Computer-maker Bak USA shutting down, citing 'economic pressures'

Nov 1, 2018

Bak USA, a Buffalo-based tablet and computer maker, has announced it will shut down its operations, effective immediately.  The company issued a statement from Chairman J.P. Bak, who said it is with "great sadness" the company will close.

BAK USA will close, effective immediately.
Credit WBFO News photo by Eileen Buckley

Bak blames economic pressures on a young company being too difficult to withstand. The statement says the company failed to reach the point of profitability to sustain itself. It also blames unanticipated expenses associated with tariffs imposed by the White House in the 'ultimate decision' to close.

The company employs 77 people. They were notified of the decision Thursday.

Bak opened with its headquarters in Buffalo nearly four years ago producing computers and tablets. J.P. and Ulla Bak and their family moved from a small computer company in Europe to establishing their business in the former Sheehan Hospital on Michigan Avenue.

Their dream was a locally-based, socially responsible computer-maker, gradually hiring 130 workers to assemble tiny parts into computers to be sold in this country and shipped overseas.

Bak said it will reach out to customers and reimburse them for any unfulfilled purchase orders.

Inside BAK USA from a past tour, with Mayor Brown & BAK USA chairman J.P. Bak.
Credit WBFO News photo by Eileen Buckley

Here is the full statement issued by Bak USA Chairman J.P Bak:

“It is with great sadness that I announce today that Bak USA will close its doors. My family started this business nearly four years ago with a bold vision: to empower American students and workers by producing computers in the U.S. Through the innovation and hard work of our talented team, we achieved more than we dreamed. Regrettably, the economic pressures on our young company have become too great to withstand.

"Employees were notified of the decision today.

"Beginning today, we will reach out to customers and partners to notify them of this sad news. The company will reimburse customers for any unfulfilled purchase orders.

"While we are beyond proud of Bak USA’s many successes, the business did not reach the point of profitability necessary to sustain itself. The additional, unanticipated expenses associated with the tariffs imposed by the White House were a deciding factor in our ultimate decision to close.

"I’d like to express my deepest gratitude to our employees, our partners, and the Buffalo community for supporting us over the last four years.”

Bak USA's headquarters on Michigan Avenue
Credit Mike Desmond/WBFO

Erie County Executive Mark Poloncarz says he was saddened to learn of Bak's closure. He said the decision came as a result of President Trump's tariffs.

"Unfortunately the recent imposition of tariffs by the Trump Administration against the importation of Chinese tablet components penalized their products compared to those assembled in China, thereby eliminating whatever small profit margin existed," Poloncarz said.

The county executive says the tariff system is "backwards" and penalizes American manufacturing.

"Apple, Dell, Amazon, Lenovo and other tablets that are fully assembled in China by Chinese workers are not subject to tariffs even if the components also come from China, but Bak USA’s tablets assembled in the USA by Americans using Chinese components are subject to tariffs when the components are imported," Poloncarz said.

Poloncarz said the U.S. imposed tariffs are in fact promoting the offshoring of jobs to China.

"Tariffs are supposed to protect American jobs, not promote Chinese jobs," he said. "Unfortunately, the current tariffs promote Chinese jobs, not those in Buffalo, New York."

Poloncarz said the county is ready to assist Bak's 77 employees and the Bak family should they attempt to reopen the company if the tariffs are lifted.

University at Buffalo Distinguished Management Profesor Nallan Suresh said there was also the issue of the customers.

"Many of their key customers are overseas, particularly in Africa, and, like any other exporters, you face the usual financial risks and you have lost customers overseas," Suresh said. "You have payment delays. Sometimes, the payments just don't come. The international dealing with overseas banks and letters of credit and all those international trade-related issues. The company faced that risk."

With the tariffs expected to rise even higher in this trade war, Suresh said there might be more companies irretrievably squeezed by the costs of doing business, as the tariffs narrow profit margins.

Credit Bak USA

"A big part of their material for the components came under the status regime. I understand more than 80 percent of the components were now hit with these tariffs," he said. "Now these tariffs are already 10 percent, I believe, in the electonics sector and they are going to go up in two months to 25 percent. So two big vulnerabilities."

Suresh said he hopes that incidents like this "send a strong signal to the Administration to resolve matters with China quicker." He said the goal is to push the U.S. back to manufacturing, but that's going to take time, money and training to restore the skilled trade workforce that has eroded over time as the manufacturing segment of the economy has shrunk.

The company had achieved many of its goals before it all fell apart. The workforce was heavily minority, heavily recently arrived immigrants. Bak had figured out how to make and sell computers, and had a deal with Microsoft to use the Windows software.

In the end, however, Bak follows the path of computer-makers like Gateway and Commodore.