Solutia Investing Heavily Outside United States

28.01.2011 -

Chemicals maker Solutia is investing heavily outside the United States to be near customers hungry for its products, not because of cheap labor and land, its chief executive told Reuters.

Missouri-based Solutia announced a Malaysian plant expansion on Tuesday, and said it could pour money into U.S. facilities if demand and business conditions improve.

Solutia's overseas plans highlight a growing trend among U.S. manufacturers, especially in the chemical industry, to build plants in emerging economies perceived to be friendlier to business and that have a growing middle class.

"We are investing in Asia not as a low-cost manufacturing site. We're investing in Asia because of the demand in Asia and the growing economies there," Chief Executive Jeff Quinn told Reuters. "The thing that would spur us to invest more in the U.S. would be a growing, booming U.S. economy."

President Barack Obama's State of the Union address on Tuesday outlined an aggressive policy to retain companies like Solutia by growing the U.S. manufacturing base, streamlining regulation and promoting clean energy.

The United States also must consider changes to its tax policy, Quinn said.

Solutia's products include display films for Apple's iPad and's Kindle, insoluble sulfur to keep rubber in tires bonded, and encapsulants for solar panels. All three are major growth areas.

As demand for those and other products grows, Malaysia offers Solutia proximity to China and India's rising middle class, as well as strong economic incentives, Quinn said. Malaysia is "a very good climate for business," he said.

Quinn's comments echo those of other chemical industry executives, including Dow Chemical Chief Executive Andrew Liveris, who recently wrote a book proposing that the U.S. government offer incentives to keep manufacturers from leaving U.S. shores. Solutia, which was spun off from Monsanto in 1997, posted better-than-expected quarterly profit on Wednesday.