Companies find U.S. an attractive location



By Jim Landers

WASHINGTON – Many U.S. corporations prowl the world for business and make good money doing it. Texas Instruments last year got 85 percent of its revenue from abroad. Exxon Mobil takes in 60 percent to 70 percent of its earnings from overseas.

Three years ago, Congress tried to lure some of that money home by giving companies a one-time corporate income tax break on foreign earnings reinvested in the United States. Instead of paying income tax of 35 percent, the repatriated earnings brought home under the American Jobs Creation Act faced only a 5.25 percent income tax.

Dell took advantage of the law to put $120 million of its foreign earnings into a North Carolina computer plant that opened in October 2005. Texas Instruments made use of the tax break to bring home $1.29 billion in 2005, with much of that reinvested in semiconductor plants in Richardson and Dallas.

But you don't need a congressional windfall to build a U.S. factory. Korean chipmaker Samsung Electronics spent $3.5 billion on a project in Austin that opened this year.

Todd Malan is president of the Washington-based Organization for International Investment, a trade association for foreign companies doing business in the United States He says lots of U.S. and foreign companies are finding the United States an attractive manufacturing platform – a role more commonly associated these days with China.

"I just got back from the groundbreaking ceremonies in Alabama for a new $3.7 billion steel plant that will create 2,700 jobs," he said, referring to a new project north of Mobile by German steel maker ThyssenKrupp AG.

When foreign companies build U.S. factories, the usual assumption is that they come for market access. When a U.S. firm says it's building a plant at home, the assumption is that governments showered it with tax breaks, free land or other incentives.

These are no longer the deciding factors. Texas Instruments has said state funds boosting engineering and research at the University of Texas at Dallas helped seal the deal for the Richardson plant because the $50 million for the university would support a stronger local employment base.

Mr. Malan said ThyssenKrupp, Samsung and a raft of European companies interested in alternative energy are choosing to build in the United States for similar reasons.

"A greenfields steel plant in the United States really runs counter to the conventional negative wisdom," he said. "But the thing we hear day in, day out from our investors is they build here because of the quality of the workforce, the quality and flexibility of the workforce."

Not every company is swayed by this local strength. Hershey Foods is eliminating 900 chocolate manufacturing jobs from its Pennsylvania namesake town (3,000 nationwide) in order to build a factory in Monterrey, Mexico, where the company says labor costs are 10 percent less.

Nearly all the news of manufacturing jobs over the last 25 years has run in a similar direction – cheaper labor abroad, so, "Goodbye, America."

You could argue that ThyssenKrupp or another European company like EDP-Energias de Portugal SA, which last summer bought Horizon Wind Energy LLC of Houston for $2.15 billion, were lured here by foreign exchange fluctuations. The dollar, once a stronger currency than the euro, now stands in its shadow. Today, one euro is worth just shy of $1.45. A weak dollar means it is more profitable for a European company to make things in America than in Europe, especially things for the U.S. market.

Mr. Malan says this, too, is conventional wisdom that is not supported by the facts.

"Nobody goes on a buying spree just because of currency depreciation because they report earnings in dollars as well, so it tends to be a wash," he said.

It seems there's a better reason to manufacture in America – American workers. And that's good news with some staying power.