Taxpayers sank almost $100 million into a COVID glove factory that never opened

The promises echoed into a massive warehouse once used by Bethlehem Steel: $350 million in public and private investment, 2,000 new jobs and the return of manufacturing to Sparrows Point within a year.

It was March 2022, the tail end of the Omicron wave of COVID-19 in the U.S., and a company called United Safety Technology hosted local politicians and federal officials at a groundbreaking of its state-of-the-art nitrile glove factory — jumpstarted by a $96.1 million investment from the federal government.

Two years later, not a single glove has rolled off the line.

The factory sits unfinished, the feds are distancing themselves, and the CEO of the New York-based company says he needs more money.

Dan Izhaky, who founded United Safety Technology in 2020, said his ambitions for the factory ran headlong into the country’s struggle to manufacture personal protective equipment, or PPE, cheaply enough to compete with established foreign players.

“I think this is a national story, to be honest with you,” he said in an interview.

United Safety Technology was among a wave of PPE companies formed during the COVID-19 pandemic. At the time, hospitals were scrambling for masks, gowns and gloves, and the federal government was burning through its PPE stockpile, almost all of which was made overseas.

Congress decided that America should never again be caught flat-footed during a global pandemic. An agency within the U.S Department of Health and Human Services was tasked with jumpstarting the domestic production of PPE, pharmaceutical ingredients and more. That meant giving $16 billion to private companies for 87 different manufacturing projects.

While some recipients were established manufacturers, others like United Safety Technology were starting from scratch. Izhaky’s background is on Wall Street.

The company, which according to its website initially wanted to make masks, won a $96.1 million federal grant to manufacture nitrile rubber gloves, the blue exam gloves worn by doctors, nurses and other medical workers. United Safety Technology raised an additional $250 million in private investment and decided to base its operations at Tradepoint Atlantic, the massive logistics hub in Baltimore County that was once a steel plant.

United Safety Technology and a handful of other companies were supposed to produce billions of American-made gloves annually.

The federal government awarded six companies $574 million to increase the production of nitrile gloves, and put up another $123 million for a proposed nitrile rubber factory in Virginia. Just two companies, including Showa US — the lone established glove manufacturer among the six awardees — are making gloves today. The rubber factory never opened.

It’s not just gloves that have failed to launch. The larger plan to onshore PPE production has largely failed, according to Tinglong Dai, a professor of operations management and business analytics at the Johns Hopkins Carey Business School.

That’s because American companies are competing with manufacturers in countries like China, where the government has been subsidizing its medical manufacturing industry for years. China has muscled its way into becoming a leading exporter of PPE globally, Dai said, and most of America’s PPE likely comes from there.

If America wants to make its own PPE, the U.S. needs to beat China and other countries at their own game and become a global exporter, he said. Only then can American manufacturers attain the scale needed to match the low prices of gloves made abroad, he said.

But with the pandemic in the rearview mirror, Dai said, few people seem to care about subsidizing American-made gloves anymore.

“It was a feel-good story at that time,” Dai said.

At the kickoff event for United Safety Technology in 2022, politicians and business leaders treated the proposed 735,000-square-foot factory and its promised 2,000 employees like a certainty.

“Think about it,” said Baltimore County Executive Johnny Olszewski. “An annual payroll of tens of millions of dollars put to work supporting our communities, our local businesses and our country.”

Then-Gov. Larry Hogan called it a “game-changer” for the state and the country.

In addition to the federal money, Maryland approved $61 million of tax incentives and loans. A spokesperson for the Department of Commerce said none of the state’s money was ever paid out.

Dawn O’Connell, assistant secretary of HHS’s Preparedness and Response office, told the crowd she looked forward to coming back and visiting the factory when it opened. It was O’Connell’s office that oversaw the $96.1 million investment from the federal government.

O’Connell never came back.

A year later, she delivered a starkly different message when she testified before Congress. Her agency was running out of the pandemic-era money used to start up American PPE manufacturing. She urged lawmakers to carve out an annual budget to subsidize the fledgling industry — or risk being unprepared for the next pandemic.

There might be a better way to do this, said Greg LeRoy, executive director of Good Jobs First, a watchdog organization that researches government subsidies. Rather than focusing on the supply of gloves, LeRoy said, the government could create demand.

That would mean strictly enforcing that federal agencies buy American-made gloves, he said, ensuring a small but steady demand for a domestic industry. To LeRoy, that makes more sense than trying to subsidize a globally competitive manufacturing industry.

“You can’t defy gravity,” LeRoy said. “If you have really cheap imports coming in, I can understand why this strategy didn’t work.”

A spokesman for HHS said the agency has terminated its contract with the company for cause, making it unlikely to receive further federal support.

One contractor, A.C. Schultes of Maryland, is suing United Safety Technology over a $1.5 million project to install a deepwater well at the factory site. According to the lawsuit, United Safety Technology “suddenly and without any warning or explanation” told the contractor to halt its work in February 2023.

United Safety Technology denied the claims in court filings, and a settlement hearing is scheduled for July.

Izhaky declined to say how much of the federal money his company has spent, but said it needs additional investments to get off the ground. Private financing disappeared when it became clear that Chinese manufacturers would undercut the price of American-made gloves, Izhaky said.

Still, Izhaky said he is trying to move forward with the project. He declined to say how close the factory is to being operational.

“We spent a lot of money building out the factory, retrofitting that facility,” Izhaky said. “The equipment is in there.”

Giacomo Bologna

giacomo.bologna@thebaltimorebanner.com

Giacomo "Jack" Bologna covers business and development at The Baltimore Banner.

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