Keeping afloat in the import flood

Nation's Business, Sept, 1985 by Henry Eason

Technological breakthroughs in American defense and space programs have benefited aerospace companies. Competition traditionally has been all-American in the domestic market. And yet, in recent years, even mighty Boeing Commercial Aircraft Company has been feeling foreign pressure.

Airbus Industrie, a European consortium backed by Common Market governments, is making sales to U.S. airlines. So is British Aerospace.

Though foreign sales have only scractched the surface, says Boeing Executive Vice President Richard Albrecht, the threat is clear and present.

"We have probably done a better job than the automobile industry in staying competitive and adapting to the marketplace," he says. But competing with foreign governments that subsidize aerospace firms represents a real challenge.

European governments, anxious to keep employment high, are willing to eat some of the costs of producing planes that are then "made available at competitive prices," Albrecht complains.

Gulfstream Aerospace in Savannah, Ga., a maker of business jets, finds that its competition is government-backed Canadian and European business.

The executive plane market has been in a slump since the recession, says Gulfstream spokesman Al Balaban. Gulfstream decided to increase its marketing efforts when other firms were calling in some of their salespeople. The decision has paid off in sales. But Gulfstream has an edge. Its planes are at the top of the line, where demand has been fairly constant. A Gulfstream III sells for $14 million and seats 14 to 19 people. In this product category, competition has been modest from domestic manufacturers, though foreign firms have crowded in aggressively.

"These companies compete in the United States because they don't have that big a market at home," says Balaban.

Some firms prosper by taking advantage of a small but profitable niche. Despite determined efforts by foreign pharmaceutical companies to deeply penetrate the American market, Alcon Laboratories in Fort Worth continues to do well.

Alcon makes specialized products for eye care--a market simply not big enough to attract foreign giants. There will always be room for small firms like his, servicing niches, President Ed Schollmaier says.

"By and large most of the pharmaceutical industry is dominated by the large corporations," he says. "They compete with each other internationally."

Merck and Company, with $3.5 billion in sales, is one of those giants. The New Jersey firm has about 9 percent of the domestic market, and it is holding its own, in spite of pressure from European and Japanese companies.

The United States continues to maintain pre-eminence in many medical product fields. Always strong in R&D, companies like Merck produce an array of products and market them effectively abroad. America customarily has a trade surplus in pharmaceuticals.

But, says Merck President John Huck, the American firms are having to struggle to maintain the foreign sales that give them economies of scale that help them keep prices competitive.