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Is it possible to be an all-American company?

Mag Instrument is an ardently American company. But it's not easy.  It faces a flood of cheap imports, and copycats. And it also struggles with government regulations.

Anthony Maglica has lived the American Dream – arriving in booming post-war United States as a penniless young man, he made his way to California in a rusty Studebaker, worked hard and saved just enough money to start his own business. He parlayed the humble sum of $125 into a business empire.

Maglica’s company, Mag Instrument, has sold 420 million of its aluminum-encased flashlights since 1979. Its Maglite brand is known worldwide as a high-quality American product.

But the company’s story illustrates just how difficult it is to be all-American. Not only does it face a flood of cheap imports, but Mag is in perpetual legal battle to protect itself from copycats. And, in spite of Herculean efforts to make or source all components domestically, Mag falls just shy of 100 percent — not close enough, under state laws, to be labeled “Made in USA.”

American tale
Maglica was born in New York in 1930, but grew up in his mother’s native Croatia during the Depression and German occupation in World War II. He made his way back to the United States at age 22. Working factory jobs, he scraped together $125 to put down on a metal lathe and start his own machining business on the side.

Through the 1960s and ’70s, his business grew in size and reputation as it produced a wide array of precision parts for industry, the military and aerospace, including a part used on the first American satellite, Explorer I.

In 1979, the company introduced its first flashlight — the tough, durable Maglite, which became a favorite of police and firefighters, followed by the “Mini Maglite” in 1984, which sent sales soaring in the mass market.

In a showroom at Mag’s administrative offices, Maglica shows an exhibit of Mag’s early products and a book of testimonials to the durability of Mag products: the Maglite that sank to the bottom of a lake and was recovered — still working — two years later; the policeman’s account of his Maglite deflecting a bullet, and so on.

Observers say the company is responsible for changing the reputation of hand held lights, which were previously expected to fail after being dropped on the floor.

“Maglite is the originator of quality flashlights in my opinion,” says Rob Rich president of MEI Research Corp., a high-end flashlight distributor based in Temecula, Calif. “They’ve got the best brand recognition, period.”

Still, the market has changed. In the professional and industrial market, Maglite has largely lost out to a handful of U.S. competitors who source some or all of their products outside the country. In the mass market, it faces dozens of factories in southern China that can turn out flashlights quickly, cheaply and with increasing quality. Over the last 15 years, big retailers have dedicated more and more of their shelf space to these products.

Wringing out efficiency
Today, as he nears 80, Maglica could afford to retire, or at least take a vacation – he’s reportedly one of the richest people in Orange County, Calif. But most days, he is the first to arrive at Mag Instrument, and the last to leave. Each day, he logs miles walking the floors of the factory in immaculate white sneakers — U.S.-made New Balance, he points out — and a lab coat emblazoned with the name “Tony.” He spends evenings working on designs, he says.

Maglica is obsessed with upgrading automation and fine tuning work flow in the plant to wring out speed and efficiency — the only way, he says, that he can compete with imports from China where labor is so much cheaper. The company has invested tens of millions in automation against pressures to go overseas — a strategy that has worked remarkably well, according to distributor Rich.

“The amazing thing with Maglite is we have sold their product for at least 10 years and they have never had a price increase,” he says. “I’ve never seen anybody not have a price increase every year. Not any other product line we’ve ever sold … and the quality has remained.”

Still, it’s a strategy with costs. As an example, as Mag was developing a new model, the XCEL100, one part they lacked was the part to hold batteries in place. Maglica estimates he could have had the small plastic gizmo manufactured in China and delivered to his doorstep in Ontario for about 12 cents each.

“I will not do it,” he says, of ordering parts from China. “It’s like feeding a lion. As soon as you quit giving it meat, it bites your head off.”

Sothe company spent almost a million dollars on tooling for the battery holders.

“You have to invent it, design it, and prove it works, and then you have to automate it,” he says. And then, “there are glitches to work out.”

And after all that, he says Mag can produce the part for 25-30 cents apiece — still twice the price of the Chinese product.

Doing the work in house rather than contracting out also costs time, sometimes as long as five years to develop a new product.

It is also risky, as demonstrated when orders started falling off sharply in 2007-2008. Mag was forced to halt a major expansion that was under way, a $100 million anodizing facility for burnishing the aluminum casings.

The new building stands empty. Instead of hiring 1,000 workers as it had planned, Mag was forced to lay off about 300, bringing its total workforce down to 700.

Battling the copycats
After investing heavily on design, Mag Instrument is continuously fighting to beat back copies, spending more than $100 million on intellectual property suits since 1985.

Where possible, the company goes after manufacturers that are infringing on patents or trademark designs, but that largely excludes China, where IP protections are poorly developed.

“Unfortunately, it’s difficult even to get intellectual property rights in the PRC,” says Mag Instrument attorney Bob Weiss.

In many cases, the company takes on retailers that it alleges are importing infringing products.

The company has won awards or settled with companies throughout the West, including Marks and Spencer in the U.K., Ikea in Sweden, and Coleman and Streamlight in the United States.

In a recent case it sued Dollar Tree stores for selling a Mini Maglite look-alike for one dollar.

“It broke when the judge was handling it,” says Weiss. “You couldn’t get the materials (for the real product) for one dollar.”

Just don’t say “Made in USA”
One of the advantages that Mag Instrument has in the U.S. market is the strength of its reputation as an American manufacturer at a time when more U.S. consumers have grown leery of imports, particularly those made in China, and increasingly concerned about jobs going out of the country.

Mag long proudly sported the “Made in USA” label on its products, but it was recently forced to stop because of two imported components — an O-ring and a light bulb — that Mag says are not produced by anyone in the United States.

The issue is not with the federal regulations, which say that “Made in USA” is OK if the value of a product is “substantially” domestic. But a California law prohibits the Made in USA claim when any part of the product is made outside the United States. That law has been on the books for many years, but a flurry of cases taken up since 2005 has forced companies either to drop the Made in USA claims or create California-specific packaging.

Different packaging is not a viable option, says attorney Weiss, since it supplies to major chains that move their inventory around, so there’s no guarantee that the “Made in USA” goods will not end up on California shelves.

“If you have a product with several components you’re almost certain that some of those components cannot be made in USA,” says Weiss.

To avoid lawsuits, Mag now uses labeling that says “a USA manufacturer” with a caveat stating that “some components” may be imported. In talking to distributors, the company stresses its commitment to manufacturing in America. And in marketing, it signals its commitment with flags, and slogans like: “It’s never dark in America.”

“We have had chances to move to Mexico or China,” says Tom Richardson, marketing director. In fact, he says he was a proponent of making some parts overseas, but Maglica refused. Now, says Richardson, he uses Maglica as part of his sales pitch. “We use Mr. Maglica as the epitome of the American manufacturer.”

The company still gets credit for its U.S. loyalty on Web sites dedicated to American manufacturers — and

“If they are going overseas to buy a lot of stuff they could buy here, I wouldn’t want to list them,” says David Riley, who runs AmericansWorking. “But we also have to be realistic.”

For Maglica, the California law is just another example of ways that government is hindering U.S. businesses, and job creation, through heavy-handed regulation and taxation.

“I’m frustrated — I’m an old guy, and I’m really frustrated,” says Maglica.

“Government should give the incentive (to business),” says Maglica. “I know that if you have a little dog, and you want him to do the tricks, you give him a bone. People need incentive too.”