By Mark Schmit, National Accounts Manager, National Institute of Standards and Technology, Hollings Manufacturing Extension Partnership
The United States is an attractive destination for foreign investment dollars for a variety of reasons, including a large economy with diverse consumer markets, a skilled labor force (thanks to community colleges with skill-development missions as well as research universities) and a predictable and stable regulatory system. These reasons and more explain why the U.S. has been the worldâ€™s largest recipient of foreign direct investment (FDI) since 2006 according to an October 2013 White House report, Foreign Direct Investment in the U.S.
Working for NISTâ€™s Hollings Manufacturing Extension Partnership (MEP), I wasnâ€™t surprised to learn that the manufacturing industry is the largest beneficiary of FDI in the United States, accounting for more than one-third of that investment, according to data from the Commerce Departmentâ€™s Bureau of Economic Analysis. â€śMade in Americaâ€ť is, after all, a de facto stamp of approval the world over. We are a manufacturerâ€™s dream!
And investments in manufacturing have powerful multiplier effects on the U.S. economy. Every $1 spent in manufacturing generates $1.35 in additional economic activity. Since 1988, MEP has been committed to strengthening U.S. manufacturing and individual manufacturers, contributing to the growth of well-paying jobs, the development of dynamic manufacturing communities, and the enhancement of American innovation and global competitiveness.
MEP delivers its own high return on investment to taxpayers. For every dollar of federal investment, MEP clients generate nearly $19 in new sales, which translates into $2.5 billion annually. Last year, MEP centers served more than 30,000 manufacturing clientsâ€”a subset of which are foreign-owned. For example, since 2012, MEP centers worked on 900 projects with 322 manufacturers in the U.S. that have ownership ties to other countries. These projects helped those companies create and retain more than $700 million dollars in sales, save about $77 million and create or retain more than 6,000 U.S. jobs.
Looking beyond the statistics, we find many interesting success stories that illustrate how MEP centers across the country help make the most of foreign investment in U.S. manufacturing.
- Pasta Montana is a contract manufacturer that uses durum semolina to craft specialty pasta. About 40 percent of the 100-employee, 24-7 operationâ€™s business goes to the Japanese market, and it sells to other countries as well. When a key customer asked the company to certify its products to the Global Food Safety Initiative (GFSI), Pasta Montana called Montana MEP affiliate MMEC to help prepare for the GFSI auditâ€”which they did in less than four months. The successful effort helped the company retain millions of dollars in sales (about 15 percent of its business), and achieve 3 to 5 percent growth through new business opportunities.
- Eagle Bend Manufacturing, Inc., manufactures automotive parts for cars and light weight trucks worldwide. A division of Magna International, Inc., of Canada, Eagle Bend has been in Clinton, Tenn., for more than 25 years and employs more than 450 workers. When the increasing number and volume of parts the company made started to create inefficiencies, Eagle Bend turned to Tennessee MEP for help optimizing both its product flow and use of space. This resulted in projected benefits that will top $2 million annually and a $64 million dollar facility expansion that will create 188 jobs over the next five years and add 100,000 square feet of floor space.
- With more than a century of design and manufacturing experience, RECARO Aircraft Seating Americas Inc. is a global supplier of premium aircraft seats for leading airlines around the world. Based in SchwĂ¤bisch Hall, Germany, the company employs more than 1,600 worldwide including 350 at its facility in Fort Worth, Tex. To meet growing demand, the company partnered with TMAC, the Texas MEP affiliate, on a series of operational excellence initiatives. As a result of that investment, RECARE has seen a 15 percent increase in production, 38 percent increase in on-time delivery, and an 86 percent improvement in the time needed to retrieve parts.
- Igus Bearings, Inc., is a global company with headquarters in Germany and a new, 162,000- square-foot factory and office facility in East Providence, R.I. Igus has served the North American market for almost 30 years, making polymer bearings and chains that are sold across many industries, including agriculture, construction and automotive. The economic downturn of 2008 changed business operations for Igus, as smaller orders replaced the large orders it was efficiently fulfilling. The ability to handle any order of any size was key to survival against larger (but slower) competitors. Providence-based Polaris MEP helped Igus implement lean practices, leading to 50 percent fewer customer complaints and faster shipping timesâ€”96 percent of orders now ship within 24 hours.
We should see even more of these success stories thanks to high investor confidence in the strength of the U.S. economic recovery. For the second year in a row, the U.S. topped A.T. Kearneyâ€™s 2014 Foreign Direct Investment Confidence Index, a survey of 300 companies worldwide. The U.S. is not only the most likely destination for FDI, but never in the 16-year history of this index has a country had such a positive net position. Foreign investment is clearly good for foreign investors, U.S. manufacturers and the communities they support.