sony Corp. is investing $15 million in a color-TV assembly plant in San Diego that is expected to be turning out 240,000 sets annually by year's end. A Hitachi subsidiary began producing magnets in March at a $2,000,000 plant in Edmore, Mich., that it owns jointly with General Electric. Mitsubishi, whose San Angelo, Tex., subsidiary plant has been turning out executive jets since 1967, recently acquired a factory in Moonachie, N.J., to make synthetic leather. The Tokyo government is encouraging the push. This year it began giving Japanese investors a 30% tax write-off on new U.S. ventures.

To European investors, the U.S. offers an abundant supply of skilled labor--which is increasingly scarce at home--and an inflation rate that is low by current European standards. Farb-werke Hoechst AG, a West German chemical company, will spend $30 million this year to expand two existing American plants. Britain's Cadbury Schweppes Ltd. broke ground last month on a $10 million chocolate factory in Hazleton, Pa.

U.S. banking laws prevent almost all American-owned banks from branching outside their home states, but foreign banks are under no such restriction. Japan's Sumitomo Bank and Britain's Barclays Bank each have opened a total of 45 branches in California, New York and Illinois. Barclays was nationalized in Egypt, the Sudan and Tasmania, and was given 48 hours to get out of Libya. Barclays executives do not get as great a return on their money in the U.S. as they did in Africa, but they expect to be around longer.

Potential foreign investors still find much to make them hesitant about operating in the U.S.: labor costs are high, the vaunted marketing skills of American competitors and sheer size of the U.S. market are daunting, and antitrust laws are difficult for many alien executives to comprehend. Yet after they have dipped a toe into the market, foreign businessmen often grow more confident. Canon Inc., a Japanese maker of cameras and office equipment, is taking control of its U.S. marketing and distribution after more than a decade of dealing through Bell & Howell. Says Canon President Takeshi Mitarai: "The parents had a child entrusted to foster parents, and now we want him back. We know him best." New investments prompted by such confidence can only help reduce the U.S. balance of payments deficit, create more jobs and provide some healthy competition for home-grown industries.

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