For Sale: America
By Stephen Koepp
"Everything here is so cheap!"
-- A Japanese real estate agent visiting Manhattan
"The political issue of the 1990s is going to be the foreign invasion of the U.S."
-- Paul Krugman, M.I.T. economist
It was an unlikely stop for sightseers, but there they were: two carloads of serious-minded, dark-suited Japanese in a deserted parking lot in Chattanooga, Tenn. Each carrying a packed briefcase, the visitors gazed long and intently at the object of their interest: a rusted, run-down manufacturing plant as big as five football fields. The plant was obsolete and abandoned, but the Japanese were delighted by their discovery. Taking pains to conceal their satisfaction, they peered into the distance and busily scribbled in their notebooks. Later, after several trips back, they bought the forlorn plant. Today, after a $27 million investment, the refurbished factory has become a manufacturer of heavy earth-moving equipment for Japan's huge Komatsu conglomerate.
Such scenes are taking place all over America today, as other foreign scouting parties comb the highways and byways on the lookout for profitable finds. The searchers are Japanese and British, Canadian and South Korean, West German and Swiss, and all of them have one thought in mind: Buy! Buy! Buy! They are in search not only of factories but also of skyscrapers, shopping malls, farms and forest land, ski resorts and vineyards, refineries and mineral deposits. They have already bought some of the biggest and best-known corporations in the U.S., and their appetite appears to be gargantuan.
Suddenly, the U.S. seems to have become a country for sale, a huge shopping mart in which foreigners are energetically filling up their carts. Result: foreign ownership in the U.S., including everything from real estate to securities, rose to a remarkable $1.33 trillion in 1986, up 25% from the previous year. By contrast, in a complete reversal of the situation only a decade ago, U.S. holdings abroad now total only $1.07 trillion. In addition to spurring fabulous hikes in real estate values and igniting corporate takeovers, the wave of foreign purchases has become an important force behind Wall Street's stratospheric bull market.
Never before have U.S. citizens witnessed so many familiar American landmarks and trademarks passing into foreign hands. Japanese investors last December bought the Exxon headquarters building in Manhattan's Rockefeller Center for $610 million, the highest price ever paid for a Manhattan skyscraper. The British, who burned Washington in 1814, have now built or bought an estimated $1 billion in District of Columbia property, including part ownership of the famed Watergate complex. Esteemed U.S. corporate nameplates are also changing citizenship at a rapid clip. Doubleday books has gone to the West Germans, Brooks Brothers clothiers to the Canadians, Smith + & Wesson handguns to the British, Chesebrough-Pond's consumer products to a Dutch-British combine. General Electric television sets have been bought by the French, Carnation foods by the Swiss, General tires by the West Germans.
In fact, the question of what constitutes a truly American icon has become befuddling. A Sohio gasoline station? British Petroleum owns that company now. An Allis-Chalmers farm tractor? The West Germans manufacture those. Ball Park franks are owned by a British conglomerate; so is French's mustard. The take from Las Vegas' Dunes Hotel and Country Club, one of the best-known American gambling and entertainment centers, will soon go to its new Japanese owner. The latest hit recording by Country Singer Kenny Rogers is a foreign-owned product; his record label, RCA, is now West German property. And what about breakfast (or a diamond ring) at Tiffany, or drinks in the literarefied atmosphere of Manhattan's Algonquin hotel? Those vintage landmark buildings are now Japanese possessions.
The foreign buying spree has inevitably become controversial. How does foreign investment affect America's industrial strength and ability to compete? Just how much overseas investment is good for the country, and how much of America should foreigners be allowed to buy? What other kinds of control might follow? What will happen if nothing is done to stem the buying tide? Warns Lawrence Brainard, chief international economist for Manhattan's Bankers Trust: "By the end of this century, the U.S. may have the most modern manufacturing sector in the world, but it won't own it." Says Democratic Representative John Bryant of Texas: "America has been selling off its family jewels to pay for a night on the town, and we don't know enough about the proud new owners."
