TO:  Professor Schermerhorn
FROM:  Matt Suver, Chad Harrison, Libby Lang, and Matt C.
DATE:  October 9, 2000
SUBJECT:  FOREIGN INVESTMENT IN AMERICA
ATTACHMENTS:  Report over foreign investment in the United States and references

The question is whether foreign investment in the United States is a cause for concern, or is it something to be welcomed.  Our answer to the question is that foreign investment in the United States is something to be welcomed.

Our major reason why foreign investment is something to be welcomed in the United States is because the benefits from foreign investment outweigh the costs.  The major costs and benefits are the following:

Benefits

Costs These benefits have more of an impact on the U.S. than the cost do.  This is why we believe that foreign investment in the United States is something to be welcomed and not a cause for concern.

Outline

Is foreign investment in the United States a cause for concern, or is it something to be welcomed?
I.What is the major industry that foreign investment is found in?

A. Auto manufactories

1.Honda, Nissan, Toyota, Daewoo, and Mitsubishi
II.Benefits:
A.Supplies jobs and lowers unemployment rate for several states

 1. Honda employees more than 120,000

 2. Toyota employees 27,246 thousand Americans

a.University of Michigan determined that for every direct manufacturing job Toyota creates, more than 5.5 spin-off jobs are created in related industries.
3.Nissan Motor company has supplied thousands jobs

B. Helps raise state’s revenues

1.East Liberty, Ohio accounts for a large part of the State’s income
2.Pittsburgh, Pennsylvania serves as the U.S. center for a number of foreign corporations, which in return helps raise the state revenues
3.Toyota’s presence has increased Kentucky’s state tax revenues by nearly $700 million

4.Tennessee’s state’s per capita income has grown from $3,000 in 1970 too more than $19,000 in 1995.This growth in Tennessee is from foreign companies, such as Bridgestone Tire and Rubber Company and Nissan Motors, establishing plants in the state

C. Reinvesting money back into the U.S. economy

1.“Honda purchased materials and parts from more than 445 suppliers in 36 states last year, which totaled $8.1 billion”
2.“Since Toyota opened business in 1957, nearly every dollar earned by the U.S. operations has been reinvested in the U.S.”
III.Cost

A.Competition foreign companies bring into the U.S.

B. Effect of Keiretsu

1.“Keiretsu is a Japanese term describing alliances or business groups that link together manufactures, suppliers, and finance companies with a common interests”
2.Mazda USA stopped buying from one of its suppliers, Tenneco, and began purchasing supplies from a keiretsu company that just opened up in the U.S.
3.States can also be hurt by keiretsu, such as Tennessee, that have Japanese companies as their largest percentage of foreign companies.

4.Japanese companies that are apart of keiretsu know that first come keiretsu companies, than Japanese companies, and finally local companies in that area when selecting a supplier for parts or materials

C. Different social views and political laws

1.An example of this was in 1990 when Mitsubishi had sexual harassment and discrimination claims against them from federal Equal Employment Opportunity Commission
IV.Conclusion
A.Foreign investment in the U.S. is not something to be a cause for concern for now, but something that should be welcomed

Foreign Investment in America

Foreign Investment in the United States is an important issue, but is it something to be concerned about or something to be welcomed?To decide whether it is a concern or something to be welcomed, we must analyze the benefits and the costs of foreign investment in the U.S. 

