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Tuesday, April 09, 2002

By Len Boselovic, Post-Gazette Staff Writer

Anyone looking for evidence that Western Pennsylvania's economy is more influenced by forces beyond the region's borders need not look too far. After all, the world's a smaller place than it used to be.

		Behind the numbers Verizon Communications BUSINESS: Telephone and wireless services HEADQUARTERS: New York City EMPLOYEES: 247,309 Sony Corp. BUSINESS: Consumer electronics, film, insurance and banking HEADQUARTERS: Tokyo EMPLOYEES: 181,800 GlaxoSmithKline BUSINESS: Pharmaceutical and consumer health-care products HEADQUARTERS: Middlesex, United Kingdom EMPLOYEES: 107,517 Bayer Corp. BUSINESS: Healthcare, agriculture, polymer and chemical products. HEADQUARTERS: Bayerwerk, Germany EMPLOYEES: 119,500 Viacom BUSINESS: Network and cable television, radio, outdoor advertising, motion pictures, theme parks, Blockbuster, books, Internet HEADQUARTERS: New York City EMPLOYEES: 60,100 Online graphic: Local companies based elsewhere based on total revenue

You can find it in the executive office of Alcoa, where Brazilian Alain Belda is chairman of the world's largest aluminum producer.

You can find it at any former Mellon Bank branch, now operated by the U.S. subsidiary of the Royal Bank of Scotland.

You can find it inside any General Nutrition store, owned by Dutch-based Royal Numico.

You can find it on your television, where the carefully coiffed anchors serving up the local news take orders from Viacom in New York, not Westinghouse Electric in Pittsburgh.

You can even find plenty of evidence in the steel industry, the enterprise that provided Pittsburgh its only identity for so many years. J&L Specialty Steel, descended from an early contributor to Pittsburgh's industrial revolution, is now part of Luxembourg-based Arcelor, the world's largest steelmaker. U.S. Steel, the nation's largest unionized steelmaker, has used profits from its Slovakian subsidiary to cushion losses from its domestic mills.

"The globalization of that industry is taking place, however much some people would resist," said James Burnham, a Duquesne University business school professor who specializes in the steel industry and international trade.

Overseas investors aren't the only ones reshaping the region's economy. Dominion Resources, FedEx Corp., Verizon and NiSource have become major players here through mergers and acquisitions.

Cross-border investment -- whether it's been out-of-state or foreign firms investing here or Pittsburgh companies investing outside the region -- has been a major reason why the region's fate is more closely linked to leaders and organizations based outside the region. More than ever, companies located in small towns around the world are popping up on the radar screens of global giants looking to enter new markets or expand their presence in existing ones.

Some prime examples of foreign investment locally: Sony's major presence in Westmoreland County; British Nuclear Fuel's purchase of Westinghouse Electric Co., the nuclear energy business of the former conglomerate; Marconi's acquisition of computer networking tech star Fore Systems; and Sweden's Svenksa Cellulosa Aktiebolaget's purchase of Tuscarora Inc., a New Brighton maker of custom plastics. Recent overseas investments by Pittsburgh companies include Alcoa's purchase of aluminum producers in Spain and Italy.

Robert Nachtmann, executive associate dean of the University of Pittsburgh's Katz Graduate School of Business, says the investments are part of a restructuring driven by the need to be competitive on a global basis.

"You wouldn't say this is a Pittsburgh phenomenon. It's a global phenomenon," said Nachtmann, who teaches finance. "The whole world has moved through an industrial restructuring."

He cited the auto industry, where General Motors owns Saab and Subaru, Ford owns Volvo and Jaguar, and Germany's Daimler-Benz owns Chrysler. Those combinations were driven by the companies' need to become more competitive globally. Those forces affect every company because when their customers are looking for the best product at the most competitive price, their shopping list extends far beyond the supplier down the street.

"Even when they aren't exporting directly, they're supplying those who do export," Burnham said.

The inexorable advance of globalization is evident in the area of human capital as well.

When Nachtmann first came to Pitt, the university's executive MBA program was stocked with executives from such local giants as U.S. Steel, National Steel, Koppers, Westinghouse, Mellon and PNC Financial. Today, about 40 percent of the Katz School's full-time students are from outside the United States, he says. Moreover, Pitt has MBA programs in Prague and Sao Paolo, Brazil.

"We're part of the global restructuring of higher education," Nachtmann said.

Consultants, lawyers, hospitals and other service providers also have more ties outside the region.

"The service sector is internationalized to an extent that most people don't appreciate," Burnham said.

What does it all mean? Nachtmann says the development makes it more important than ever for the state to provide an environment where companies can thrive. If it doesn't, investors will place their bets in other regions.

"The core issue we should be looking at ... are the laws that we set. Are they conducive to nurture a corporate environment?"