The proud new owners know a good thing when they see it, and the reasons for their rush to buy are abundantly clear. To start with, U.S. properties are going for unprecedentedly low prices because of the fall of the dollar. The U.S. currency has plunged some 40% in value during the past two years against such major foreign currencies as the Japanese yen, the West German mark and the British pound. The result is that while prices of real estate and commercial properties may seem high to most Americans, everything with a dollar-denominated price tag looks like a tremendous steal to holders of other, stronger currencies.
At the same time, America's industrial rivals are flush with cash, either ! their own savings or the billions of dollars that import-hungry U.S. consumers have been spending on Japanese video gear, South Korean appliances and West German autos. Those wealthy nations are eager to use this money to tap the $1.3 trillion U.S. marketplace, where immense diversity and opportunity act as both a model and a magnet for the rest of the world. In addition, foreigners are eager to gain access to the advanced fruits of American research and technology, as well as to enjoy the benefits of U.S. rates of corporate taxation, which are appreciably lower than elsewhere.
Buyers from overseas are especially attracted by American political stability, which is particularly alluring to those with long-term investment prospects in mind. And foreign investors continue to be impressed by the wide- open nature of the American economy and the freedom of its capital and equity markets. Says a Japanese banker in Tokyo: "We are amazed at the way Americans are willing to sell out their companies. In Japan, owners of companies hold on for life."
The foreign shopping bender signals a major transformation in America's global economic role. For nearly four decades following World War II, the U.S. did the buying, savoring its role as the globe's foremost exporter of capital. U.S. investment power was so great that in 1968 French Economics Journalist Jean-Jacques Servan-Schreiber predicted that American multinational companies like IBM and ITT threatened to turn Western Europe into an economic province. Concern about foreign cash flowing into the U.S. arose briefly in the 1970s, when a weak U.S. dollar and the emerging clout of OPEC prompted fear of an Arab buying spree. By and large, however, the cautious oil sheiks steered their petrodollars into bank accounts and securities portfolios rather than toward the bricks and mortar of U.S. real estate and corporations.
But after years of mammoth U.S. budget and foreign-trade deficits, the situation today is radically different. The buying of America has virtually turned into an industry of its own, with sharp-eyed advance crews scouting out the country's most attractively undervalued treasures, researchers typing up thick intelligence reports on U.S. acquisition targets, finance teams huddling with investment bankers in Tokyo, London and elsewhere, and blue-chip law firms constantly at work drafting reams of tender offers, prospectuses and sale documents.
Foreign bargain hunters often pour enormous effort into their shopping. Michael Dornemann, a director of West Germany's Bertelsmann communications giant, flew to the U.S. more than 50 times over the past three years while deciding how his company should spend its $1 billion American shopping budget. Often taking the morning Concorde from Paris in order to put in a full day's work in the states, Dornemann visited more than 20 U.S. companies before choosing his recommended targets: Doubleday publishing and RCA records. The possibility of snagging both was considered so unlikely that he and his boss, Bertelsmann Head Mark Wossner, 48, had called it their "extreme case."
Nonetheless, they turned all their persuasive powers on Publisher Nelson Doubleday and GE Chairman John Welch, offering them hefty prices and even giving the GE boss a lecture on corporate strategy. (Says Wossner: "We told him that music was too far away from electric motors and rockets.") Then Wossner tried another tack. In separate meetings one day last September, he recalls, he gave each American executive the impression that the West Germans could afford to buy only one of the two companies. "Either you sell to us, or we'll go to the others," warned Wossner. By the end of that day, the Germans had won both prizes. Total price for the double-barreled victory: $805 million.
Foreign shopping fever reaches even into the country's remote fastnesses. When the brash British raider Sir James Goldsmith calculated that U.S. timberland was becoming a tempting prize, he launched a $500 million takeover bid at San Francisco's Crown Zellerbach paper company in order to grab the corporation's vast forests. As a result of the 1985 takeover, Goldsmith now owns 1.9 million acres of American forests in Washington State and Oregon.
