The Lure of Many Lands

Americans are the world's greatest travelers, and the nation's money and know-how are even more peripatetic than its citizens. Bolstered by continued prosperity at home, more U.S. firms than ever are setting up shop abroad, building new plants, expanding old ones and buying into foreign companies. Last week the Commerce Department announced that private U.S. investment abroad--investments in plant and equipment, bank credits, stocks and bonds --rose by $6.3 billion in 1963 to a record $66.4 billion. Already this year, the foreign investment stake of U.S. industry has risen beyond $68 billion, and Commerce predicts that the "vigorous growth rate will continue for some time ahead."

Cornflakes & Consortiums. The powerful lure for American companies is the vast sales potential abroad, where the market is growing generally twice as fast as it is in the U.S. Many U.S. firms have a healthy cash surplus that they want to put to work, as well as the growing feeling that it is both prestigious and profitable to go international. About three-fourths of new U.S. investment money goes to Canada, Western Europe and the other developed countries, where the risks are least and the markets best. (Latin America and Africa are currently out of favor.) U.S. investments represent 70% of all the foreign capital in Japan. Western Europe has drawn $10.3 billion in the last decade, spread out through 2,707 new U.S. operations.

Avon Products has set up production in France in recent months, has just announced that it will build a new plant near Munich next spring. General Electric bought into France's Machines Bull (49%) and a German electrical appliance maker, is now negotiating for a share of Italy's Olivetti. IBM, whose investments throughout Western Europe are extensive, has built a striking new research laboratory at La Gaude, outside Nice. Willys has just announced plans to build a new Jeep assembly plant in Brazil, and General Mills is negotiating a joint venture to make cornflakes in Japan. The Indian government, which has often been suspicious of private investment, last week gave approval for a plan to study the building of five fertilizer plants in India at a cost of $350 million, $200 million of which would be put up by San Francisco's Bechtel Corp. and a consortium of U.S. firms.

Still Welcomed. Among the heaviest investors abroad are the auto and chemical companies, which have increased their foreign stakes fourfold since 1950. Chrysler recently bought a majority interest in Simca of France and 30% of Britain's Rootes Motors. In West Germany, Ford and General Motors command 37% of the auto market. Other U.S. industries with rapidly expanding foreign holdings: office equipment, farm machinery, petroleum, aluminum, razor blades. For most, the overseas investment pays off handsomely. Last year, earnings on corporate investment abroad grew by 8% to $4.6 billion more than all the U.S. companies sent abroad in 1963.

The American economic presence abroad inevitably worries some nations, particularly in Europe, where some governments feel that the rising tide could turn into a flood to inundate local industries. In France, American companies already account for 90% of the synthetic rubber market, 95% of carbon black, and 65% of farm machinery. Many experts feel that the tide of U.S. investment in Europe has reached its peak, and is due to level off and eventually fall. That may happen, but U.S. companies are still welcomed into hundreds of industries in Europe--and are still moving in fast. Even if the tide does gradually recede, there are countless opportunities for U.S. investment in whole areas of the world that are anxious to make an acquaintance with U.S. products and know-how.

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