Pemko Helps Memphis Weather Recession

Nov. 2, 2011
Now part of ASSA ABLOY, new leadership and foreign investment helped Pemko navigate through tough times.

Oct. 30--Hard times faced Memphis door hardware maker Pemko when the building boom began fading in 2007, slicing away 2 million construction jobs nationwide.

Instead of slashing jobs, Pemko added designers and engineers.

What happened at the Southeast Memphis plant reflects a quiet trend in the United States.

Foreign investment has flowed in, and begun to help brace companies and communities.

While 10 percent of Pemko's workers were let go in the past three years, managers say the company, which employs about 165 people in the city, was probably saved from a bigger fall by its new owner.

Assa Abloy, a Swedish door hardware conglomerate, in 2007 bought Pemko and brought in more orders. Pemko soon turned out more parts on complex enclosures designed by Assa Abloy for buildings throughout North America.

"Working with Assa Abloy forces us to be more innovative," said Helen Rose, Pemko brand manager. "We provide solutions for entire openings."

The Swedish buyout of Pemko, a manufacturer that opened in California in the 1950s, is part of a growing trend.

It's not only big foreign manufacturers such as Mitsubishi Electric and Electrolux coming to Memphis. Companies big and small are putting cash into the United States.

Last year, businesses based abroad spent an estimated $83 billion to buy manufacturers in the United States and build plants here, up from $51 billion a decade earlier, according to the U.S. Bureau of Economic Analysis. Investments could accelerate.

President Barack Obama's new jobs initiative could lure massive flows of foreign investment -- as much as $1 trillion over the next few years, analysts guess.

"We've been focusing a lot on investment, but we really haven't had the kind of pro-active campaign that you see in other countries to attract investment," Robert Hormats, U.S. undersecretary of state for economic affairs, recently told Britain's Financial Times.

To draw in more capital, White House plans call for lower corporate taxes, innovation investment zones and visa and immigration reform.

While those measures could stall in Congress, the administration earlier this month took first steps to put the plan in place. It's called Select USA. American diplomats in 222 embassies throughout the world were instructed to urge companies to invest in the United States.

"We are updating our foreign policy priorities to include economics every step of the way," Secretary of State Hillary Clinton said in a recent speech at the Economic Club of New York.

Attracting foreign capital is nothing new. During the devastating 1982 recession, for instance, the Federal Reserve Board's policy of high interest rates brought in cash from investors throughout the world, setting off a boom on Wall Street.

Rather than retool U.S. industries, historians note, much of that cash was used into the 1990s to finance mergers and acquisitions of American companies.

This time, however, an inflow of foreign capital must rebuild the nation's industrial base, contends Clyde Prestowitz, a leading trade official in the 1980s administration of President Ronald Reagan.

Prestowitz, now head of the Economic Policy Institute, a Washington think tank, argues the United States cannot sustain its heavy level of imports. Americans must cut consumption and their standard of living to get by, he said, or scale back imports and make more goods here. Attracting foreign manufacturers is a way to boost U.S. production, he said.

Across Memphis and the Mid-South, foreign capital hasn't revived the slow economy, but it has quietly helped.

"I think in the case of Memphis, and even areas outside of it, there's been a wave of business investment in factories that will go a long way toward turning around pockets of the state," said economist Alex Miron, who studies Tennessee for the research firm Moody's Economy.com, of West Chester, Pa.

Foreign manufacturers have led the investment wave in Memphis and the region around it. For example:

Canadian papermaker Kruger Inc. earlier revamped its KTG USA plant in Memphis, adding 27 jobs.

KMA Manufacturing, part of the Japanese conglomerate Marubeni Group, has built a 40-employee Memphis steel service plant.

German pipe maker Wilhelm Schulz opened Schulz Xtruded Products, a 180-employee plant just outside metropolitan Memphis in Tunica, Miss.

In Northeast Mississippi, Japanese automaker Toyota is completing a car assembly plant slated to employ 2,000 at Blue Springs.

Japanese manufacturer Mitsubishi Electric will put up a 275-employee plant in Memphis making electrical transformers.

Swedish appliance maker Electrolux plans a 1,240-employee Memphis factory.

That wave of investment has encouraged many Memphis companies.

"We expect we'll see some good orders for ourselves down the road with Electrolux," said Michael Gallagher, head of Centro Inc., a 60-employee Memphis supplier of industrial valves and other factory equipment.

More foreign companies are likely to locate not only in the Mid-South, but also across the United States, said John Daniels, co-author of the widely read college textbook "International Business: Environments and Operations."

Daniels, however, said he doubts the lower business taxes talked about in Washington will be much of a lure. The dollar's weak value abroad has helped cut the cost for many foreign companies putting operations in the United States. But the key attraction, he said, is close access to American buyers.

"If you believe the U.S. market is going to grow, you'll get foreign companies trying to locate near the market," said Daniels, a management professor at the University of Miami, in Florida.

That was the case at Assa Abloy.

"Being part of Assa Abloy helps us protect our business during good times and bad," said Helen Rose, the Pemko brand manager.

-- Ted Evanoff: (901) 529-2292

Copyright 2011 - The Commercial Appeal, Memphis, Tenn.