Two years ago, the high dollar forced Economic Laboratory Inc. to build a plant in Belgium to supply its European customers with "Solid Power," a new product for cleaning silver, dishes, pots and pans in restaurants and hotels.
With the dollar down more than 30 percent during the past year, though, the St. Paul, Minn., firm now ships the detergent to its Far East customers from plants in the United States.
When the dollar was high, U.S.-made "Solid Power" cost more in foreign currencies than overseas customers were willing to pay. The solution was to produce it in overseas factories to eliminate the exchange-rate disadvantage.
Now, with the dollar down, Economic Laboratory doesn't have to build a plant in Japan, and has been able to use the money it saved to buy out its Japanese partner.
"We can sell U.S.-made products in Japan now the way we couldn't 18 months ago," said Adrian Smith, Economic Laboratory's senior vice president for Canadian and Pacific Far East operations.
A number of American companies surveyed during the past month agree with Smith that the sharp decline in the value of the dollar, especially in relation to European currencies and the Japanese yen, has bolstered their sales. But some companies still are looking for sales increases they are sure will come, while others fear it is going to be extremely hard for U.S. businesses to regain market shares they lost when the dollar was overvalued.
The fall of the dollar is considered critical to ending four years of record trade deficits; economists blamed the dollar's high value for making U.S. products uncompetively expensive in overseas markets, while attracting a flood of cheap imports to this country.
The dollar started dropping in February 1985, and picked up speed after finance ministers of the United States, West Germany, Japan, Britain and France decided last September to take coordinated action to bring world currencies into better alignment.
While the lower dollar is supposed to make it easier for American companies to sell overseas, Commerce Secretary Malcolm Baldrige, a former businessman, warned that the currency swing alone isn't enough to guarantee sales. In a meeting with reporters last month, he criticized some U.S. companies for failing to take advantage of the dollar's fall by becoming aggressive sellers in the new highly competitive global marketplace.
"I still see businessmen who are waiting for a chance to raise prices," Baldrige said. "I think they are living in a world that is past. The competition is more severe now, and U.S. businesses have to prepare themselves for a competitively different future than they have seen in the past."
Baldrige's views were echoed by Peter Y. Sato, economic minister of the Japanese Embassy here, who said a 30 percent increase in the value of the yen has given American companies "extremely favorable conditions to increase their exports to Japan. . . . American firms can sell their products 30 percent cheaper to Japan. Japan's actions to improve market access in the past year created substantial opportunities for increased sales of foreign products in the Japanese marketplace.
"And yet we do not see signs of a substantial increase of American exports to Japan," Sato said. "What we see are only signs of a decrease in our exports."
In Senate testimony last week, however, former Commerce Department official Clyde Prestowitz said the United States doesn't have a chance of selling in Japan. He said a web of long-standing informal arrangements among Japanese firms and a national reluctance to buy foreign goods pose an invisible barrier to U.S. sales despite changed currency values and government-sponsored market-opening moves.
Japan, with the largest trade surplus with the United States -- nearly $50 billion last year -- has suffered most from the fall of the dollar. Major companies complain their profits have been cut drastically, and smaller firms say they are being driven to the brink of bankruptcy because their higher-priced exports are no longer competitive.
Charles H. Nevil, the head of a trading company based in Los Angeles, sees potentially bleak prospects for using the lower dollar to increase sales to Europe. He said businesses there have begun producing competitive products that they used to buy from American companies until the high dollar made the cost too high.
They don't want to give back their market share, he said, and "pricing has become predatory."
Thus, he added, "The return of the dollar to a realistic relationship against other world currencies may be too late.
"It is not enough for the currency to have adjusted downward. The damage done to our country's exports during the high dollar may be almost irreparable," said Nevil, a member of the California State World Trade Commission and president of The Meridian Group, which specializes in selling U.S. products overseas.
"The world is not waiting for us to get back in. The hard-dollar period spawned so much local industry that we may never get back in."
Economics Laboratory, the St. Paul firm that is successfully selling its hotel and restaurant cleaning supplies around the world, said it is using the lower dollar to seek new customers. Smith said the company expects strong new business from Korea, which, as host to the Asian Games this year and the 1988 summer Olympics, is concerned that hotel and restaurant kitchen facilities meet rigorous sanitary standards.
"What we are doing is expanding our business base," Smith said. "Even if the dollar goes stronger, we will still have those new customers."
"What the weakness of the dollar has enabled us to do is introduce our new product into Asia at competitive prices without making the capital investment for new plants."
