When Vice President Mike Pence rolled through town, the main stop on his list — aside from a campaign fundraiser — was his visit to Merit Medical, where he spoke in glowing terms about the homegrown medical device manufacturer.
The vice president praised the company’s steady growth, its innovation, and its founder and CEO Fred Lampropoulos’ optimism and faith.
“Merit Medical is a great company,” Pence said. “But Fred would be the first one to say Merit Medical is a great company because it has great people at every level of this company. So give yourselves a round of applause.”
The couple hundred employees in attendance obliged, giving themselves a hearty ovation for their good work.
Less than a week later, those employees and the rest of the Merit team got an email notifying them that Merit was suspending its match to their 401(k) retirement plans.
This is a company that, as Pence noted, is on course to have a billion dollars in revenues this year. According to the company’s last quarterly report, sales and profits were up 15 percent for the first six months of 2019 over the previous year.
And it’s a company that recently got $56 million in taxpayer subsidies to expand its operations at the South Jordan campus, with a new manufacturing facility under construction and due to open in December — an unorthodox deal it got, in part, by threatening to build the facility in Mexico or Ireland if leaders didn’t come through with the money.
The 401(k) suspension won’t hamper the subsidy since economic incentives are awarded based solely on wages rather than total compensation. So to get its money, Merit only has to pay its employees slightly more than the average wage, about $55,000 annually. (Legislators and the Governor’s Office of Economic Development should revisit this policy when they’re doling out future incentives.)
When I spoke to Lampropoulos, he wouldn’t comment on the 401(k) issue, saying it is an internal company matter, aside from saying: “Businesses have choices to make and in making those choices, it might appear to be something draconian … but any contributions through the balance of the year is minimal. It affects the least amount of people.”
And, to be fair to Merit, there are some pluses to working there. For example, Lampropoulos points out that the cost of health benefits hasn’t gone up in five years, which he attributes in part to their on-campus health and dental clinics.
But there is another layer to this issue. The email that went out to employees cited “business conditions” as prompting the 401(k) suspension — and those conditions are indeed complex, as Lampropoulos explained to me.
The company’s main distribution hub for Asian markets is in Hong Kong, where the airport was shut down for a period of time last month by protests against the Chinese government.
The U.S. trade war with China is disruptive, making products more expensive in that market where Merit had $120 million in sales last year alone.
Lampropoulos said there is concern that, with Brexit looming in the United Kingdom, they won’t be able to ship products to England from the company’s facilities in Ireland or The Netherlands, so they’ve built a new distribution center near London where they can distribute products manufactured in the United States.
While it wouldn’t be fair to suggest that President Donald Trump is the source of these problems, his irrational and destabilizing foreign policy hasn’t helped. He has dubbed himself “Mr. Brexit” and encouraged the withdrawal from the European Union; his message on the protests in Hong Kong has been all over, dismissing the pro-democracy protesters and suggesting China deal with them itself; and, of course, there is the trade war that he initiated and continues to escalate that is costing businesses and consumers billions of dollars.
For his part, Lampropoulos is willing to endure the trade dispute with China.
“I’m a free-trade guy, but I’m a fair-trade guy, so I don’t like tariffs, but I think things have been awry,” he said. “We finally have an American president who will speak up and do something.”
Lampropoulos also has problems with Democrats. A medical device tax that was part of Obamacare has been suspended until Jan. 1, but if that isn’t extended it will cost his company millions. And he wants to see the U.S.-Mexico-Canada trade deal ratified to ease shipments from Merit’s facilities in those countries, but House Democratic leaders want stronger environmental and labor standards in the deal.
Wall Street has noted Merit’s challenges, and the company’s stock price has plummeted, dropping 37% in a little more than a month.
What Merit’s current problems illustrate is the complexity of doing business in a global economy and the fallout of a president who creates chaos wherever he goes. Utahns are feeling it in real terms. The trade war with China alone is costing households between $580 and $831 a year.
And now, even as the vice president touts this administration’s record, Merit employees are feeling the impacts of its disruptive trade policies in their retirement accounts as well.