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WSJ.com - Globalization Remains a Priority For Businesses in U.S. Heartland
Globalization Remains a Priority
For Businesses in U.S. Heartland
By TIMOTHY AEPPEL
Staff Reporter of THE WALL STREET
JOURNAL
Advertisement
Most businesses have too much riding on globalization to give up on it
now.
That's the attitude in Cleveland -- a heartland industrial city that
epitomizes how the fortunes of many U.S. companies have become linked to
the global economy. Managers in Cleveland have dutifully trooped along on
state-sponsored trade missions, scoured China for suppliers, set up
factories in the Czech Republic and generally added new strands to the webs
of world commerce.
Now comes terrorism and war. Last month's attacks will certainly prompt
changes, such as new ways to move products through clogged ports and added
layers of security for expatriates. But the urgency for companies to be
global remains.
"We're just going to have to find ways to continue serving all our
markets," says Gordon Harnett, chairman and chief executive of Brush Engineered Materials Inc., a
maker of rare metals used in everything from cellphones to jet planes.
The last thing Brush can afford to do is turn its back on overseas
customers. The Cleveland-based company exports about 40% of its products to
places such as China and Malaysia. And like many businesses, Brush saw its
markets go south long before the events of Sept. 11, as part of the broader
economic slump. Orders from the hard-hit telecommunications sector were
down by half before the terror attacks. "So basically, my need to be close
to my customers and close to my markets is even more powerful now," Mr.
Harnett says.
Similar attitudes are voiced throughout this industrial city, an
economic hub in Ohio. Part of the economic expansion of recent years was
fueled by exports. Last year, Ohio saw its merchandise exports jump 5.8% to
$26.3 billion, according to the U.S. Department of Commerce.
Selling products overseas is one thing. It's another to build factories
or offices that could be targets for those attacking symbols of U.S.
economic might. But even the bricks-and-mortar aspect of globalization
appears surprisingly resilient. A recent survey of U.S. business executives
found two-thirds expected their investments in factories and other business
assets abroad next year will equal this year's level. About 16% expected to
invest more. That wouldn't surprise Donald Washkewicz. The chief executive
of Parker Hannifin Corp., a big maker
of industrial equipment, expects to make an important acquisition outside
the U.S. "within weeks," and just finished another deal to buy a company in
South America. Mr. Washkewicz sees no reason to pull back from
globalization now. Parker operated in 25 countries a decade ago; now, it's
in 45. Indeed, if anything, Mr. Washkewicz sees the current situation
offering some good buying opportunities, both in the U.S. and abroad.
Still, Parker is being cautious. Many of the company's core businesses,
such as supplying parts to the aviation industry, are in trouble and
hunkering down for grim times.
"I think companies are more resolved than ever to be global; they see
opportunities in this," says Diane Swonk, chief economist at Bank One Corp.
in Chicago. Ms. Swonk says problems spawned by the terrorist attacks are
largely transitory, and businesses are making changes to deal with them.
The auto industry -- which saw border shutdowns disrupt their delicate
just-in-time delivery systems -- is already working on a system that would
seal trucks at parts plants in Canada and Mexico, and mark them with
barcodes. Those trucks could then move quickly even across tightly watched
borders.
Richard DeKaser, chief economist at National City Corp. in Cleveland,
says many companies face a choice: In light of slumping markets, they are
likely to pull back and focus on their core markets. That might be
perceived as pulling back from a global expansion drive. "But I think it's
more of a respite, rather than a retreat," he says.
Thomas Duesterberg, president of the Manufacturer's Alliance/MAPI, an
Arlington, Va., association of manufacturing companies, says it's too early
to tell what impact the terrorist attacks will have on U.S. business
attitudes about globalization. Companies are unlikely to retreat, he says,
"but some things on the margins are certainly going to be rethought."
Consider transportation. The administrative and logistical costs associated
with moving parts across borders have jumped as a result of tighter
controls. Faced with that, says Mr. Duesterberg, some U.S. companies might
opt to move manufacturing back inside the country.
One danger is concerns about terror could further cleave the world
between those areas deemed suitable for U.S. investment and involvement and
those that aren't. The result could be a growing split between haves and
have-nots in the world's economies. Alexander Cutler, chief executive of
manufacturer Eaton Corp., says his company was
already avoiding the most dangerous regions.