Equally sharp-eyed Canadian mining companies have snapped up the rights to some 40% of the new gold-digging projects in Montana, Nevada and other Western states. In Northern California, foreign investors have picked up more than two dozen of the region's 300 wineries, among them the Almaden label (now British) and the St. Clement Vineyard (Japanese). In Alaska, Japanese investors control more than one-third of the state's $680 million seafood-packing industry. U.S. farmland might be a bigger target for raiders, except that more than two dozen states have imposed controls or bans on foreign ownership.
Despite the shopping spree, however, the value of U.S. property under foreign control is still only a tiny fraction of America's immense total. (The & estimated value of all U.S. residential dwellings alone comes to some $6 trillion.) But foreign holdings have grown surprisingly large in many lucrative, and occasionally sensitive, spots. Foreign investors now own 46% of the commercial real estate in downtown Los Angeles, for example, according to a survey by the Coldwell Banker Real Estate Group. In downtown Houston, the foreign-owned tally is 39%; in Minneapolis 32%; and in Manhattan 21%.
With so much overseas demand for high-profile U.S. commercial property, competing foreign bidders practically bump into one another at airports. To increase their already considerable bargaining power, many would-be buyers go to striking lengths to conceal their ultimate intentions. The Japanese Komatsu executives who went shopping in Tennessee for a factory kept their state government hosts completely in the dark about what they actually wanted. After a tour of the 1940s-era structure that eventually housed their heavy-equipment concern, the Japanese pronounced it "very dull and scary, very gloomy," recalls John Gregory, a Tennessee official who escorted the group. When the Komatsu executives suddenly announced that they were buying the abandoned plant, says Gregory, "it kind of threw us for a loop."
Japanese businessmen are throwing the U.S. for a loop in a number of ways. Japan, the world's largest creditor country, where consumers save 17% of their earnings (vs. 4% in the U.S.), has the mightiest bankroll of all to engage in buying America. Bereft of enough investment opportunities at home to absorb their astonishing pile of savings, the Japanese are hungrily looking abroad for places to park the excess cash. Japan's direct investments in U.S. real estate and corporations reached $23.4 billion at the end of 1986, a jump of about 18% from the previous year. Predicts Amir Mahini, director of international business research for the McKinsey consulting firm: "In the next two or three years, Japanese investments here will build up very rapidly. It's going to become a torrent."
In particular, the Japanese are taking America's skylines by storm. They have invested an estimated $7 billion ($5.5 billion last year alone) in office towers and other buildings. Oil-company headquarters are a favorite: Hiro Real Estate last month paid $250 million for Mobil Oil's 42-story Manhattan headquarters tower. An older landmark, Fifth Avenue's Tiffany building, was sold last November to Dai-ichi America Real Estate for $94 million. Where landmarks are not available, seascapes will do: in Hawaii, Japanese investors own more than half of the twelve major hotels along Waikiki Beach.
American real estate agents love the trend: by some estimates, the Japanese have single-handedly boosted the selling prices of prime Manhattan real estate 10% to 15%, to roughly $500 per sq. ft. Those prices are still a bargain compared with costs in Tokyo, where office towers sell for an astronomical $20,000 or more per sq. ft. -- on those rare occasions when anything comes up for sale. Says Shigeru Kobayashi, owner of Japan's multibillion-dollar Shuwa real estate empire: "Bond buyers are holding paper, but I have buildings and land. That's the future." Kobayashi's son Takashi, head of the family firm's U.S. subsidiary, controls 26 U.S. buildings worth some $2 billion. Among them: the ARCO Plaza in Los Angeles (bought for $620 million last September) and the ABC network headquarters in Manhattan ($175 million in October). Says the senior Kobayashi: "America is where greatness is."
Japanese bargain shoppers increasingly covet neglected American gambling casinos. Last April, Ginji Yasuda, a Korean-born Japanese, reopened the 1,100- room Aladdin Hotel in Las Vegas after buying the ailing complex for $54 million and spending $30 million more to restore its glitzy decor. He plans to shuttle customers from Japan in a posh jet equipped with sleeping cabins. Says Yasuda: "You have a lot of dreams still available in this country that you don't have in Japan."
