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Monday, September 8, 2014

Tom Still: Foreign direct investment plays growing role in Wisconsin's economy


By Tom Still
Waupaca Foundry can trace its roots in Wisconsin to 1871, when the Rosche family opened the company on the banks of the Waupaca River. Today, the firm still operates three foundries in Waupaca and another in Marinette, but its ownership has turned to the east ... the Far East.

The $1.3 billion purchase of Waupaca Foundry by Japan's Hitachi Metals Ltd., part of a larger global conglomerate, will likely mean even more growth for a company that already describes itself as the world's largest supplier of iron castings.

Last month's announced deal is the latest example of how foreign direct investment is globalizing Wisconsin's state's economy in ways that create jobs, expand supply chains, open the doors to new markets and provide needed investment dollars.

Foreign direct investment is investment by foreign-owned companies in Wisconsin companies, often for the purpose of cracking into North American markets. Between 2010 and 2012, 37 foreign direct investment deals were reported in Wisconsin, a figure that lagged most Midwest states but nonetheless contributed significantly to the state's economy.

Exports and foreign direct investments are flip sides of the same coin. They represent Wisconsin's ability to build, produce and grow what the world needs – and to attract investment from other markets that understand Wisconsin's strengths.

A surprising number of Wisconsin companies have foreign ownership, including many in manufacturing, food services, paper and packaging. According to a recent report to the Wisconsin Economic Development Corporation by a special University of Wisconsin task force on foreign direct investment, the leading nations are Canada, Germany, Finland, the United Kingdom, Italy, Brazil and France, which collectively represent ownership in about 80 companies. The full list would run well into the hundreds of companies, large and small.

Some companies have boasted foreign ownership for decades, such as Kikkoman Foods in Walworth. But others are more recent additions, reflecting trends in currency exchange rates, trade patterns and more.

Marinette Marine, which is building a new class of combat ships for the U.S. Navy, is owned by Fincantieri, an Italian firm. Other recent examples include Ingeteam, a Spanish company that selected Milwaukee for a wind generator and solar inverter plant, and SEDA, an Italian cup and packaging manufacturer that selected Racine County. Bostik Products, Milwaukee Electric Tool, Talgo, Schwartz Pharma, Packerland Packing Co. and McCain Foods are among other examples.

Experts say foreign direct investment shouldn't be looked as just being about the money – but as an opportunity to expand supply chains, establish markets, improve warehousing and distribution and more. It short, it can help companies grow.

Waupaca Foundry is a ready example. It hasn't been owned by its founding family or anyone in Wisconsin for decades. It was first purchased by the Michigan-based Budd Co. in 1968, followed by Germany's Thyssen group and later KPS Capital Partners LP, which sold it to Hitachi. The company has grown more or less throughout those transitions to 3,900 workers, including 2,300 in Waupaca and Marinette.

A 2011 study by NorthStar Economics for the UW System International Economic Development Task Force showed that manufacturing and food processing has attracted a "critical mass" of foreign investment – and that northeast Wisconsin is a particular hot spot.

Earlier this year, a first-ever report by the Brookings Institution noted that since 1991, there has been an increase of more than 23,000 jobs from foreign-owned establishments in Wisconsin, bringing the total to 86,440. The majority were created in the manufacturing industry, making up 54 percent of the total jobs created by foreign companies in 2011.

In Milwaukee, jobs from foreign-owned establishments totaled 27,320, an increase of about 4,500. Manufacturing also was the leading category, with 42 percent of the total jobs created by foreign firms in 2011.

Madison experienced less growth with a total of 7,560 jobs from foreign companies, an increase of about 3,300 since 1991. Its financial and insurance industry was most affected, making up 30 percent of all jobs from foreign companies in 2011.

There are some risks inherent in foreign direct investment, such as the loss of Wisconsin-based corporate headquarters. But for those who worry about Wisconsin jobs moving overseas, foreign direct investment counters that trend by retaining and creating jobs here.

As the political debate continues about the advantages and drawbacks of outsourcing and trade, foreign direct investment shouldn't be overlooked as a part of the equation. Wisconsin's reputation as a place to do business can mean attracting investment dollars from far beyond its borders – and the borders of the nation.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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