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'Sunday Journal It\'s all but impossible to predict stock-market returns. But we\'ll give it our best shot. Utter foolishness?'+
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'Tom Herman on Taxes: A refresher course on rules for deducting stock losses.'+
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Globalization Remains a Priority
For Businesses in U.S. Heartland
By TIMOTHY AEPPEL
Staff Reporter of THE WALL STREET
JOURNAL
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Most businesses have too much riding on globalization to give up on it
now.
That's the attitude in Cleveland -- a heartland industrial city that
epitomizes how the fortunes of many U.S. companies have become linked to
the global economy. Managers in Cleveland have dutifully trooped along on
state-sponsored trade missions, scoured China for suppliers, set up
factories in the Czech Republic and generally added new strands to the webs
of world commerce.
Now comes terrorism and war. Last month's attacks will certainly prompt
changes, such as new ways to move products through clogged ports and added
layers of security for expatriates. But the urgency for companies to be
global remains.
"We're just going to have to find ways to continue serving all our
markets," says Gordon Harnett, chairman and chief executive of Brush Engineered Materials Inc., a
maker of rare metals used in everything from cellphones to jet planes.
The last thing Brush can afford to do is turn its back on overseas
customers. The Cleveland-based company exports about 40% of its products to
places such as China and Malaysia. And like many businesses, Brush saw its
markets go south long before the events of Sept. 11, as part of the broader
economic slump. Orders from the hard-hit telecommunications sector were
down by half before the terror attacks. "So basically, my need to be close
to my customers and close to my markets is even more powerful now," Mr.
Harnett says.
Similar attitudes are voiced throughout this industrial city, an
economic hub in Ohio. Part of the economic expansion of recent years was
fueled by exports. Last year, Ohio saw its merchandise exports jump 5.8% to
$26.3 billion, according to the U.S. Department of Commerce.
Selling products overseas is one thing. It's another to build factories
or offices that could be targets for those attacking symbols of U.S.
economic might. But even the bricks-and-mortar aspect of globalization
appears surprisingly resilient. A recent survey of U.S. business executives
found two-thirds expected their investments in factories and other business
assets abroad next year will equal this year's level. About 16% expected to
invest more. That wouldn't surprise Donald Washkewicz. The chief executive
of Parker Hannifin Corp., a big maker
of industrial equipment, expects to make an important acquisition outside
the U.S. "within weeks," and just finished another deal to buy a company in
South America. Mr. Washkewicz sees no reason to pull back from
globalization now. Parker operated in 25 countries a decade ago; now, it's
in 45. Indeed, if anything, Mr. Washkewicz sees the current situation
offering some good buying opportunities, both in the U.S. and abroad.
Still, Parker is being cautious. Many of the company's core businesses,
such as supplying parts to the aviation industry, are in trouble and
hunkering down for grim times.
"I think companies are more resolved than ever to be global; they see
opportunities in this," says Diane Swonk, chief economist at Bank One Corp.
in Chicago. Ms. Swonk says problems spawned by the terrorist attacks are
largely transitory, and businesses are making changes to deal with them.
The auto industry -- which saw border shutdowns disrupt their delicate
just-in-time delivery systems -- is already working on a system that would
seal trucks at parts plants in Canada and Mexico, and mark them with
barcodes. Those trucks could then move quickly even across tightly watched
borders.
Richard DeKaser, chief economist at National City Corp. in Cleveland,
says many companies face a choice: In light of slumping markets, they are
likely to pull back and focus on their core markets. That might be
perceived as pulling back from a global expansion drive. "But I think it's
more of a respite, rather than a retreat," he says.
Thomas Duesterberg, president of the Manufacturer's Alliance/MAPI, an
Arlington, Va., association of manufacturing companies, says it's too early
to tell what impact the terrorist attacks will have on U.S. business
attitudes about globalization. Companies are unlikely to retreat, he says,
"but some things on the margins are certainly going to be rethought."
Consider transportation. The administrative and logistical costs associated
with moving parts across borders have jumped as a result of tighter
controls. Faced with that, says Mr. Duesterberg, some U.S. companies might
opt to move manufacturing back inside the country.
One danger is concerns about terror could further cleave the world
between those areas deemed suitable for U.S. investment and involvement and
those that aren't. The result could be a growing split between haves and
have-nots in the world's economies. Alexander Cutler, chief executive of
manufacturer Eaton Corp., says his company was
already avoiding the most dangerous regions.
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