THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, August 18, 1996 TAG: 9608170481
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MYLENE MANGALINDAN, STAFF WRITER
LENGTH: 126 lines
In a telling testimonial about the power of connections, executives of the Oji-Yuka Corp. were introduced to Hampton Roads through a relative - parent company Mitsubishi Chemical Corp.
Mitsubishi's American subsidiary in Chesapeake suggested that Oji-Yuka consider the region for a planned expansion. Mitsubishi executives like the Tidewater community and thought it might be a good fit for Oji-Yuka, as well.
What had been billed as merely a blind date eventually turned into a full-blown relationship as Oji-Yuka executives met Chesapeake city officials, toured the city and settled on a site for their U.S. synthetic paper manufacturing plant.
This courtship ritual isn't new. Hampton Roads has wooed foreign companies, particularly manufacturers, for years.
Since Canon Virginia Inc., Stihl Inc. and Sumitomo Machinery Corp. of America set up shop in Hampton Roads, other manufacturing companies with foreign-affiliations have followed and slowly carved a significant presence in this area.
Some perceive that foreign investment in manufacturing has leveled off a bit locally, while others claim the interest is still there - and growing. However, some local manufacturers say opportunities aren't as golden as they once were when foreign companies first populated Hampton Roads.
Still, the numbers for Virginia and the nation remain strong.
Last year's foreign-investment activity rocked the Old Dominion. Foreign manufacturers pledged a record $1.3 billion investment, thanks primarily to two computer chip plants planned by Motorola and IBM/Toshiba.
That's a huge leap from the $30 million foreigners invested in 1994 and the 10-year record low of $23 million in 1992.
As with investment dollars, foreign companies' segment of the state's manufacturing employees has crept up over the past couple of years. In 1991, foreign-affiliate manufacturers employed 11.7 percent of Virginia's manufacturing work force. That rose to 13 percent in 1994.
Foreign investment as a share of the nation's gross domestic product has been increasing in recent years, said William Zeile, an international economist at the Bureau of Economic Analysis.
Before the recession in the early '90s, a surge of foreign capital infused the U.S. economy. During both 1988 and 1989, foreign companies invested slightly more than $70 billion each year in the United States for new facilities or the acquisition of existing companies.
As the recession spread throughout the country and overseas economies faltered, that outlay plummeted to $15 billion in 1992. But it climbed again to $46 billion in 1994. Last year, foreign investment reached $54 billion, according to the Bureau of Economic Analysis.
About half of the production of foreign-owned businesses has been in the manufacturing sector, proving that the United States is still fertile ground, Zeile said.
Foreign investment in Hampton Roads seems to be on a similar track.
Total foreign-manufacturing investment, both new investment and expansions, dipped from the $95.6 million pledged in 1990 to $17 million in 1994, according to data from the Virginia Economic Development Partnership. It shot up again to more than $35 million in 1995.
Hampton Roads, however, continues to have lots of appeal to foreign companies.
Demand still rages for large tracts of land, a low-cost environment of doing business, cheap and skilled labor, central East Coast location, proximity to port and rail points of distribution, quality of life, and a low regulatory environment in the state.
``It's very active right now,'' said Ann Baldwin of Forward Hampton Roads, the economic development arm of the Hampton Roads Chamber of Commerce, who cited numerous visits or calls from prospective companies.
Many of those prospects echo Sumitomo President William Lechler, whose company has operated in the region since 1988.
``We wanted to find some place that had good export facilities,'' Lechler said. ``Sixty percent of our business was east of the Mississippi and between Maine and Florida. With Norfolk Southern, the port, the quality of life and the things that Virginia has to offer, we decided to come here.''
Both the region and the state have been good to the companies that have located here. Not only is the business environment conducive for growth, economic development agencies offer assistance such as the Opportunity Virginia program and other incentives. A state-backed program, Opportunity Virginia offers money to relocating companies or expanding businesses in Virginia to help them with work-force training, road or infrastructure costs.
Last September, Motorola announced a $3 billion chip-making plant scheduled to employ up to 5,000 people. In return, the state is providing a $19.9 million incentive package to the venture, which includes $1.4 million in job tax credits, $1.5 million in work-force training, $15 million in performance-based grants and a $2 million investment in higher education.
Closer to home, Gateway 2000, a North Dakota-based computer maker, received $1 million from Opportunity Virginia for its new computer assembly facility in Hampton.
Many existing companies have expanded, too. Some more than once. Sumitomo recently announced a $15 million expansion. Mitsubishi Chemical completed a $17 million toner plant addition to its Chesapeake operation. Allied Colloids Inc., a Suffolk-based manufacturer of water-soluble chemicals that just completed a $28 million expansion, plans to invest $106 million more.
While lauding the region for its many draws, however, some existing manufacturers here do not hesitate to point out its drawbacks.
Opportunities have diminished, they say.
The labor pool has started to tighten up, said one human-resources manager at a large firm.
Leitch Inc., a Canadian-affiliated company that makes television broadcasting equipment, Mitsubishi Chemical of America and others hired employees from the closing GE plant in Suffolk when they first entered the market in the early 1980s.
Opportunities to pick up clumps of skilled employees like that no longer exist. The labor market has reached a level where employers suspect they may see raids on competing companies. The region's unemployment rate of 4.7 percent has been bumping against record lows.
Another problem that looms is the question of significant regional cooperation and coordination.
``Too many organizations are trying to do good things,'' said Lynn Johnson, vice president of finance and administration at Siemens Automotive. ``We need to pull together and integrate, have one umbrella organization.''
That has started to happen with the formation of the Hampton Roads Partnership, a public-private organization forming a regional agenda. The partnership wants to achieve consensus among the area's various constituencies so they can focus on regional priorities like the port, privatization and economic development, instead of tackling problems as individual cities.
Such organizations are critical to the region's success.
``The area has an identity crisis,'' one area executive said. Cities participate in a ``turf battle'' by competing for prospective companies instead of offering a united regional front.
``Tax incentives are just taking from one pocket to another,'' another manufacturer said.
While local conditions are important to attracting new business, they carry less weight than global conditions or the relative value of the dollar at the time a foreign manufacturer wants to invest its money, many say.
``It's going to come down to financial risk, because it means investing money and there are stockholders that company is accountable to,'' said Siemens' Johnson. by CNB