Foreign Investors Stoking Growth
By Kevin Flessner

Business investment in Tennessee increasingly is taking on a foreign accent.

Some of the state’s biggest business additions in the past couple of years have come from companies headquartered in Europe or Asia.

After landing the 1,500-employee North American headquarters for the Japanese-based Nissan Corp. in 2006 and a 350-employee expansion by the French-owned Alstom Power Co., last year, Tennessee economic recruiters are trying this year to lure an even bigger foreign prospect. The Volunteer State is competing against Alabama and Michigan to land the German-based Volkswagen for a new car assembly plant.

VW’s supervisory board is scheduled to decide Tuesday where to locate the proposed facility, which is expected to employ up to 2,000 workers.

Already, at least 112,298 Tennessee workers are employed by one of 694 foreign-based businesses operating in the Volunteer State, including 11,741 who work for German companies, according to the Tennessee Department of Economic and Community Development.

Nationwide, the Organization for International Investment estimates more than 5.1 million Americans are employed by U.S. subsidiaries of foreign companies.

“Given the state of our economy right now, anybody investing in the United States and creating jobs should be most welcome,” said Todd M. Malan, president of the Organization for International Investment, a trade group that promotes foreign investment and trade. “If you are on the unemployment line or looking for a better job in Tennessee, the prospect of Volkswagen building a new factory has got to be good news.”

Last year, Mr. Malan’s group estimates companies based in other countries announced 760 new projects or expansions in the United States, the highest level in at least five years. Spending to acquire or establish American businesses by foreign companies grew to $276.8 billion in 2007, or 67 percent more than in 2006, according to the Bureau of Economic Analysis.

Spurred by rising fuel costs and the falling value of the dollar, foreign investment in the United States could break a record this year, Mr. Malan said.

VW could be among the biggest such investments with its plans for a new car assembly plant in the United States to help meet its goal of quadrupling U.S. vehicle sales.

Tennessee has pitched the Enterprise South industrial park in Chattanooga for Volkswagen to build either an assembly plant or an engine plant. The automotive “megasite” proposed to VW was carved out of a former TNT production plant built by America’s military in World War II to fight the Germans.

Jim Frierson, a former chief of staff for the U.S. trade ambassador and previously chairman of Chattanooga’s World Trade Center, said Tennessee historically has been open to foreign investment and business. Indeed, the Scenic City was rebuilt in the 19th century after it was nearly destroyed during the Civil War, in part, by former Yankee soldiers whose families settled in the area and wanted to make Chattanooga the “Chicago of the South,” according to the Tennessee Encyclopedia of History and Culture.

“Chattanoogans recognize the value of business opportunities no matter where they come from,” Mr. Frierson said.

german and Japanese flavor

In Chattanooga, more than 2,000 workers are employed by businesses whose parent companies are based in Germany, including such major employers as BASF and T-Mobile.

City and county leaders in Chattanooga also have invested millions of dollars to prepare Enterprise South to lure VW, based in Wolfsburg, Germany, or other foreign-based automakers to the site.

Tennessee has been a national leader in recruitment of Japanese companies since Nissan was recruited to Smyrna 25 years ago, according to Dr. Steve Livingston, a political science professor at Middle Tennessee State University who publishes Global Commerce.

“Because of Nissan and Denso (which together have more than 10,000 workers in Tennessee), we have a bigger share of Japanese direct investment than most other states,” Dr. Livingston said. “But with the currency changes we’ve seen and the growing globalization of business, we’re likely to see more foreign investment from all over the world.”

What constitutes “foreign” or “domestic” is becoming blurred as international conglomerates and business markets cross national boundaries, Mr. Malan said.

“When IBM has 70,000 people in India and Thyssen Krupp is building a $3.7 billion steel plant in Mobile, Alabama, people are beginning to realize that it really doesn’t matter where the CEO lives,” he said. “This is not the Olympics and we shouldn’t try to put country flags on international businesses.”