Caterpillar Tractor Co., the company that complained the loudest in business and government circles about the harm the high dollar was doing to its overseas sales, says it hasn't yet reaped the benefits of the low dollar. Caterpillar, the world's largest construction-equipment manufacturer, said it appears that dealers for its major competitor, the Japanese Komatsu Ltd., are using past profits to keep from raising prices. Komatsu, which opened a U.S. plant last year, is the world's second-largest maker of construction equipment.
"We expect Komatsu's prices to increase, but we haven't seen it yet," said Gilbert Nolde, Caterpillar's public information manager. Nonetheless, he said, Caterpillar has noted a slight increase in its sales. But he added that company analysts are not sure that it is due to the weakened dollar.
"We are not yet seeing the benefits of the yen strengthening," Nolde said. "We expect to see it, though. That's good. That's a plus. Our yelling and screaming all those years about the yen is about to pay off."
Caterpillar lost $773 million in 1982 and 1983, when the dollar was at its height, mostly because of lost overseas sales.
Ingersoll-Rand Co., which pointed out in congressional testimony more than 2 1/2 years ago that the high dollar made its U.S.-manufactured road compactors and portable compressors more expensive than the same products made in the company's outdated European factories, also says it hasn't gotten major increases in sales as a result of the dollar's retreat.
"What we have seen is the Japanese are starting to raise prices," said D. King Cunningham, vice pesident of international marketing. As a result, he added, "In Asia and the Pacific, we are seeing a pickup in business against the Japanese."
The Japanese previously had been "way below" U.S. and European companies "and stealing all the jobs. Now they are up 20 percent and, of course, all of us are happy to compete at that level."
E. I. du Pont de Nemours & Co. also finds some increase in sales as a result of the lowered dollar, but Senior Vice President John R. Malloy said that currencies in such major markets as Hong Kong, Canada, Korea and Taiwan have not strengthened because they are pegged to the dollar.
"We are not seeing much relief in fibers and textiles," which come mostly from Far Eastern nations whose currencies have remained weak relative to the dollar, said Malloy.
"There's a dog fight out there. There's not the immediate turnaround that one might think. I would like to think we always have been aggressive," he added.
The short-term effect of a weaker dollar is fatter profits for Texas Instruments Inc. because foreign currencies are worth more in U.S. dollars, said Chief Financial Officer William Aylesworth.
"We've been helped in our overseas operations, especially in Europe, to the extent that sales there translated into U.S. dollars give us higher revenue and favorable profit margins compared to when the dollar was strong," he said. "In the long term, we and others should be able to be more competitive in world markets."
And Harry Hammerly, financial vice president of 3M Corp., said: "We're smiling. The more-properly-valued dollar has had a positive effect on 3M's business because 35 percent of our sales are outside the United States."
But he said 3M doesn't expect to seek new markets, because "we did not pull out or give up market share during the overvalued dollar but suffered a reduction in profits. The main effect is that margins are improved."
He added that one positive effect for American workers is that the "natural bias" in favor of manufacturing overseas has been eliminated.
A major beneficiary of the dollar's shift has been U.S. soybean farmers, whose products now are selling far better in Europe and Japan. "Our consumption is up substantially in Europe over a year ago, and we think we are going to see a substantial increase in Japan," said John Baize, head of the American Soybean Association's Washington office.
Agriculture Department figures show that Europe increased its soybean purchases by 19 percent during the past year. The price paid the American farmer is slightly lower but, because of the dollar swing, the purchase price to the Europeans is "substantially lower" in their currency, Baize said.
A year ago, when the soybean price was $5.50 a bushel, West Germans paid 17.05 deutschemarks. This year, though, the price is down to $5.25 -- but soybeans cost the Germans only 11.90 marks.
One American company, though, prospered on exports despite the high dollar. It is Timberland Co., maker of hand-sewn casual shoes that became a hot fashion item in Italian stores during the past four years. This special appeal, which now takes one-fourth of the company's sales, has turned a New Hampshire boot maker into international traders.
"The reason for Timberland's success is anything but price. If anything, the strength of the dollar seemed to enhance the value of the imported product," said Marketing Vice President John Thorbeck.
Now he is trying to expand Timberland's Italian success into other parts of Europe, Hong Kong and Japan. Although the company isn't changing its styles for the foreign market, figuring its appeal is the outdoorsy, American look, it has adjusted its sizing to accommodate the smaller Asian body -- something the Japanese accuse U.S. companies of failing to do.
Thorbeck said shoes sent to the Far East start with a size 5 instead of the normal size 7 for the United States.