Irish HP job cuts highlight Ireland's risky dependence on US investment
Reports that HP (Hewlett-Packard) Inc., a US technology giant, is planning to announce up to 500 job losses at its Leixlip, County Kildare plant, again highlights Ireland's dependence on American inward investment and the persistent underperformance of the indigenous exporting sectors.
In a sign of the changing times, reports from Tokyo this week say that Shinzo Abe, Japan's prime minister, is set to arrive in Washington on Friday for his first official summit with President Trump, and he is expected to present proposals on how Japanese companies will create hundreds of thousands of jobs and invest in United States infrastructure including high speed train projects.
In 2014 US jobs at Japanese companies totaled 840,000 while the cumulative total of majority Japanese-owned affiliate assets was at $1.8tn.
Next month Enda Kenny, Irish taoiseach/ prime minister, will visit President Trump at the White House, during his St. Patrick's Day trip to the US.
Kenny could cite official US Department of Commerce data showing that Irish companies employed 217,000 people in the US in 2014 and majority owned Irish affiliates had total assets with a value of $356bn.
If the volatile president shouted "fake news" he would be right!
Kenny could pivot and argue that Ireland is a very important host of investment by American companies with the fifth highest stock of investment value in the world. For example official US data for 2015 show that direct investment on a historical cost basis was $343bn in 2015 compared with $74bn in China; $108bn in Germany and Japan; $593bn in the United Kingdom and $352bn in Canada.
If the volatile president again shouted "fake news" he would be right again!
Apart from cash in real-world holding companies in Ireland, Apple for example has a cash trove in Irish shell companies — the cash is in the US, mainly invested in US Treasuries.
So this total of $343bn is fake as it is massively boosted by tax avoidance.
While the American Chamber of Commerce in Ireland uses the data to present a misleading account of how much more significant Ireland is to US companies than for example China, the jobs data show a more realistic situation.
In 2014 Irish employment in majority-owned US affiliates in Ireland was 123,000 compared with 677,000 in affiliates in Germany; 1.35m in the UK; 1.7m in China and 340,000 in Japan.
As for employment by Irish companies in the US, most of the 217,000 are employed by US companies that have moved their headquarters to Ireland. These firms use what are called tax inversions to shift their tax residency to countries such as Ireland.
There are 25 companies on the Nasdaq Stick Exchange under the label "Companies in Ireland" and about 20 are not Irish.
Data from the fake-Irish companies also distort international comparisons — for example a 2016 IBM report says "Ireland continued to lead the world in attracting 'high-value' projects."
Another report published last year had Ireland joining an FDI Confidence Index at a 23 ranking of 25 countries after an absence of a decade.
Real US FDI in Ireland
In 2014 we estimated that 40 American companies accounted for two-thirds of the value of Irish exports.
IDA Ireland 2015 data show that outside of the US and Europe, jobs provided by FDI (foreign direct investment) account for only 4% of total direct employment — China and Japan, the second and third biggest global economies, have no significant FDI presences in Ireland.
Firms in the US, Germany and the UK account for 84% of the jobs with the US accounting for 74%.
Jobs in FDI exporters account for 10% of all jobs.
Apart from the 2015 takeover of Avolon, an Irish aviation lesser, in a deal worth about $2.5bn and few jobs, Ireland has had little success in attracting Chinese projects. Ireland got €99m of €46bn invested in EU in 2000-2014.
Europe is however the key destination for Chinese OFDI (offshore direct investment). In 2016, Chinese companies invested €35bn in the European Union (EU), a 77% increase from 2015.
HP in Ireland
After Intel announced in 1989 that it would build a chip plant in Leixlip, County Kildare, Hewlett-Packard was one of the other high tech giants along with the US drugs firms, to open significant facilities in Ireland.
In 2015 a struggling Hewlett-Packard split into two companies with HP Inc. being responsible for PCs and printers while Hewlett-Packard Enterprise took charge of servers, networking equipment, software and services.
Last October HP Inc. announced that it would cut 3,000 to 4,000 jobs globally over the coming three years.
The Irish Times reports that senior US management are due to brief staff on Wednesday on the future of the Leixlip operation which makes ink-jet printer cartridges and also has an R&D role.
Pic above: Stanford University classmates Bill Hewlett and Dave Packard founded Hewlett-Packard (HP) in 1939. The company's first product, built in a garage, part of Packard's rented house on 367 Addison Avenue in Palo Alto, California, was an audio oscillator — an electronic test instrument used by sound engineers. One of HP's first customers was Walt Disney Studios, which purchased eight oscillators to develop and test an innovative sound system for the movie 'Fantasia.'
The simple one car garage became the HP workshop and a little shack out back became Bill Hewlett's home. In 1989, California named the garage "the birthplace of Silicon Valley" and made it a California Historical Landmark. Photo HP Museum