Foreign investment on the rise
Manufacturers from overseas control many Mid-South factories
Industrial engineer Onor Orcun wasn’t sure what to expect when he and his wife, Esra, set out for Memphis.
Having lived, studied and worked for most of his 35 years in Turkey, a crossroads for Europe, Asia and the Mideast, Orcun figured he’d never find anything like kumpir, a stuffed potato, or come across anyone familiar with Istanbul, his hometown of 14 million people.
Now settled into his stint as director of Volvo Group’s new truck-parts depot at Byhalia, Mississippi, Orcun said the pleasant nature of Americans and the taste of grilled beef steak and baked potatoes erased any doubts.
“After 10 days I started to feel at home,” said the fairhaired graduate of Istanbul Technical University, which was established in 1773 as the royal naval engineering college. “We all like the food.”
On this Fourth of July weekend, Memphis and America are immersed in the long debate over race, civil rights and forging a just society.
We focus on individual rights and ignore the wideopen commercial world quietly reshaping where many Americans earn their paychecks.
Foreign investment has surged. At the same time, all around us, hard assets are for sale. Factories, office towers and technology have shifted into the hands of investors in places such as New York and companies overseas. In 2014, foreign purchases of U.S. corporations doubled in a year to $275 billion, reports investment bank adviser Dealogic.
For a large share of the 578,000 people employed in metropolitan Memphis, the top decision makers in their company are in a distant city or, more often lately, a foreign city.
This acquisition of assets has gone on for decades, though the pace quickened in the late 1990s as wealthy
Americans invested in Silicon Valley’s quick-profit ventures rather than slowprofit steel, textiles and chemicals.
As factories automated or moved abroad, and Greater Memphis shed about 25,000 industrial jobs between 1995 and 2010, imports accelerated and cash flowed out of the country. Then the world sent part of the windfall back to buy assets and invest in businesses Americans had departed.
Buy a roll of White Cloud toilet paper at Wal-Mart, and it was likely made in Memphis by KTG America, a Canadian company that recently renovated an old north-side plant.
Buy a half-gallon of Breyers ice cream at Kroger, and it likely came from the Covington plant of Unilever, a British-Dutch manufacturer converting an old SlimFast factory into the country’s largest ice cream producer.
Foreign manufacturers, by my count, have spent about $1 billion building, buying and equipping Memphis-area plants in the last five years, including the $70 million distribution center Volvo executives showed off at Tuesday’s ribbon-cutting event.
One billion dollars came from overseas. There’s no comparable outlay here by any American industrialist.
Does it matter if you work for a business that Memphians no longer control? It can be bad. Look at what happened at Holiday Inn.
Memphis’ premier public corporation three decades ago, the hotel chain borrowed cash to fend off New York developer Donald Trump, opening the way for British brewer Bass Plc to buy the debtstressed company and move the offices to Atlanta.
Left in Memphis as a separate company was the casino business, which wound up in the control of New York investor Apollo Management. The investor borrowed heavily against the casinos to buy Caesar’s Entertainment, a debt-stricken casino operation that later fell into bankruptcy and last year closed the 2,200acre Harrah’s resort near Memphis.
Would the 1,200-employee resort have stayed open had it remained in Memphians’ hands? Hard to say. But chances are the local executives would have fought to keep open the Memphis area’s most iconic gambling destination.
To the old Holiday Inn, Harrah’s resort was a point of pride. To Apollo Management, it was a blip on a financial spreadsheet.
There is one good aspect about the wave of fresh foreign investment.
These aren’t financial engineers like Apollo. These are manufacturers.
Kroger doesn’t have to buy from Unilever. WalMart doesn’t need KTG. Manufacturers know that to make money, to win market share in the world’s biggest market, they have to produce at world-class levels.
So they send in bright, talented executives.
That’s why a Swedish truck maker stationed a Turkish industrial engineer in the American South to work with a labor force represented by a Northern union, the
United Auto Workers. “I wanted it so much.” That’s Orcun talking — in good English with an accent that sounds vaguely German. He’s talking about the new job at Byhalia.
“Volvo has done nothing like this in 25 years,” he said.
Stand at one end of the plant and you can almost believe you see the earth curve at the other. Floor space totals 1,040,000 square feet. Machines guided by satellite navigation units graded the concrete floor flawlessly smooth and level.
Rows of racks nearly reach the ceiling. The racks hold thousands of shelves. The key is to take in boxes at the receiving dock and get the truck parts inside the boxes to the correct shelf quickly. This is called stock time.
Once it runs full bore, the plant will operate 24 hours a day. Forty to 60 trailers and seagoing containers will come in daily, and 30 to 40 full trailers will go out, bound for the eight regional distribution depots in North America and 2,000 truck dealers.
Volvo’s share of the North American commercial truck market is 19.6 percent. Its executives know to hold on to that share, parts must flow reliably. No Volvo exec wants a truck fleet mechanic to say Kenworth can turn around a repair order faster. So stock time is key. If the part isn’t on the shelf, it can’t be put on the outbound trailer.
Orcun knows about stock time.
The son of a former Turkish air force engineer (since 1952 Turkey has been a member of NATO, the European military bloc organized by the United States to face the Soviet Union), Orcun was hired nine years ago at Volvo Group’s distribution center in Istanbul.
Beginning in 2010, he helped design a new Volvo parts depot and relocate it within the city.
The project made him stand out. So did the dramatic improvement in stock time.
Systems in the old plant required four days to get a part on the shelf. Turnaround in the new plant dropped to 36 hours.
Orcun remembers he talked frequently to workers, searching for tips to tweak the system and improve stock time.
“I was able to work with people on the floor,” Orcun said. “That made the difference.”
Now, he’s settled into a new home just over the state line from Byhalia in Collierville.
He knows if he needs help, like he did once in Target, someone will step up. Americans’ friendliness quietly surprised him. “They are really helpful,” he said.
And more people than you might expect know something about Turkey. Speaking in the grocery store, his accent would draw the usual question: Where ya from?
“It was amazing. So many people knowing Turkey,” he said. “A lot were there in military service.”
There is one change he’s looking forward to. In February, Esra is scheduled to give birth to the couple’s first baby.
“It’s a new adventure,” he said.