America On Sale: A Response to Readers

Posted by: Ben Steverman on July 28, 2008

Last week I wrote a story, “America on Sale,” on the sale of U.S. firms to overseas companies — a trend exemplified by InBev’s acquisition of Anheuser Busch (BUD).

The story sparked a lot of reader feedback, with many commenters disturbed by the prospect that U.S. firms were being sold away to foreigners.

Here’s my response:
If you’re concerned by the prospect of U.S. companies being sold off to foreign buyers, here’s my question to you: Do you see these foreign buyouts as just the symptoms of a problem or the problem by themselves?

A rash of foreign buyouts can be seen as simply the result of economic weakness: U.S. stocks are in bear market territory and the U.S. dollar is at record lows against the euro. Both make U.S. firms more affordable to foreign buyers.

But surely there are at least some benefits to foreign acquisitions? American shareholders get a payoff, and can then invest their windfalls elsewhere. In some cases, overseas investors are pumping money into U.S. companies. With long-term investment time frames, these buyers might have the patience to actually expand and improve businesses here. While ownership and sometimes headquarters shift overseas, foreign buyers typically try hard to retain American employees and operations.

Still, some readers clearly would prefer U.S. companies to be owned and run by Americans. Crenee wrote: “Wow. Wake up! Foreigners are taking over our country right up under our noses!”

Many readers trained their fire on lawmakers in Washington, blaming them for both the country’s apparent economic weakness and foreign buyouts in general. I’m wondering what you would have lawmakers do. Do you think foreign buyouts should be blocked? Or would you prefer policymakers deal with the economic weakness itself? The first option is easy — if radical — but the second option could take years to accomplish. There’s no easy solution for restoring the American economy to full health: For example, a much stronger dollar (which some commenters were pushing) would hurt U.S. exporters.

In a global economy, it gets complicated when one talks about nationality. Toyota is headquartered and listed in Japan, but it manufactures many of its cars in the U.S. Meanwhile, many American furniture companies have outsourced nearly all their production work to foreign countries. Which makes a company “American”? The location of its headquarters, its employees, its capital investments, its customers or its investors?

These comments were mostly quite pessimistic, so let me counter that gloom with one optimistic observation: For the most part, foreign buyers are coming to the U.S. because they recognize long-term potential here. They’re trying to get access to the world’s largest and wealthiest consumer market. They’re betting our problems — whether the housing slowdown, the credit crisis, dependence on expensive foreign oil, fiscal shortfalls, foreign entanglements, etc. — will blow over. In one sense, then, foreign buyouts are a vote of confidence in the American economy.

Reader Comments

Faraz Shaf

July 29, 2008 2:34 AM

The US economy is at doldrums with no hope in insight, unless the govt solves the financial turmoil plaguing the country, there seems to be no hope.

One hope could be disaster recovery measures by overhauling the financial system to put the country's population on track

Arnold J. Harriett

July 31, 2008 8:39 AM

This just a symptom of the problems. We have eliminated "individuality" and "take charge and innovate." We have become a follow the herd mentality nation and do not give any new ideas a chance. Perpetuate the old regardless of its usefulness. Foreign companies have embraced the new and use the best of the old. This is why they buy a US company to gain market and then introduce new products which Americans run to buy.

E G Bowles

July 31, 2008 5:06 PM

It is the problem. The real truth is it is simply a "cut bait & run" mentality.

The good thing for foreign concerns is that when the bill comes due for all of the money we have borrowed from China & Japan for the war they will already own everything. They won't foreclose on themselves (BUSH ECONOMICS).

Can't you just see America in 2025. A country of indentured servants. If you start learning Chinese now you can avoid the high cost of instruction and a great deal of embarrassment.

Terence

August 1, 2008 12:57 AM

It is definitely a problem. And why is it a problem - why are foreigners buying ?

It reminds me of a similar situation in my country of Singapore why I am always asking - why are local porperty developers conducting roadshows in other countries trying to get foreigners to buy our properties. Is it a question of local buyers can't be found, and why?

I am quite sure both answers won't be that far different even I dont know much of Corp America.

Singapore.

Squeezebox

August 1, 2008 9:18 AM

What makes a company "American" is where the profits go. The wages Toyota pays its American workforce is only a fraction of the sales price of a car. Most of their production is overseas, so we don't even get that fraction. The real money goes to Japan.

Part of the problem is the venture capitalists. If you get a great idea and start producing it in your garage, you use American labor. Then you go to a venture capitalist to get money to expand the business, and the first thing he does is force you to move production to China, simply because the labor's cheaper.

If we lose all our jobs, nobody will have the money to buy all that stuff from China. We'll have all those debts and no money coming in to pay them with.

The real problem is that the American standard of living is too high and the wages are too high to suit the world. We're no longer competitive. Another problem is that the world wants us to buy their stuff, but they won't reciprocate by buying ours. How are we supposed to get the money to buy if we can't sell?

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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