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Jun 08, 2024

Glove factory set to bring 2,500 jobs to Wythe County on hold with funding uncertain

It was heralded as “transformational” and “a game-changer” — “the largest job creation commitment Southwest Virginia has seen in a generation,” and part of a national goal to reshore manufacturing of

It was heralded as “transformational” and “a game-changer” — “the largest job creation commitment Southwest Virginia has seen in a generation,” and part of a national goal to reshore manufacturing of critical supplies after COVID-19 disrupted global supply chains.

But nearly two years after then-Gov. Ralph Northam announced in October 2021 that a manufacturer of rubber gloves would bring 2,500 jobs to Wythe County, the project is stalled as it remains unclear how Blue Star NBR will get the money it needs to finish building its facilities and begin operations.

The company expected to use a pandemic-related federal loan package to finish the project, but after a series of delays and, ultimately, the expiration of the associated federal agency’s loan-making authority, that money didn’t come through, said Blue Star NBR CEO Scott Maier.

The price tag to get Blue Star up and running now stands at $230 million.

“Everyone’s ready to go. We’re ready to go. We just need to figure out how can the government unlock the funding to get it done,” Maier said.

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The Blue Star project was divided into two phases.

The first was to build a factory capable of producing 90,000 tons annually of nitrile butadiene rubber, or NBR, which is used to make rubber gloves such as those ubiquitous in doctors’ offices and hospitals. That’s enough NBR to produce six to 12 billion gloves, depending on the type and thickness of the glove.

That phase was completed in May and was funded by $123 million from the U.S. Department of Defense, which issued the contract in partnership with the U.S. Department of Health and Human Services.

The second phase includes building a plant to produce the rubber gloves, hiring the necessary staff for both factories and getting them up and running.

By producing both the gloves and the raw material needed to make them, the Blue Star project is designed to help safeguard the U.S. against supply chain disruption and price fluctuations.

Maier said the company anticipated paying for that second phase with a loan package from the U.S. International Development Finance Corporation, or DFC.

The DFC is a federal agency that typically finances overseas economic development, but in May 2020 then-President Donald Trump issued an executive order authorizing the agency’s CEO to loan money to domestic companies that produce “strategic resources needed to respond to the COVID-19 outbreak.”

The executive order put a two-year time limit on that loan-making authority.

In October 2020, DFC chose Blue Star to receive financing to build facilities to produce NBR and nitrile gloves, Maier said.

In November 2020, he said, DFC instructed Blue Star to apply for funding through the Department of Defense and told Blue Star that DFC would make up any shortfall not covered by that funding.

But, Maier said, DFC delayed processing Blue Star’s loan request, asked for a revised budget after Blue Star was awarded the Defense Department contract, and then, at the end of 2021, told Blue Star that DFC’s loan-making authority would expire before it could finalize the financing package.

DFC officials did not respond to a request for comment.

A U.S. Government Accountability Office study published in November 2021 noted that as of mid-October of that year, DFC had received 178 applications under the Defense Production Act loan program authorized by Trump’s executive order but had completed no loans.

The GAO said it undertook the study because “members of Congress have expressed concern about DFC’s ability to manage DPA activities along with its international development mission.”

In a response published with the study, DFC acting CEO Dev Jagadesan wrote that the agency’s role in financing domestic, rather than international, loans was “unprecedented” and that most of the authority over budgeting and project eligibility actually lay with the Department of Defense and the Department of Health and Human Services.

Now, Maier said, potential paths forward to secure the funding that Blue Star needs could involve Congress or the Biden administration directing Health and Human Services to reallocate money toward the project, or designating money for the project in an upcoming continuing resolution, which is the federal government’s short-term funding bill.

One factor that could complicate efforts is that debt-ceiling negotiations earlier this year to avoid the federal government defaulting on its obligations led to officials pulling back about $27 billion in unspent funding that had been allocated to federal agencies to fight the COVID-19 pandemic.

The offices of U.S. Sen. Mark Warner, D-Virginia; U.S. Sen. Tim Kaine, D-Virginia; and U.S. Rep. Morgan Griffith, R-Salem, said in a joint statement in response to a Cardinal News inquiry that “upon learning of the issues with the development of the Blue Star plant,” the three elected officials “teamed up in a bipartisan push to urge the Biden Administration and the company to come to an agreement to get the plant on track for completion.”

“They are disappointed that an agreement was not reached. They will continue to look for ways to work across the aisle to support domestic manufacturing and job growth in Southwest Virginia,” the statement said.

The lawmakers will meet with local officials soon to look for solutions, Kaine spokesperson Mia Fisher said in an email.

In a statement to Cardinal News, Virginia Economic Development Partnership President and CEO Jason El Koubi said, “We remain hopeful that the federal government will provide Blue Star with the funding to enable the operation of its state-of-the-art NBR plant and proceed with the glove manufacturing plant as planned, and stand ready to support this transformational project that represents 2,500 new jobs for Southwest Virginia.”

Maier said Blue Star has also been exploring private financing options, but “it is not a viable option right now.”

“In order to either service debt or provide an equity return the NBR facility needs to sell its entire 90,000 metric ton capacity to U.S. glove manufacturers and have long-term contracts for that capacity. Right now, there is only production up and running that requires about 17,000 metric tons of NBR,” Maier said.

Maier said Blue Star has also been in touch with the U.S. Export-Import Bank, the federal government’s credit agency that assists in financing U.S. exports, but he said that without a diverse set of purchase agreements from government and industry in place, the project contains too much risk for the bank to underwrite.

When the Blue Star project was publicly announced in October 2021, Northam praised its role in bringing the manufacturing of important personal protective equipment, or PPE, back to the United States from Asia. Most nitrile rubber gloves are made in China, Malaysia or Thailand.

At the time of the announcement, Blue Star was still working with DFC to finalize the financing, Maier said.

“Everyone was confident it was going to close,” he said. “We were dealing with an agency of the federal government. … We got to the point where we had mapped out a closing timeline, and we even got to the point where the DFC told us to basically send a retainer in for their attorneys. My background’s private equity, and when you start paying the attorneys, you’re pretty much at the finish line.”

Maier said once the operation is running, Blue Star plans to expand over five years to the point where it has about 150 employees at the NBR plant and about 400 at each of six glove-making plants producing billions of gloves annually, reaching the figure of 2,500 jobs.

Blue Star’s careers website advertises positions such as maintenance technicians who can earn $64,000 a year, or managers who can earn $84,000. Maier said he anticipates entry-level jobs paying around $18 an hour with benefits. The median household income in Wythe County is $52,726.

With the announcement of the 2,500 pending jobs also came the news that Virginia had committed $8.5 million to upgrade water and sewer infrastructure at Wythe County’s Progress Park, and the Virginia Tobacco Region Revitalization Commission had approved another $1 million for additional public infrastructure for the project.

“As a community, we fully support the project and especially its goals of reshoring PPE manufacturing, capital investment and job creation in rural Southwest Virginia,” said David Manley, executive director of the Wythe County Joint Industrial Development Authority.

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Matt Busse is the business reporter for Cardinal News. Matt spent nearly 19 years at The News & Advance,... More by Matt Busse