Private Equity Is Hollowing Out American Manufacturing — It’s Time to Put Builders Back in Charge
In the race to rebuild America’s industrial base, we are dangerously close to losing the plot.
For the last two decades, the private equity model has quietly crept into nearly every corner of U.S. manufacturing. And at a surface level, it’s easy to see why. PE firms offer liquidity to aging owners, promise operational efficiency, and tout financial engineering as a value driver. But behind the spreadsheets lies a growing problem: these firms are gutting the very capacity and talent we need to compete with China and restore industrial sovereignty.
This is not a partisan issue. It’s a national one. And it’s time we got serious about what kind of capital America needs — and what kind it must leave behind.
The Private Equity Playbook: Efficiency Over Resilience
The typical private equity strategy in manufacturing follows a well-trodden script:
- Acquire a profitable, owner-operated manufacturing business.
- Slash headcount, outsource operations, and centralize finance, HR, and IT.
- Migrate systems to the cloud and cut any “non-core” expenses.
- Raise EBITDA, dress up the company, and flip it to the next PE firm in line.
This rinse-and-repeat model is not designed to build; it’s designed to extract.
It may generate short-term returns for LPs, but it comes at the long-term expense of American industrial capacity. Skilled workers are let go. Facilities are run leaner, not smarter. R&D is often considered a cost center, not a growth engine. The result? A hollowed-out shell that looks good on a P&L but can’t build the future.
Real World Fallout: Case Studies in PE Decline
Consider the fate of Remington Arms, one of America’s oldest manufacturers. Passed between PE firms, it suffered years of cost-cutting and mismanagement. Innovation stalled, quality control declined, and workers were laid off in droves — culminating in bankruptcy and fire sales.
Or take American Apparel, bought by PE firm Standard General. Despite initial hype about a turnaround, years of misaligned incentives and aggressive financial maneuvering drove the company into the ground, with manufacturing jobs lost and production outsourced.
These aren’t isolated incidents. They are systemic symptoms of a financial model that views manufacturing not as a strategic asset, but as an arbitrage opportunity.
Why This Matters Now: The China Challenge
We’re not in a vacuum. While America shuffles factory ownership from fund to fund, China is investing in capabilities. It’s pouring state and venture capital into drones, semiconductors, advanced materials, and batteries — the building blocks of tomorrow’s economy.
Just look at BYD (EVs), DJI (drones), or SMIC (chips). These companies are vertically integrated, backed by long-term capital, and constantly reinvesting in innovation and production.
Meanwhile, America is debating whether it can even make its own antibiotics or solar panels.
This isn’t just economic strategy. It’s geo-economic survival. The nation that controls manufacturing will dominate trade, energy, defense, and even culture. If we want the next century to be shaped by American values — not authoritarian ones — we need to reclaim our industrial might.
A Better Path: Backing Builders, Not Bankers
So what’s the alternative?
Equip builders and operators — founders who know how to build teams, factories, and technology — with the capital, resources, and networks they need to scale. That means:
- Raising operator-first funds that acquire and operate manufacturing companies with a long-term view.
- Embedding cutting-edge tech into legacy industrial firms — not as a cost-cutting tool, but as a productivity multiplier.
- Structuring worker ownership models that align incentives, reduce churn, and foster a culture of pride and performance.
- Creating talent pipelines that train the next generation of industrial leaders, from factory floor to founder.
This isn’t wishful thinking. It’s already happening in pockets: companies like Anduril, Varda, and Hadrian are pioneering a new model of vertically integrated, mission-driven manufacturing. But they are the exception. We need 100 more.
Capital Must Serve Capability — Not Just Returns
To be clear, this isn’t an anti-capital argument. It’s a call to reframe what kind of capitalism we practice.
Capital should serve capability. It should invest in hard things, real assets, and human potential. It should support long-term builders — not just short-term extractors.
Because if private equity continues to dominate this sector unchecked, we will end up with fewer factories, fewer skilled workers, and less national leverage — even if EBITDA margins look great for a few years.
The choice before us is simple: do we let spreadsheets dictate our industrial future, or do we back the people who can actually build it?
The fate of the next American century depends on what we choose.
Let’s choose builders.
George Payne 