More Than an Image Thing : Japanese Investment Is Broad--and Mostly Here to Stay
The question at a business breakfast in Los Angeles was plaintive and influenced by Sony’s massive write-down of movie investments. “With no more Japanese investment in our area, how seriously will the local economy be hurt?” asked an investment banker.
The answer is that the question is mistaken; it misses a forest of investment for a few high-profile trees.
Japanese investment in Southern California is vast and permanent, with 615 companies employing 78,000 people. Total dollar figures for Southern California are hard to come by, oddly enough, although the value of Japanese industrial investment statewide is estimated at more than $30 billion.
And new U.S. investment on the part of Japanese companies, including real estate transactions, rose to $14.7 billion last year from $13.8 billion the year before.
In Los Angeles and Orange counties, the variety of Japanese companies ranges from Mitsubishi making big screen televisions in Santa Ana to Nippondenso making auto parts in Long Beach to Union Bank making loans throughout the area.
And Sony is not going away either, despite its initial debacle in the film business. As part of its $100-million investment in movie lots in Culver City, the company has built laboratories for digital sound, high-definition video and motion-picture special effects.
Indeed, if we looked at how and why companies from Japan do business here, rather than worrying that their investments will dry up and blow away, we would get a better idea of Southern California’s real strengths and economic outlook.
The region welcomes people from many lands and has a great port. Takashi Kiuchi, chairman of Mitsubishi Electric America, which is headquartered in Cypress, commands U.S. manufacturing activities stretching from nearby Santa Ana to Sunnyvale, in Northern California, to Atlanta. Mitsubishi Electric set up U.S. operations here in 1971.
“You pick a site first because of proximity to the home office in Japan and because of the Port (of Los Angeles-Long Beach),” says Kiuchi.
Japan’s major automobile makers have their U.S. headquarters here--Toyota, Nissan and Honda in Torrance, Mazda in Irvine and Suzuki in Brea--even though their U.S. factories are east of the Mississippi.
The fact that the region had a large Japanese American population made it easier 25 years ago, when many companies opened U.S. operations, to bring employees and their families from Japan. That factor is less important now that much of the United States has become cosmopolitan, but other forces--including politics and regulation--are pushing business this way.
“Government policies that say auto parts must be made in the United States, plus the high yen, weak dollar--which stem also from political decisions--mean we will be increasing production here,” says Kazunori Amano, president of Nippondenso of Los Angeles.
Nippondenso, the world’s largest auto parts maker, came to Long Beach in 1971. Amano, an engineer by training, came earlier to New Jersey to study catalytic converters because Congress had passed the first law mandating reduced auto emissions.
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Now the company has major operations in Tennessee and Michigan, while Long Beach does $470 million in annual sales supplying parts dealers nationwide with spark plugs, auto air conditioners and alternators and fuel pumps for trucks.
The many ways in which California encourages innovation attract investment. “To keep up with technology in the audiovisual fields, you have to be here,” says Jack Osborn, who heads Mitsubishi Consumer Electronics, the division of Kiuchi’s company that produces big-screen televisions, among other products. “This is where new developments in multimedia will be made.”
Mitsubishi, like all other Japanese companies, gets overtures to move from other states and regions. But it is keeping the big-screen plant in Santa Ana, even though Southern California at the moment is a less affluent market than it used to be. The work force of about 450 is good and productive, Osborn explains, and though Mexican wages are far lower than the $15 an hour with benefits paid in Santa Ana, productivity is far less also.
Japanese companies complain of the same disadvantages as other Southern California firms: crime, taxes, regulations and high costs. And in recent years, they have faced an additional difficulty with the collapse of Japan’s bubble economy. Head offices in Japan pulled in purse strings, instructed U.S. divisions that profit was the No. 1 priority. And some of them closed up shop. Membership in the Japan Business Assn. has dropped to 615 from 700, but Amano feels the worst is over.
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Otherwise, these companies are part of the landscape, involved in local causes and charities, and most of them successful--unlike Sony in the movies. The consensus among Japanese executives is that Sony was taken advantage of by “unprincipled people”--a reference to its free-spending U.S. managers whom Tokyo headquarters couldn’t or didn’t have the wit to manage properly.
Yet Sony’s troubles won’t affect a trend among Japanese companies of trying to give U.S. managers real authority now. It’s no secret that American managers have been largely figureheads at Japanese companies, Japanese executives admit. “But now it’s time to change. We have to give U.S. managers more authority if we’re to make good profits in this demanding market,” says Kiuchi of Mitsubishi, who came here as a student in 1958.
In that respect, Japanese companies in Southern California--like U.S. companies in Europe decades ago--are becoming less travelers in a strange land than local businesses in a global economy. And, importantly for us, they’re choosing this region as home.
The Job Count For all the noise about investment in movie studios and fancy hotels, the big Japanese employers in Souther California are in everyday banking and industry. Japanese firms with the most Southern California employees:
Union Bank: 7,283
Sanwa Bank: 3,250
Minebea: 3,000
Nissan Motor: 2,483
Canon U.S.A.: 2,251
Toshiba: 2,010
Toyota Motor: 1,977
Mitsubishi Electronics: 1,180
Fujitisu Business Systems: 1,100
Nissan Foods: 1,000 Source: Japan Business Assn. Editor’s note: James Flanigan’s Wednesday columns now focus on Southern California business issues and trends.
