New "Buy America" Policy

More and more Americans have a foreign boss in their future. Propelled by hopes of profit and fears of protectionism, foreign firms are swallowing up American companies or forming their own U.S. subsidiaries to produce goods as diverse as turbines and carpets, chocolate and steel. The tide of investment from overseas has been significantly quickened by the abysmal decline in U.S. stock prices, which enables dollar-laden European and Japanese businessmen to pick up U.S. concerns at bargain rates. Of the corporations buying into America, Frank Sheaffer, the Commerce Department's international investment chief, says: "It is never going to be cheaper for them than it is now."

At present, about 580 overseas firms have direct investments in the U.S. that, on the basis of their book value, total roughly $15 billion; measured by their real market value, the businesses are worth much more. These holdings are still relatively small compared to the $90 billion worth of American properties abroad, but the gap is slowly narrowing. Foreigners last year invested a record $1 billion in buying and building businesses in the U.S., and this year the country seems to have been turned into a giant supermarket, with foreign buyers rushing in to buy corporations off the shelves. Notes Investment Banker Raphael W. Hodgson, vice president of Goldman, Sachs: "Last month there were seven tender offers for U.S. companies from England alone, and there is no reason why there will not be seven more this month."

Brown & Williamson Tobacco, a subsidiary of British-American Tobacco Co., has all but wrapped up a deal to pay $200 million for Manhattan-based Gimbel Brothers, one of the nation's oldest department store chains. Lloyds Bank of London plans to take over Los Angeles' First Western Bank & Trust Co. for $115 million. A battle has erupted between Norwegian Shipping Magnate Hilmar Reksten and Britain's P & O Steam Navigation Co. over Texas-based Zapata Corp., a shipping, oil and real estate conglomerate. In the midst of P & O's negotiations to buy Zapata's shipping subsidiary, Reksten weighed in two weeks ago with an offer of $200 million for control of the entire company--and the fight was on.

Huge Market. Officials of Sweden's Volvo are scouting the Chesapeake Bay area for a site to build an auto assembly plant. Liquifin, an Italian holding company, has made an offer of $19 million for control of Ronson, the appliance producer. British Land Co. is negotiating a $153 million bid to take over Manhattan's Uris Buildings Corp.

Meanwhile, Japan's YKK Zipper Co. has almost completed a $15 million factory in Macon, Ga., and to give it a touch of home the company will fill the grounds with 2,000 cherry trees. Japanese Developer Tsuguto Kitano has bought Manhattan's Murray Hotel, renamed it after himself, and will open for business next month. Kikkoman Shoya Co. opened a $9,000,000 soy sauce plant last week in Walworth, Wis. Japan's widely diversified Mitsui has revised its former policy of seeking export markets in the U.S. and is now shopping for new American properties.

Foreigners often feel more optimistic about the U.S. economy than American businessmen do. The overseas investors are attracted by the U.S.'s huge market, its prospects for profit growth and--by their own standards--its moderate rate of inflation. Credit is easy for them to get because so many surplus dollars are sloshing around abroad. With greenbacks continuing to decline on money markets, foreign currency buys more investment dollars than in many decades. Europeans and Japanese are also opening up within the U.S. because they fear that rising protectionism among American labor leaders may lead to stern import barriers.

The foreign inflow has been generally well received by American businessmen, but hints of corporate xenophobia are cropping up. Last week U.S. steelmen, ignoring the enormous presence of American business round the world, began to grumble about the competition that they may face from an $18 million mini steel mill being built for a Japanese consortium in Auburn, N.Y. Yet the surge in direct foreign investment is a golden boon for the U.S. It will help offset the persistent deficit in the nation's balance of payments and provide new technology for the American economy. How do American workers shape up in the eyes of their foreign bosses? In a wry comment on Sony's plant in San Diego, President Akio Morita says: "Our American dealers questioned whether Sony products made in California would have the same quality as products made in Japan. Regardless of nationality, our workers must use our know-how with the same attention to quality as our Japanese workers do. I am convinced that the Americans are also people of tremendous capabilities."

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