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backAMERItalk May, 2011

Overcoming Obstacles of Foreign Industry in America

Foreign companies setting up shop in America is more than a cultural merge, it’s a process.

Successful integration is critical for manufacturing plant owners to locate operations in the United States. The obstacles faced by non-U.S. companies may be of legal, political, real estate, design/construction, labor, or cultural in nature. For instance, the air pollution permit process in the U.S. is a stringent, detailed, and prescriptive process involving numerous rules and regulations reinforced by the Clean Air Act.

Adapting to U.S. environmental regulations may seem overwhelming or even be a deal-killer to foreign industry establishing here in the U.S. However, when teamed with engineering consultants who are experienced in the nuances of establishing manufacturing plants and understanding the diversities between the U.S. and other nations, obstacles can be overcome with minimal paper cuts from all the “red tape.”

Finding a Location
U.S. real estate law and practices not only vary from other countries, they vary from state to state and city to city. Land acquisition, tax structure, and zoning questions will come into play during every step of site selection. In most cases, an Environmental Impact Report (EIR) will be a requisite step in the relocation process. The EIR, which is costly and time-consuming, is a highly public process, exposing the foreign company to open scrutiny that is unfamiliar. Real estate issues require a competent consultant and the EIR, in particular, should be prepared by experienced engineering and planning experts.

Communication
Cultural differences can create real challenges for foreign firms seeking to operate in America where forms and styles of communication can be markedly different from the home country. Foreign companies may provide communication on a very limited basis; American cultural expectations are that all information is subject to discussion, review, and public comment. Culturally, communication between management and labor, company and media, and company and government vary from what foreign companies may be used to.

American workers expect significant information to be shared by their company; in many cases, transparency is considered ideal. Non-American managers can be uncomfortable or even resistant to communication on this level, deeming it intrusive, nonessential, or even troublesome.

Media relations are a necessary fact of life for overseas companies doing business here. American media, with its watchdog role, is not shy about asking pointed questions. Foreign firms should have a media strategy and, where there are unfavorable past issues, be prepared to respond positively.

In one recent case, a foreign manufacturer identified a possible location adjacent to a residential area in a southeastern state. Public perception quickly formed around the notion of an industrial looking building. The manufacturer, through its architectural consultant, was able to reshape that perception and scrupulously adhered to local building and height regulations where its exterior harmonized with the residential character of the area. Citizens’ concerns were addressed straightforwardly in the media and in public sessions. This manufacturer went even further, taking the additional step of donating land to the township for a community park.

Government Interaction
Interaction between corporations and American government is culturally divergent too. Many companies have a hand-in-hand relationship with government in their home country and may not understand American government’s role as a representative of the public. Where foreign governments may see themselves as a facilitator of industry, their American counterparts may be adversarial. As challenging as this is to American companies, it may be extremely confusing to foreign firms.

Resolving Labor Issues
Labor and workforce issues can be among the most vexing faced by foreign companies. Employment law, human resource practices, and workers compensation rules will be unfamiliar to non-American companies. Geography will affect labor issues; the southeastern states are generally “open shop” while the northeast and midwest labor force is often unionized. Companies relocating from Europe are conversant with union practices while Asian companies are generally non-union. Regardless of the workforce structure (union or non-union), foreign firms must adjust to American law and customs regarding worker rights and workplace safety. The same openness and transparency expected with government and media relations will come into play with employees.

Design and Construction
Facility design and construction in America is also different from most other countries. The American model of owner, engineer/architect, and contractor as three separate entities and defined contractual roles may be unfamiliar to foreign companies. Design/build or construction manager contracts, often favored by American industry, may be equally unknown. The company-owned and controlled engineering and construction which may be common in a home country is much rarer in the USA; state legal requirements for licensed engineers, architects, and contractors may actually prevent this type of project delivery.

Construction contracts vary widely from country to country as well. Foreign construction practices often favor unit price, time and materials contracts. In contrast, American contractors generally work on a lump sum or guaranteed maximum price basis with scope changes being negotiated as change orders. Each model has its advantages and disadvantages, but foreign firms must understand the impact of the construction contract they choose.

Consultants Applying a Process
A well-defined and documented process is critical to the success of a foreign industry relocating to America. Experienced consultants will play an important part in this process; the foreign firm should carefully select consultants and have them in place from the beginning. Legal, real estate, labor, and public relations firms should be part of the consultant team. The engineering/architect/planning firm is, of course, essential as is the contractor or construction manager. Consultants should be evaluated and hired based on their experience in working with foreign companies and helping them work through the complexities of integrating and operating in America.

Getting the team on the same page is essential for a project to succeed. At an immersion session—company and all consultants--critical topics such as project expectations, project delivery, contracting methods, cost changes and team communication channels can be identified. When and how changes are made and their cost impact, identification of decision makers, and definition of their responsibilities occurs in the “immersion” meeting.

Foreign owned companies will consider locating in the USA for a variety of reasons. Relocation in America will raise cultural, real estate, political, labor, and design/construction issues that can derail a project. Successful relocations will adopt a disciplined methodology and utilize American consulting firms who understand these issues and can help the foreign firm realize their objectives and expectations.

About the author
Ron P. Guiliani, PE, PMP, is a Senior Vice President at SSOE Group (www.ssoe.com), an international engineering, procurement, and construction management firm. With 23 years of experience, Ron specializes in Industrial Manufacturing and R&D projects.

Source: Ron P. Guiliani, PE, PMP, SSOE Group - GAI

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