The Chinese purchase of Nexteer in November from General Motors for about… (Rebecca Cook/Reuters )
Reporting from Saginaw, Michigan — For many in this proud but depressed industrial town, Chinese President Hu Jintao's visit to an Illinois exhibit showcasing products made in the U.S. by Chinese-owned companies was a bittersweet reflection of new realities they were already living with.
Just over a month ago, Saginaw's largest private employer — car steering systems maker Nexteer Automotive — rolled out its own red carpet: The company's new owners had come to town, all the way from China.
For a century, Nexteer had been a symbol of America's industry, employing thousands of workers. But the Chinese purchase of the company in November from General Motors for about $450 million in cash was one of the latest and largest Chinese investments in U.S. companies. It's a growing trend that has stirred both hope and anxiety here and across the country.
By pouring money into American businesses, the Chinese may see a painless solution to the problem of what to do with the billions in U.S. dollars they now hold. The new investments are likely to yield higher returns than the hoard of low-interest-bearing U.S. Treasury bonds that Beijing has amassed, while giving Chinese enterprises better access to American markets and technology.
For Americans too, redistributing China's trade-surplus dollars into the weak U.S. economy has benefits, at least in the short term. Chinese infusions into companies like Nexteer, which employs 3,600 people, are keeping U.S. workers employed and giving the firms capital to grow their businesses.
At the same time, just as the Japanese buying spree in the U.S. in the 1980s and the flood of Arab oil money a decade earlier fanned resentment, the emerging wave of Chinese investments is stirring some apprehension. And it will complicate the already tense economic relations between the world's two biggest economies. During Hu's visit this week, President Obama and U.S. lawmakers pressed China to open up its market, stop intellectual property theft and revalue its cheap currency.
But here in Saginaw, as in communities such as Elgin, Ill., Spartanburg, S.C., and Goodyear, Ariz., where Chinese investments have been felt, it's not about grand policy. It's personal.
Troy Newberry, the 38-year-old union leader at Nexteer, didn't want to talk about China or Hu's visit this week, though he was acutely aware that the Chinese leader had stopped in America's industrial heartland in his four-day trip to the U.S. Over and over, Newberry said he and other workers at Nexteer didn't care whether their paychecks were made in China, so long as they kept coming.
"There weren't a whole lot of options," said Newberry, a former police officer whose family ties to Michigan's auto industry go back generations. "The alternative was somebody breaking us up or moving it away," he said of the company, which for most of its 105 years was called Saginaw Steering Gear. Both GM and Delphi, which owned the company briefly, had filed for bankruptcy.
"We have a buyer who is interested in growing Nexteer in all parts of the world," said Robert Remenar, Nexteer's chief executive, who with the rest of the existing management team was retained.
On paper, Nexteer's new owner is Pacific Century Motors. But behind that name is an investment group funded by Beijing's municipal government. The group declined to comment when reached by phone this week.
Jack Z. Chen, a Los Angeles-based consultant who advised the Beijing buyer, said the Chinese were attracted by Nexteer's global reach. The company has 20 plants and 8,300 employees worldwide, as well as more than 1,000 patents and the ability to produce emission-reducing electric steering systems.
"When the market is down, you can get a good price," said Chen, chairman of Transworld Capital Group.
Pacific Century pledged to invest more than $100 million in the operations and recently posted openings for 100 jobs. But the deal wasn't sealed until after the United Auto Workers local at Nexteer accepted a new five-year contract with significant concessions.
Chen said the transaction, which required federal approval, took only a few months to complete — a relatively fast and trouble-free turnaround he believes will spur other potential Chinese investors.
Chinese investors often have complained about what they perceive as barriers in the U.S. Many remember state-owned China National Offshore Oil Corp, better known as CNOOC, and its failed 2005 bid to buy Unocal Corp. after intense opposition from U.S. lawmakers worried about American energy security.
According to private estimates, Chinese purchases of American companies and other assets have surged in the last two years, to more than $12 billion. But that's still just a speck of the total foreign direct investments in the U.S.