Illinois continues to be a strong magnet for foreign investment despite a recession that has many American businesses downsizing operations and laying off employees, according to a study conducted by KPMG Peat Marwick and the Illinois Department of Commerce and Community Affairs.
And foreign employers have been generally pleased with the quality of the Illinois work force, contrary to the current Japanese criticism of American workers, according to Lenz Neuhauser, a Peat Marwick partner and a member of the team that spent six months compiling and analyzing data in the report.
”Foreign companies are very upbeat about doing business in Illinois,”
said Neuhauser, who said the report focused primarily on foreign companies that have their U.S. headquarters in the state.
”They like the fact that Illinois is a trading hub, that it has a tremendous infrastructure of air, water and rail transportation, and that it has a large market area,” Neuhauser said. ”Many actually plan to increase the number of workers they employ.”
Among the disclosures in ”1992 Illinois Inbound Investment Study:”
– More than 1,600 foreign-owned businesses operate in Illinois and employ about 200,000 people.
– Of the 1,600, 617 have their U.S. headquarters in Illinois and 90 percent of those are in Chicago and its surrounding counties-Du Page, Kane, Lake, McHenry and Will.
– European-owned companies represent 55 percent of those interviewed for the study, 41 percent come from Pacific Rim nations and 4 percent are from the Americas.
– When classified according to their primary operation, 49 percent of the foreign-owned companies are involved in sales and distribution; 33 percent in manufacturing; and 18 percent in the service sector.
– Japanese companies represent the single largest segment. They account for 213 of the 617 companies, followed by Germany, with 86. Of the other companies, the United Kingdom has 68; France 38; Switzerland 36; Canada 34;
Sweden 28; and The Netherlands 25.
According to the study, which Peat Marwick and the Department of Commerce and Community Affairs are calling the most comprehensive ever undertaken in the state, the 1980s saw an unprecedented growth of foreign investment in Illinois, with annual growth rates that averaged between 9 and 14 percent a year.
The study showed, for example, that 35 percent of the companies surveyed had been established since 1985 and 5 percent were set up in 1990.
Few companies cited state or local incentive programs, such as tax credits and deferments or subsidized loans, as the primary reason for locating in Illinois.
”Government incentives of any kind were not so important,” said Neuhauser. ”Incentives rarely played a large role in the location factor. One of the most important considerations was schools. Foreign executives want to be sure their children will be able to attend good schools wherever they locate.”
The survey found that 97 percent of the work force at the foreign-owned companies was American, though more than half (54 percent) reported that their senior executive was a foreign national.
The three nations that use foreign nationals as senior executives most often are Japan (87 percent); Switzerland (52 percent); and the United Kingdom (45 percent).
In terms of performance, more than half the companies surveyed reported they had met or exceeded expectations.
Of those responding, 82 percent reported combined sales of more than $23 billion during fiscal 1990. Of those, 38 percent had annual sales of less than $5 million; 49 percent reported sales between $5 million and $100 million; and 13 percent had sales in excess of $100 million.
While fully 70 percent reported they had made a profit in the last fiscal year, 69 percent also predicted minimal sales in 1992, with growth rates of 10 percent or less.
”Many are taking the long-term view,” said Neuhauser. ”They know the economy is soft, but most are still optimistic. They like the business climate in Illinois-especially the ease in obtaining permits and licenses; in dealing with financial institutions; in moving around. It is much easier to do business here than it is in Europe, for example.”
Seventy-nine percent of the companies are involved in importing and 52 percent in exporting. Of those that export, $1.6 billion of their total sales was generated by exports. Japanese companies ranked first in that category with $863 million, followed by the United Kingdom ($358 million) and Germany
($112 million).
At least 45 percent of the companies reported they planned to expand their operations, with 10 percent planning to add space or move to a larger space; 28 percent planning to add more employees; and 26 percent planning to add a new product line or ”make some significant step to expand into new markets.”
When asked about their investment plans, 130 companies said they intended to spend a combined total of $293 million on new plants, property and equipment during the current fiscal year.
Many of the companies are actively involved in acquiring businesses in the United States. Of the 361 interviewed, 70 have already acquired other U.S. companies.
While there are questions about possible negative impact from so much foreign investment (driving local competitors out of business, draining talented American workers, etc.) Neuhauser said the positives far outweigh the negatives.
”After you look at this study I think you can see that one of the biggest misconceptions in this country is that exports create U.S. jobs and imports destroy U.S. jobs,” said Neuhauser. ”Most of these companies are involved in some form of importing, and they are employing a lot of Illinois workers.”
