Cadillac Products looks to diversify from automotive with medical gown unit

Troy, Mich. — Automotive plastics supplier Cadillac Products Inc. is investing millions of dollars into manufacturing hospital gowns in hopes of turning a charitable pandemic pivot into a full-fledged business unit.

Its newly launched health care subsidiary, ProTEC-USA, has donated nearly 1.2 million gowns since the COVID-19 pandemic started in early 2020 but has yet to land a paying customer. Its executives, however, are banking on sustained demand for local personal protective equipment after the pandemic exposed the United States' reliance on China for hospital supplies.

At the auto supplier's 62,000-square-foot plant in Troy, around two dozen of the company's 225 employees have a hand in making gowns at any given time. Around 10 are devoted full time to running the new $1 million gown-making machine, which sits in a 5,000-square-foot area carved out for ProTEC. The machine was built in-house and is capable of producing 2 million gowns each year, said Mike Williams, vice president of operations and purchasing.

At a sale price of $1 apiece, which Williams said is competitive with offshore sourcing, that would create $2 million in new revenue for Cadillac Products, or around 5 percent of overall revenue for the company.

"I've got a goal. I'd like to diversify our business outside of just automotive products," Williams said on a recent tour of the plant for dignitaries and media. "If I could get this to 25 to 30 percent [of overall revenue], that would be great."

Plastics News placed Cadillac Products at No. 104 in the most recent of North American film and sheet makers with an estimated $40 million in annual sales in the region.

The nation's supply of PPE was quickly depleted when the pandemic hit. Then supply from China, the world's largest exporter of PPE, was shut off. The shortage led to horror stories of nurses and doctors reusing equipment and treating patients without adequate protection.

While the frenzied early days of the pandemic have passed and hand sanitizer and masks now sit discounted on store shelves, many politicians are calling for PPE to be manufactured domestically to prepare for health crises in the future.

"I came into the [Michigan] Legislature and met with so many people who said that our economy is risky because we are so dependent on the auto industry," said state Sen. Mallory McMorrow, D-Royal Oak, who attended the company's tour to laud its "made in Michigan" PPE plan, alongside a few other Democratic lawmakers. "When the auto industry is hit hard, we're hit hard."

That's a big factor in Cadillac Products' desire to diversify. The company is planning to invest another $1 million to build a new machine and double gown production capacity, underscoring its confidence that there is a market for locally made PPE.

The company received a $100,000 grant from the state to help it build the first vertically integrated machine, which pulls plastic sheets made of resin pellets down a line and cuts them into gowns. Before the machine, gowns were cut by hand in a much more laborious process.

Photographs of the machine are prohibited, and it is concealed by makeshift walls to keep proprietary secrets from Chinese competitors, according to the company.

Cadillac Products makes Level 1-3 surgical gowns and could also produce Level 4 gowns, though they are lower volume and face more rigorous regulatory standards, said Daniel Sceli, CEO of Cadillac Products Automotive. The company's gowns meet U.S. Food and Drug Administration specifications, but it has yet to receive its 510(k) clearance, which would allow the gowns to be marketed as safe and effective. Sceli said the company is clearing necessary regulatory hurdles.

"While we await a long-term supply contract for this new line, we are entertaining requests for information and requests for quote," spokesperson Don Lowe told Plastics News. "We have quoted some business but acknowledged the line was not capable of producing in quantity yet."

The company said it is in talks with medical distributors and hospital systems but declined to name them.

Detroit Medical Center spokesman Brian Taylor told Crain's Detroit Business in an email that its Sinai-Grace hospital received 12,000 of the donated gowns, but the health system declined to discuss its PPE purchasing strategy or the possibility of procuring supplies from Cadillac Products in the future.

"The U.S. government is [also] looking for gown manufacturers in the U.S.," Lowe added, both for immediate use in hospitals still treating COVID-19 patients and for national stockpiles.

"We have been involved in a couple 'request for information' inquiries," from the U.S. government, Lowe said. "Because our product is 100 percent made in the U.S., we are optimistic that we'll be chosen to quote when the time comes."

Cadillac Products developed its strategy to diversify two years ago in order to "protect the business," Lowe said, when it received a forecast for medical gowns that projected "a steady increase in gowns about 7 percent year over year through 2027."

"That forecast was issued before the pandemic, due to additional cosmetic surgery and other procedures being done for more protection for those involved in those procedures," Lowe said.

Sceli said he thinks the health care business unit will be sustainable and has the potential to branch out.

"We're obviously focused on gowns right now, but five years from now, who knows," he said. "We make plastic films. There's a lot of things you can make out of that stuff."