Why American mask makers are going out of business
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Mike Bowen has spent much of the pandemic saying, “I told you so,” and you can hardly blame him. Back in 2005, just as low-cost Chinese manufacturers were taking over the personal protective equipment industry, Bowen was joined by a friend who had started a small surgical mask company called Prestige Ameritech. The plan was to market his company’s masks as a way to provide flexibility to American hospitals and distributors – a means of ensuring domestic supply if the supply chain ever breaks down.
“Every company had left America,” he recalled recently. “The entire US mask supply was under foreign control.” He remembers warning customers, “If there’s a pandemic, we’re going to be in trouble.”
At first, Bowen’s sales pitch was not very successful. But in 2009, the swine flu virus caused a shortage of masks in the United States. Suddenly, Prestige Ameritech had a lot of customers. “We went from 80 employees to 250,” says Mr. Bowen. “The phones were ringing off the hook. We thought, ‘People finally get it. We’re going to fix this problem.'”
He was wrong. As the swine flu pandemic ended, the company’s new customers went back to buy cheap masks from China; Chinese manufacturers soon controlled 90 percent of the US market. “The cost savings were like crack cocaine for American hospitals,” said Mr. Bowen.
Still, Mr. Bowen never stopped telling anyone who would listen that the offshoring of personal protective equipment – including nitrile gloves, hospital gowns and respirators, as well as surgical masks – would pose a bigger problem for America next time. . global pandemic.
Understand the supply chain crisis
Which, of course, is what happened. Within weeks of the COVID-19 pandemic in 2020, the supply chain of protective equipment was broken, causing severe shortages that claimed lives. A black market emerged, full of thieves and the rich quickly.
A handful of American entrepreneurs decided they would do their bit by making masks.
In Miami, a family-owned surgical device company, Demtech, spent several million dollars expanding its facilities, manufacturing machines, and hiring hundreds of employees; By the fall of 2020, it was able to manufacture five million masks a day, according to the company’s vice president, Luis Argüello Jr. “We took risks as a family,” he said.
In Houston, Diego Olmos, a construction specialist who had recently left a multinational company, used his severance to help start a mask-making company called Texas Medplast. “My business partner and I said, ‘This is the right thing to do,'” he said.
In Lyndon, Utah, an entrepreneur named Paul Hickey helped found Puravita Medical to manufacture the KN95 respirator.
It’s hard to know how many of these companies were born during the pandemic; 36 of them are members of the American Mask Manufacturers Association, which he formed to lobby Washington. Almost everyone experienced the same boom and bust that Mr. Bowen did in 2009. First, customers who could no longer obtain masks through their normal supply channels were banging their doors. The same was true during the Delta and Omicron waves, when masks were also scarce.
But as the waves broke and Chinese companies, determined to grab their market share, began exporting masks at below cost, customers disappeared.
“All the hospitals and government agencies and retailers that were begging for American products suddenly said, ‘We’re good,'” Mr. Hickey said.
Today, these small American mask makers are in serious trouble—if they haven’t already gone out of business. DemeTech has furloughed almost all of the staff it hired to make masks, and it has closed most of its mask manufacturing facility. Mr. Olmos, their break-up is long overdue, hoping Texas Medplast will soon go out of business except by a miracle. And Puravita Medical? “We are on the verge of losing it all,” Mr. Hickey told me.
The government’s answer to this pattern is its own purchasing power. During his State of the Union address on Tuesday night, President Biden promised that the government would begin strictly enforcing provisions in the law that ask federal agencies to buy American-made goods whenever possible.
“Everything from the decks of aircraft carriers to the steel on highway railings” would be made in America, he vowed.
How the supply chain crisis unfolded
The pandemic caused problems. The highly complex and interconnected global supply chain is in turmoil. Much of the crisis can be traced back to the outbreak of Covid-19, which caused an economic slowdown, mass layoffs and halted production. Here’s what happened next:
However, the plight of these small shell companies suggests that reviving American manufacturing – even if the underlying logic is national security – will not be easy.
“Resilience is the joke of the day,” said Mark Schesel, a hospital supply chain specialist working to develop an alternative supply chain for personal protective equipment. And the flexibility — that is, building up additional manufacturing capacity that can get the country through an emergency — is of value to the country, smaller mask makers say. Certainly, he argues, a globalized, timely supply chain for low-cost protective equipment is fine in normal times. But we’ve learned over the past two years that the country needs domestic manufacturers if we hope to avoid terrible shortages during the next pandemic, and one after that.
But how do you build that resilience? According to Bloomberg Gov., the federal government spent $682 billion buying goods and services from contractors in 2020. That’s the amount the Biden administration wants to use to buy American products. And while that’s hardly a change, it’s only 3 percent of America’s $21.5 trillion economy.
The mask makers I interviewed for this article said that the Biden administration had expressed interest in buying their masks, but that has yet to happen. Even if it did, it would be unlikely to make much of a dent in Chinese dominance. As Mr. Bowen said in a recent email to the White House, “Hospitals run the mask market.” Since their incentives are to reduce costs, he wrote, “Any plan that allows imported masks to cost less than US-made masks will result in a foreign government controlled US mask supply – as it currently exists.” “
To put it another way, the modern imperative to maximize shareholder value will always place efficiency and cost over flexibility.
Mask makers are a microcosm of a bigger problem. Today, there is a shortage that goes beyond personal protective equipment. Things as diverse as semiconductors and garage doors are in short supply – all products that were manufactured offshore during previous decades as American companies embraced timely supply chains and cheap foreign labor. Economists and corporate executives overlooked flexibility, and now the country does not have a clear idea of how to build it, even though the need for it has become clear.
Mr. Bowen told me that the problem for small American mask makers could be solved by either banning imported masks or by giving notices to hospitals that they would be legally liable if their purchases of imported masks meant they could be sold in the future. I cannot protect my employees or patients. emergency. He also acknowledged that neither situation was realistic.
At the start of the pandemic, the Japanese government granted $2.3 billion in subsidies to companies that move manufacturing from China to Japan, aimed at ensuring access to essential supplies during the crisis. The US federal government could take a similar step, allowing US mask makers to match Chinese prices. The problem is that if the government subsidizes every critical product that requires supply chain flexibility, it will become very expensive.
Despite the president’s pledge to buy American by the government, the most likely scenario remains the same as it has been for months: Small mask makers will go out of business, hospitals will continue to import Chinese masks – and the country will be caught short again when the next pandemic hits. Comes.
what do you think Should the government do more to protect American manufacturers of essential supplies? What would be most effective? Tell us: [email protected]
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