Tokyo Billionaire Masao Nangaku, 68, had an expensive fantasy last month, when he outbid five U.S. companies for Las Vegas' struggling Dunes Hotel. The winning price: $157.7 million. Nangaku plans to virtually double the size of the hotel, to 2,200 rooms. Nangaku says he has wanted to buy a casino in Las Vegas for years. Backed by a vast recreation empire (bowling alleys, golf courses, hotels), he apparently had little trouble lining up the financing for the Dunes purchase through his Tokyo bankers. Boasts an aide: "Our assets are worth far more than the price of a Las Vegas hotel."
One corporate arena in which Japan's huge bankroll is prompting intense jitters is the U.S. financial-services industry. Tokyo's largest banks and investment firms, which already eclipse American companies like Citicorp (assets: $196 billion) and Merrill Lynch ($53 billion), openly aim to grab a large share of the U.S. financial marketplace. They have established a major beachhead in California, where four of the top ten banks are now Japanese owned: California First Bank, Sanwa Bank, Bank of California and Sumitomo Bank of California. On Wall Street, Japan's Sumitomo Bank shelled out $500 million for a 12.5% share of profits in the Goldman, Sachs investment-banking firm, while Nippon Life Insurance paid $538 million for a 13% slice of Shearson Lehman.
The Japanese have largely shied away from takeovers of major U.S. industrial corporations, at least partly in fear of a public relations backlash. "We are worried about investment friction now. It may get serious," says Hiroki Sakamoto, a senior official of the Japan External Trade Organization. But last month Dainippon Ink & Chemicals won a long and bitter battle to take over New York's Reichhold Chemicals, a maker of specialty polymers. The price: $540 million.
The least inhibited foreign bidders for U.S. corporate control these days are often the British. They have committed more than $22 billion so far this year to U.S. takeovers, successful or pending, in contrast to some $14 billion for all of 1986. The British invasion "is going this year at a frightening pace," observes Philip Healey, publisher of Acquisitions Monthly, a British trade journal. "Buying an American company is very much a vogue thing."
Many British raiders have shown remarkable pluck, taking on American companies many times their size. WPP Group, an upstart London advertising firm, bid $566 million in June to acquire JWT Group, the parent of Madison Avenue's lordly J. Walter Thompson agency. Last month another relatively small London outfit, the Blue Arrow employment-services agency, successfully bid $1.3 billion to take over Milwaukee-based Manpower, the largest American temporary-labor placement firm.
Perhaps the most successful British buccaneer in America is the canny, soft- spoken Sir Gordon White, 64, chairman of Hanson Industries, the U.S. investing arm of London's Hanson Trust conglomerate. Hanson employs more than 35,000 workers in the eight U.S. firms it has acquired since 1973. Among the prizes: SCM, manufacturer of Smith-Corona typewriters, and Endicott Johnson, the shoe retailer. White's current target is Kidde, a maker of products ranging from Farberware kitchen utensils to Jacuzzi Whirlpool Baths. Hanson has made an offer for Kidde, and a successful deal would double the firm's U.S. employment roster. So far White has spent $2 billion on his acquisitions.
The Dutch come right behind the British in their direct investments in U.S. companies. The Dutch-British Unilever consumer-products combine spent $3.1 billion last February alone to acquire Connecticut-based Chesebrough-Pond's. The deal gave Unilever ownership of such American brand names as Ragu spaghetti sauce, Prince tennis rackets and Vaseline petroleum jelly, along with Q-Tips and Pond's cold cream. Last week the Dutch electronics giant Philips struck a deal to swallow its North American subsidiary for more than $600 million, a move that will give the European conglomerate all rights to several famous American brand names: Norelco, Magnavox and Philco.
