Foreign Investment into Tennessee 4th Quarter 2016

Tables and Graphs

Tennessee received substantial foreign investment in 2016. New or expanded foreign-owned operations brought in investment valued at $567 million and accounted for 2,572 new jobs. (In addition, a Chinese firm acquired Franklin’s Community Health Systems for $120 million.) Investment came from 18 firms from nine different countries.

This amount, while healthy, was lower than that of recent years. The primary reason for the decline was the lack of a blockbuster investment such as 2014’s VW expansion in Chattanooga or 2015’s similar expansion in Smyrna’s Nissan operations. This past year the largest dollar investment was the expansion of JTEKT Automotive’s steering components plant in Vonore. At $218.5 million, it accounted for nearly one-third of the state’s total new foreign investment for the year.

The 515 jobs added to the Teleperformance customer service center in Bristol, however, was the single largest investment in terms of increased employment. Six of the 2016 investments were new operations, 10 were expansions of existing facilities, one was a relocation, and then there was the foreign acquisition noted above. The largest of the new investments was the establishment of the Beretta facility in Gallatin.

The accompanying map indicates the location and size of the year’s foreign investment. As can be seen, the automotive industry was once more the largest target for foreign investors. Seven of the 18 investments in 2016 were in this sector (and an eighth makes automotive components among its other products). The concentration in the automotive sector was actually a bit less than over the past few years. In 2015, more than 60% of the new or expanding firms were automotive-related.

By value, more than three-fifths of new 2016 foreign investment came from either Japan or Germany. As for the past three decades, Japan was by quite a margin the leading source. However, two investments from France combined to create 750 new jobs, more than from any other country. Japan and Canada were second and third with 550 and 346 jobs, respectively.

The big story of 2015, the arrival of substantial investment from China, did not continue. The only new investment was a solitary acquisition by a Chinese investment company. Though one can argue that such investment may strengthen local firms and make them more competitive, acquisitions such as that by Shanda Investments initially create no new jobs or facilities. One reason for the decline in Chinese investment is presumably the renewed restrictions on outward investment imposed by that country’s government in 2016 as a way to stymie the drop in its currency.

As noted earlier, comparing annual investments is problematic because of the outsized impact of one or two giant investments on the year’s totals. While the 2016 numbers are not as impressive as those of the previous several years, it’s not the case that foreign investment into the state is collapsing or is encountering some unexpected headwinds.

The reasons for the decline are as much the strengthened dollar (coming to the U.S. is harder when it costs more!), the continuing economic slowdown in many parts of the world, and that lack in 2016 of the giant mega-investments that we have been seeing in recent times.

In fact, employment and investment in the foreign-owned sector of the state’s economy is continuing to grow faster than in its domestic counterpart. Last year, new employment generated by foreign investment grew about 18% faster than Tennessee’s new employment overall. Between 4 and 5% of Tennessee’s new employment came from foreign-owned operations.

Adjusted for the size of the Tennessee economy, the state remains one of the top destinations for new foreign investment. Foreign-owned operations continue to have an outsized impact on the state’s growth and economic development.