Japanese Purchase of Stake in Tool Company Opposed

Rep. Mel Levine and nine other congressmen have asked President Bush to block the sale of a 40% stake in a Connecticut machine-tool company to a Japanese robot producer, maintaining that the transaction could deprive the United States of critical nuclear weapons technology.

Family-owned Moore Special Tool Co. makes precision machine tools that are used in nuclear weapons production as well as in conventional industrial applications. The company last year agreed to sell a 40% interest to Fanuc, one of Japan’s leading vendors of industrial robots. The deal could eventually allow Fanuc to take full control.

Foreign takeovers of U.S. technology companies have become a contentious issue in Washington in recent years, with many congressmen criticizing the Administration’s laissez faire policy toward such transactions. The President has the power to block foreign buyouts on national security grounds, but that power has been exercised only once in the past three years.

Foreign buyouts are reviewed by the interagency Committee on Foreign Investment in the United States (CFIUS), which makes non-binding recommendations to the President. CFIUS recommended late last year that the Moore-Fanuc deal be approved, and President Bush is expected to go along with that recommendation, though he need not make a formal decision because the law requiring him to do so has lapsed.

The Administration and CFIUS were sharply criticized last year for not acting in the case of Semi-Gas, a manufacturer of specialized gas distribution systems for the semiconductor industry that was to be sold to Nippon Sanso, a Japanese competitor. But the Justice Department, which apparently did not object during the CFIUS process, said last month that it would go to court to block that deal on antitrust grounds.

Levine (D-Santa Monica) and his colleagues, in a letter to Bush, said “no case could be a clearer candidate for CFIUS rejection” than the Moore-Fanuc transaction. They said it would allow “a vital component of our domestically owned defense industrial base to be controlled by foreign owners who do not share American national security interests.”

Levine said his concern extended beyond the national security issue to the broader problem of America’s diminishing industrial base in high technology. The U.S. machine tool industry has been decimated by Japanese competition in recent years, and most major companies in the field are now Japanese and European.

Kevin Kearns, a former Senate staffer and now a senior fellow with the Economic Strategy Institute, said Moore produces the “world’s best precision machine tools.” They are used in critical phases of the weapons production process, he added.

He said the company had been losing money, in part because its equipment was deemed so valuable that it had trouble getting export licenses to sell overseas, and in part because it had suffered from badly managed Department of Energy nuclear programs. The Energy Department, he said, feared that if the sale to Fanuc was blocked, the company would go under.

The congressmen noted in their letter that one or possibly two American companies were interested in buying Moore, though they apparently are unwilling to let current management remain in place. The Fanuc deal leaves the Moore family in control and gives them the option of buying out Fanuc if the company returns to profitability within two years. If it does not, Fanuc will increase its holdings.

Moore officials could not be reached for comment.