Canada has the highest levels of foreign, chiefly U.S., ownership of domestic enterprises of any major industrial country. Now the Great White North is striking back. Canadian direct investment in the U.S. has jumped from $12.1 billion to $18.3 billion in the past six years, with much of the increase in real estate and retailing. Last fall Ottawa-based Tycoon Robert Campeau swooped down on New York City to make a $3.5 billion buyout raid on Allied Stores, a 690-store retail chain with holdings that include Brooks Brothers and five major U.S. shopping centers.
West Germany, awash in boodle from selling U.S. customers everything from beer to BMWs, has taken aim at heavier industry. The huge Hoechst chemical firm last March paid $2.8 billion to acquire Celanese, the U.S. fibers firm best known for its Fortrel polyester. For its part, France's Thomson electronics company forged a deal in July to buy GE's consumer-electronics arm in exchange for an estimated $800 million cash and title to the French company's medical-equipment division. That arrangement left Zenith as the last sizable American firm to manufacture TV sets in the U.S.
Even the remote Australians have got into the corporate-takeover act. Investor George Herscu, a real estate magnate, is constructing $1.2 billion worth of supermalls to add to the $500 million string of shopping centers he has accumulated in Ohio, Florida, Colorado and South Carolina. Herscu also spent $100 million to buy Bonwit Teller, the fashion retailing chain, which he aims to double in size. In a widely publicized purchase this year, Natural Resources Magnate Robert Holmes a Court spent $1 billion to buy 9.5% of Texaco. Last month Australian Investor Alan Bond offered $500 million for the St. Joe Gold mineral corporation of Clayton, Mo.
For many parts of America, a megadose of foreign investment is a welcome tonic. In small towns or rusted industrial cities that have been unable to attract American capital, foreign money is virtually the only means to create new jobs (see box). Nearly three years ago, local boosters in Winslow, Ariz. (pop. 8,900), induced a Korean company, Young An Headwear, to buy a long- dormant underwear-manufacturing plant on nearby Hopi Indian reservation land. The refurbished factory has since provided 80 new jobs and produces $2 million worth of sport caps annually. In Fontana, Calif., a joint venture of Brazil's Rio Doce Geologia & Mineraco mining company and Japan's Kawasaki Steel reopened a foundry that was shut down in 1983. It now produces 1 million tons of steel a year and employs 800 workers. Says Kenneth Gibson, director of the California commerce department: "You wouldn't have a steel industry in this state if it were not for foreign investments."
Where U.S. businesses are merely dying rather than dead, foreign buyers flush with cash and enthusiasm can sometimes cause a dramatic turnaround. Canada's Cineplex Odeon theater chain, for example, has bought and spruced up more than 300 mostly decrepit U.S. movie theaters, at a cost of roughly $475 million. The Toronto-based company revives business by boosting the quality of feature presentations and perking up the housekeeping, the acoustics and even the quality of the popcorn.
One of the most dramatic cases of a foreign-assisted turnaround involves the Great Atlantic & Pacific Tea company, parent of A&P. The supermarket chain was ailing badly when West Germany's Tengelmann Group took over in 1980, after anteing up $100 million for control of Great Atlantic. A&P's foreign owners installed a new top manager and restored the company's reputation within three years, first by selling 600 unprofitable stores out of a total of 1,600, then by patiently plowing profits back into the remainder.
Even when U.S. managers are performing well, a foreign takeover can introduce new kinds of dynamism. In the case of last March's Hoechst-Celanese merger, for example, the West German company brought to the union an acknowledged excellence in pure research. The U.S. firm is expected to contribute American know-how in bringing new laboratory discoveries quickly to the marketplace. Moreover, the West German company expects the American addition to help loosen up the regimented corporate culture of its parent, where Hoechst engineers stiffly address one another as "Herr Doktor."
But along with opportunity, foreign owners have stirred plenty of fear. Some Americans react sharply to foreign overtures and invoke apocalyptic visions of the unwanted influence that outsiders may wield. Last May William Jovanovich, chairman of the Florida-based publishing firm of Harcourt Brace Jovanovich, made unabashed appeals to antiforeign sentiment while fending off British Press Lord Robert Maxwell's $1.7 billion takeover bid. Among other things, Jovanovich asserted that a foreigner would be unfit to publish books for American schoolchildren. That conveniently overlooked the dominant role of American publishers, Jovanovich's firm included, in Canada, where 59% of school textbooks are produced by foreign-owned companies.