Auto manufactures are clearly the major industry for foreign investment in the U.S.There is Honda, Nissan, Toyota, and many other new foreign auto manufactures, such as Daewoo, that are setting up in the U.S.Although auto manufacturing has had the biggest impact, there are other foreign investments in the U.S., such as Sony and Bridgestone. Machinery and equipment, which includes auto manufacturing, composes the largest percentage in billion of dollars in the U.S. economy based on United Industrial development Organization.  This obviously has an impact on the economy.Evidently foreign investment does play a part in the U.S. economy, but what are some of the benefits and costs of having these foreign companies in the U.S?
There are some huge benefits that foreign investment has in the U.S.The first benefit of foreign investment is that it supplies jobs and helps lower the unemployment rates in several states.Nissan Motor company has built auto plants in Tennessee, which has helped supply thousands of Americans with jobs.Honda employs more than 120,000 and will add 1,500 jobs when the $440 million plant in Alabama opens. Then there is Toyota, which has increased employment every year in the U.S. since 1981 and now employees 27,246 Americans.There are jobs created not only from the foreign companies, but also from companies that supply materials to the foreign companies.An independent study, conducted by the University of Michigan, determined that for every direct manufacturing job Toyota creates, more than 5.5 spin-off jobs are created in related industries.To illustrate this, in 1999 Toyota spent more than $10 billion for parts and materials from one hundred of North American suppliers and business partners.In turn, Toyota’s purchases from these suppliers directly created more than 55,000 local jobs.Clearly, foreign companies create jobs for their benefit, but they also help produce jobs in related industries.
The second benefit is that foreign investment helps raise states’ revenues.Honda assembly plant in East Liberty, Ohio accounts for a large part of the state’s income. While Pittsburgh, Pennsylvania serves as the U.S. center for a number of foreign corporations, which in return helps raise the state’s revenues.Since 1986, when Toyota first began operations in Kentucky, Toyota’s presence has increased Kentucky’s state tax revenues by nearly $700 million.In addition, Toyota predicts figures to increase to $1.2 billion by the year 2002. Tennessee’s state’s per capita income has grown from $3,000 in 1970 to more than $19,000 in 1995.This growth in Tennessee is from foreign companies, such as Bridgestone Tire and Rubber Company and Nissan Motors, establishing plants in the state. Therefore, foreign companies are beneficial because they aid states in taxes and revenues. 
The third benefit is that foreign companies reinvest money back into the U.S. economy.This occurs in several ways.“Honda purchased materials and parts from more than 445 suppliers in 36 states last year, which totaled $8.1 billion”(Honda Web site, no date).Honda is a prime example of how foreign companies spread their earnings in the state they are located, but also throughout the U.S.Then there is Toyota who has reinvested $10.3 billion into the U.S. economy, which can be seen in the chart below.(http://toyota.com/times/tusa/atlas/cumulative.html)“Since Toyota opened business in 1987, nearly every dollar earned by the  U.S. operations have been reinvested in the U.S.”(Toyota web site, no date). There are other benefits, such as bringing a community together or bringing in other businesses to a city, but these benefits do not have as big as an impact as the ones previously discussed.This does not mean these benefits are not as important, but that they effect a smaller amount of people when compared to the three main benefits.
        Foreign investments in the U.S. have several benefits, but there are some costs as well.The first cost is the competition foreign companies bring into the U.S.Foreign companies can gain economic dominance.For example, Honda is one of America’s largest automakers and top sellers of motorcycles, ATVs, and power equipment.This demonstrates how Honda has gained a competitive advantage over smaller domestic auto manufactures because of Honda’s size and rapid growth in the U.S.Yet, foreign competition can also be advantageous for U.S. customers.Foreign competition can lower prices for a good or service because both domestic and foreign companies have to compete against one another to get the customer to buy their product.The second cost is the effect of Keiretsu.“Keiretsu is a Japanese term describing alliances or business groups that link together manufactures, suppliers, and finance companies with a common interests”(Schermerhorn, 2000, p.109).This practice by Japanese companies operating in the U.S. is viewed as an unfair competition. For example, Japanese companies operating in the U.S. buy from suppliers in the U.S., but those suppliers might be Japanese owned, therefore, no reinvesting occurs in the U.S.An example of this is when Mazda USA stopped buying from one of its suppliers, Tenneco, and began purchasing supplies from a keiretsu company that just opened up in the U.S.Japanese companies that are a part of keiretsu know that when selecting a supplier for parts or materials, first come keiretsu companies, then Japanese companies, and finally local companies in that area.This can hurt U.S. firms that are trying to do business with Japanese companies that are setup in the U.S.States can also be hurt by keiretsu, such as Tennessee, that have Japanese companies as their largest percentage of foreign companies.The chart below, done by Tennessee Department of Economic and Community Development, indicates how much Japanese companies are a part of Tennessee’s economy.(http://www.state.tn.us/ecd/idg_forinv.htm)
 The third cost is foreign companies having different social views and political laws.An example of this was in 1990 when Mitsubishi had sexual harassment and discrimination claims against them from the federal Equal Employment Opportunity Commission.Each country that comes into the U.S. will have different views on how the workplace should operate and some foreign companies might not treat each employee the same.This is just another cost that foreign investment may bring to the U.S. 
 After looking at the benefits and the costs that foreign investments bring to the U.S., it seems that the benefits outweigh and have a greater impact on the U.S. economy than the costs do. In conclusion, foreign investment in the U.S. is not a cause for concern, rather it should be welcomed.This is not to say that the costs are not a concern, but that the government, as well as each state, should keep a close watch on how foreigncompanies are operating.
References

  page Facts and figures of doing business in the United States. (No date). Honda’s Homepage.Retrieved September 18, 2000 from http:///honda.com.

           Johnson, Paul E. & Woloch, Nancy (2000).United States (History).Microsoft Encarta 2000 [CD-Rom].Redman, WA: Microsoft.

Schermerhorn, John R.(2000).Management (6th ed.)New York, New York: John Wiley and Sons Inc.

Facts and figures of doing business in the United States (No date). Toyota’s Homepage.Retrieved September 18, 2000 from http://www.Toyota.com

Watts, Micheal (2000).United States (Economy).Microsoft Encarta 2000 [CD-Rom].Redman, WA: Microsoft.