* Each job at a foreign firm's U.S. unit supports 3 others
* Manufacturing employment leads other sectors
* U.S. slice of the global investment pie is shrinking -OFII
* Michelin, for one, steps up investment in U.S.
By Lynn Adler
May 10 (Reuters) - Foreign investment in the United States is ebbing and beefing it up is critical for economic growth as each job at a foreign company's U.S. unit supports three others, the Organization for International Investment said on Thursday.
A complex U.S. tax code and increasing global competition are curbing business development here by foreign companies. That trend is worrisome because foreign firms generally pay salaries to U.S. workers that exceed the industry average. This type of foreign investment, in turn, drives up employment and consumer spending.
"The global investment pie around the world has been getting larger, but our slice of that pie has been getting smaller as well as the share of GDP that foreign investment in the U.S. represents," Nancy McLernon, president and chief executive officer of the OFII, told Reuters in an interview.
Based in Washington, the OFII is a 21-year-old nonprofit business association representing about 160 U.S. companies with foreign parents.
In its first study of the ripple effects of foreign investment in the United States, the OFII said U.S. subsidiaries account for 21 million jobs directly and indirectly - or 12.2 percent of total employment. The OFII study, conducted by PricewaterhouseCoopers LLP, is scheduled for release later on Thursday at around 10 a.m. Eastern time.
Every dollar paid directly by foreign companies' U.S. units supports an added $2 in total U.S. compensation to supply-chain workers and companies that benefit from paycheck spending.
But the United States attracted just about 17 percent of global investment in 2009, down sharply from over 41 percent in 1999, McLernon said, citing another OFII study in October.
With unemployment still above 8 percent, the study drives home what the United States is losing out on, she added.
FROM MICHELIN TO L'OREAL
Among the OFII members are U.S. subsidiaries Michelin North America , Deutsche Post DHL , BMW of North America, Nestle USA Inc. , Toyota Motor North America , Sony Corp. of America and L'Oreal USA Inc .
"The U.S. is still the top single destination for foreign investment in terms of total dollar amount," McLernon said.
"But our share has fallen precipitously while the share in other developed countries has stayed the same," she added. "Other countries have stepped up their efforts, and the U.S. traditionally thought companies would just come here."
Up to 95 percent of foreign investment in the United States is from Europe and Canada. The United States, McLernon noted, needs to position for growth from companies in emerging markets.
U.S. subsidiaries of foreign companies and their suppliers add $2 trillion to the U.S. economy, or 14.2 percent of gross domestic product (GDP), the study found.
These units generate 21 million jobs in America. directly or indirectly, for 12.2 percent of total U.S. employment. They account for $1.2 trillion in pay, or 14 percent of the total.
The subsidiaries employ 5.3 million workers directly, account for another 6.6 million supply-chain jobs and 9.2 million jobs tied to employee paycheck spending, the study said.
Manufacturing leads the pack by a huge margin with 58 percent of those jobs, the study found. The ripple effects are biggest, too, in this sector.
Each manufacturing job supports another five jobs, based on the "supply chain and paycheck impact" - measuring economic activity tied to suppliers and the impact of paycheck spending by employees of the U.S. units and their suppliers.
Well behind are mining, accommodations and food services, transportation and warehousing, utility, agriculture, and wholesale and retail jobs created by U.S. subsidiaries of foreign companies.
Of the $2.9 trillion in goods and services sold by U.S. units of foreign companies, the manufacturing sector accounted for 39 percent, while 30 percent came from wholesale and retail, and 14 percent came from finance, insurance and real estate, the study said.
Michelin North America, based in South Carolina for four decades, has 18,000 of those jobs in 14 U.S. plants, mostly dedicated to making tires. Eighty percent of the jobs are manufacturing positions.
The company stepped up its U.S. wager a month ago with a new $750 million investment to expand one facility and build another in South Carolina to make earth-mover tires. These tires, which are 10 1/2-feet tall and weigh five tons, are used by companies like Caterpillar. Most of the tires will be exported.
"Every time we create a manufacturing job, there's a significant multiplier of additional jobs that are created in the communities in which we operate," Pete Selleck, chairman and president of Michelin North America, in Greenville, South Carolina, said in an interview.
That commitment was made with expectations that the U.S. unit's tax rate - its biggest hurdle - will ultimately be lowered with a more simplified tax code, he said.
Michelin remains committed to its U.S. operations after 40 years, having streamlined operations and increased productivity.
"A company like Michelin is unfortunately the exception," in terms of escalating investment by a foreign-owned company in the United States, Selleck said. "There are other companies that are not as optimistic as Michelin."
Improving productivity is critical for foreign companies, as they pay higher salaries than U.S. industry averages.
A manufacturing employee of a foreign company's U.S. unit is paid on average $87,000 a year, nearly 21 percent above the industry average, the OFII said in its study. In finance and insurance, the U.S. unit's average pay is $160,000, almost 65 percent above the industry average.
ACCENT ON EXPORTS
Companies here are also focusing more on exports because of the Obama administration's goal of doubling them by 2015 to create jobs and stimulate the economy.
DHL Express U.S., the Florida-based unit of Deutsche Post DHL that is also an OFII member, made an announcement in that vein on Wednesday in New York. The company revealed that it is partnering with the U.S. Department of Commerce's International Trade Administration to provide services to DHL customers that will increase their export sales.
The cause-and-effect relationship of foreign investment in the United States with U.S. employment and economic growth makes the best argument for welcoming U.S. policies at a time when other countries are competing with lower tax rates and other incentives, the OFII's McLernon said.
"The kinds of companies and types of business that they're engaging in represent the potential jobs of the future," she said, adding that "it's been a blind spot" in U.S. economic policy to not focus more on these foreign companies' activities in this country.
(Editing by Jan Paschal)