The buyout binge has stirred bitter debate over fundamental issues. The biggest is jobs: Will the foreign investment wave bring more of them or wash them away? Some U.S. groups argue that overseas companies often come out second best to native ones in generating new employment. A 1986 study by the United Auto Workers contends that foreign auto-assembly plants in the U.S. eliminate three jobs for every one they create, since the facilities import so many of their components from abroad. The study implies that foreign-owned plants often fail to spread job opportunities beyond their factory gates.
Nor is foreign ownership always a guarantee of innovative management. Last month Robert Harp, founder of the California-based personal-computer maker Cordata Technologies, quit his chairmanship of the company after a quarrel with Daewoo, the South Korean industrial giant that spent $2.5 million in 1985 to buy 70% of Cordata's stock. The once profitable American firm lost $20 million last year, claims Harp. He blames that on the Korean parent's overpricing of Cordata products and on its slowness in making decisions.
Another frequently voiced concern is that foreign owners will monopolize a particular American industry, driving out U.S. capacity and somehow gaining the capability to extract exorbitant profits or disrupt the economy. One business that draws attention is cement. The biggest player in that industry, which is more than 50% foreign owned, is Switzerland's Holderbank, a financial concern that has bought two American cement companies (Dundee Cement and Ideal Basic Industries). Holderbank wants to combine the two with a Canadian company, St. Lawrence Cement, to form North America's largest firm.
The fact is that U.S. antitrust law, however leniently enforced under the probusiness Reagan Administration, can prevent any foreign monopoly abuse. Indeed, antimonopoly laws are liable to be used more readily against foreign companies than domestic ones. The U.S. already has laws that restrict foreign ownership in any industries that the Federal Government deems essential or sensitive. Among them: telecommunications, shipping, aviation and any form of defense production that requires a U.S. security clearance.
The Reagan Administration tried to draw a new line last March, when it stunned the Japanese electronics giant Fujitsu by blocking a reported bid of $225 million for money-losing Fairchild Semiconductor, a maker of computer microchips. Washington cited national security concerns for the ban -- even though Fairchild was already owned by a foreign firm, the French oilfield- services company Schlumberger. (Last week Fairchild finally found a U.S. purchaser when a neighbor in Silicon Valley, National Semiconductor, bought the company for a meager $122 million.) The noisy Fujitsu episode may have proved a costly one for the U.S., according to Federal Reserve Chairman Alan Greenspan. The U.S. central banker told the Wall Street Journal that the incident rattled foreign investors, who reacted by cutting back their holdings of U.S. dollars. That sent the value of the greenback plunging. For a brief time, domestic interest rates moved sharply upward in a bid to force the dollar's value up again.
Even without further moments of monetary turbulence, the U.S. Congress seems bound to look more closely at the foreign buyout wave as it continues to swell. Some Washington legislators argue that the U.S. should at least develop a more vigilant system to monitor foreign inroads. The trade bill that passed the House in April includes a provision that would require foreign investors to report to the Commerce Department any interests of 5% or more in U.S. corporations or real estate. But many foreign investors oppose such scrutiny as trade harassment and a possible first step toward expropriation of their assets. Says a senior Administration official: "An investor might think that these requirements mean the U.S. Government will be coming after him." The Senate has passed a scrutineering provision in its version of the trade bill, but the White House is trying to scale back the dual proposals.
Indeed, most economists and politicians appear to come down against any major interference with the investment spree. Writing in the Washington Post last week, Economists Martin and Kathleen Feldstein (he is the former chairman of the President's Council of Economic Advisers) flatly stated, "The occasional rumblings about restricting foreign investment, such as the idea of requiring official registration, should be resisted by legislators and advisers to presidential candidates alike."
