Minnesota Loudspeaker Maker Faces Existential Threat, but the Guitars Play On For Now

Dan Digre is so frustrated with US trade policy towards China that he might as well use the loudspeakers he manufactures to amplify his displeasure. But he’s doubtful that idea or anything else he can think of will do much good. 

Digre, whose company was started by his father in 1949, is only one of two speaker manufacturers left in the country, the others having lost out to Asia competitors. The company, MISCO, has survived because of quality, spunk, and a decision years ago to import some components from China. 

“Anyone making a loudspeaker in the US is now penalized for making the speakers in the US. It doesn’t make sense, doesn’t create leverage. In fact, it has the reverse effect—acting as a disincentive to making things here with American labor.”

When tariffs hit late in the Trump administration, MISCO reached out to other manufacturers to see if they could work together on the exclusion process which exempted some imported products if they couldn’t be competitively manufactured in the United States. “If we want to be competitive, to stay in business, we need an exclusion,” Digre noted.  

Excluded from the exclusion process 

To his chagrin, every application for exclusion was denied without an explanation. Under current rules, the Department of Commerce is not required to give a reason. Digre said what hurt the most is that loudspeaker parts are on what in the executive order is known as List 3. Finished speakers, made in China, are on List 4A. List 3 has a 25% tariff; List 4A now has 7.5%. 

Digre laments: “Anyone making a loudspeaker in the US is now penalized for making the speakers in the US. It doesn’t make sense, doesn’t create leverage. In fact, it has the reverse effect—acting as a disincentive to making things here with American labor.” 

Digre doesn’t mince words laying the blame: “Anyone can see that this is not right; it should be the other way around. But there is no rational view from within Congress or the administration on how the tariffs should be administered.” 

Digre fears that the administration’s recent announcement of a new tariff exclusion process to replace the current one which expired doesn’t yet provide a space for companies like MISCO to get an exclusion. He says the situation has put the business and his 70 employees in dire straits. It has strained customer relations by raising prices. The hit to profits has lowered reinvestment in the business, making it less innovative. The labor shortage and need to boost wages while profits shrink is a triple whammy endangering the company. 

“If employees sense the business is struggling, they become demoralized and may think about finding work elsewhere,” Digre said. “Lack of employment growth because we kill off small businesses through bad trade policy is a problem waiting to happen, and the policy people have no clue.” 

Heartfelt talk from the heartland 

Digre says he’s very disappointed that the Biden administration hasn’t taken time to look at the China trade policy carefully from the perspective of smaller businesses. “With all the supply chain disruption happening, it makes me very angry that the Biden administration and Congress haven’t even dealt with it or provided any help,” he said. 

Has he gotten any help from his elected representatives? “Not really. I’ve contacted my US senators and my Congressman. They are politically sympathetic, but the whole China thing is so political for them that they don’t have much they can do. We received letters but none included anything concrete.”  

“Negotiation 101 says ‘agree on what you can agree on,’ starting with common interests and going from there.”

Though worried about the future, Digre continues to innovate based on the business model his dad invented while abroad during WWII, starting with reconing and repairing speakers. Manufacturing speakers started in the 1950s and is central to the business today. MISCO doesn’t compete with Asia, focusing instead on high-end, customized products. You can find their speakers, for example, on commercial airliners and trains. 

“We’ve thrived because we take low-tech inputs from China and reconfigure them into high-tech products,” he said. “This is how American companies like ours became globally competitive and will remain so.” 

Facing the music 

MISCO recently launched a new line of guitar speakers. There is one other competitor in the US. The others are in Asia. Digre sees this as an opportunity to compete in this market segment. The design of the cone within the speaker and the cone materials are part of the intellectual property (IP). The paper comes from trees in Wisconsin as does the water. 

What’s so special about these additives? Digre, regarding his interviewer sympathetically, said “Oh, the best guitarists can immediately tell the difference and want our premium product.” The additives are not just natural elements, they’re part of the IP. 

Digre represents a breed of American entrepreneurs that might be called a micro multinational: small in size but adept at managing global supply chains and markets. He’s been doing business in China for 25 years, and was one of the first in the industry to outsource manufacturing of some components. “It’s part of the reason we’re still in business,” he said. 

And it’s not that he hasn’t tried to diversify his suppliers. “I went to the Philippines a couple of years ago when prices in China started increasing. My friend there said,” Oh, we get the components from China too, though without any tariffs.” 

What to do? “Negotiation 101 says ‘agree on what you can agree on,’ starting with common interests and going from there,” Digre said. “The tariffs should be solved first—very obvious and very easy, and it’d be a huge win for American businesses and a minor win for the Chinese.” 

Digre says he worries every day about the future. “The dangerous state of the US-China relationship is an existential threat for a lot of American companies.”