In the view of Hawaii Governor John Waihee, "It's not the origin of an investment dollar that makes it good or bad, but how it is invested." Takeovers that encourage U.S. competitiveness and efficiency and refurbish aging plants and equipment, in other words, are usually good, whoever spends the money. Likewise, the money that foreign companies invest in America is usually more important than the ultimate destination of any future profits. "To a worker in Chicago, does it make any difference whether the dividends go to New York or Tokyo? No," says Economist Edward Bernstein, a guest scholar at the Brookings Institution.
Economic experts in other countries, notably Canada and Britain, wryly point out that they have faced similar and even proportionately larger tides of foreign investment without losing control of their national destiny. Says Economist Alan Rugman of the C.D. Howe Institute, a leading Canadian think tank: "We in Canada have much more foreign ownership than the U.S. will ever have, and we're one of the wealthiest countries in the world as a result." Even so, Canada has suffered through prolonged bouts of unhappiness concerning foreign influence within its $379.3 billion economy and has occasionally lashed back at foreign investors, at substantial cost.
Amid the growing U.S. hubbub about acquisitive foreigners, a fact worth remembering is the importance of America's own trillion-dollar foreign holdings abroad. Any crimping of foreign investment in the U.S. would invite similar measures against American investors elsewhere -- the equivalent, that is, of trade protectionism. Ironically enough, overseas worries about rising American protectionism toward imports is a prime reason for many foreign manufacturers' desire to buy physically into the U.S. market.
The U.S. economy has long based its prosperity in large part on the free flow of capital across international borders. In the mid-19th century, European investments helped finance the building of America's railroads, essential for opening up the West. Later, Europeans put their money into American ranching, farming and mining. After the turn of the century, foreigners helped buttress one of the most powerful companies of the era, U.S. Steel, by buying up fully 25% of its equity.
The current crush of foreign buyers offers more opportunities than threats -- and, in any event, the $4.5 trillion U.S. economy's best insulation against invasion remains its sheer size. Says Theodore Moran, a professor of international business diplomacy at Georgetown University: "We are not going to have our economy taken over by foreigners unless it continues to decline for 50 or 60 years." That holds true even though a couple of Asian shoppers, South Korea and Taiwan, have barely begun to make strides in the U.S. buyout market. Yet as foreigners continue to rush in, new American properties are constantly being built to balance the outside purchases. In real estate alone, the U.S. annually constructs some $30 billion worth of shopping malls, $10 billion worth of factories and $6 billion worth of hotels.
A more important reaction to the foreign buyathon would be for Americans to adopt healthier economic habits. Those especially include a concentration on selling more exports and a curbing of the appetite for foreign goods, particularly luxury consumer items. Even there, the current bargain-basement sale of U.S. assets may eventually prove to be of some help. Quick to recognize the export advantages of the weak U.S. dollar, for example, the new management at Hoechst Celanese has already decided to move some chemical production from West German factories to American ones. At the same time, new managers like Sir Gordon White are giving their American troops a pep talk. Says he: "In the U.S., you haven't got the drive to export. It's often very difficult to convince managers in companies we've bought that they should flog their products in Britain. They say, 'Why go to all of that trouble when I can sell in the U.S.?' "
White would be only too happy to discover more American corporations that need to be taken over and set straight. Says he: "I do keep a close check on many U.S. companies. We could still launch another bid of more than $10 billion in the U.S." White's bankroll is seemingly inexhaustible -- but then, so are the exciting economic opportunities of America itself. With all those tempting troves of undervalued wealth in view, it is small wonder that Sir Gordon and his many foreign imitators still want to buy, buy, buy.
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CREDIT: TIME Chart by Cynthia Davis
CAPTION: LOADING UP
Foreign direct investment in the U.S. in billions of dollars
DESCRIPTION: Foreign investment in 1980 & 1986 by Switzerland, West Germany, Canada, Japan, Netherlands, Britain.
With reporting by Scott Brown/Los Angeles, Richard Hornik/Washington and Frederick Ungeheuer/New York