Let a Hundred Kodaks Bloom?

Tad DeHaven

In a new Wall Street Journal op-ed, senior White House official Peter Navarro argues that the Pentagon’s support for Vulcan Elements and ReElement Technologies is central to breaking China’s chokehold on critical minerals. To explain the administration’s role, he points back to the COVID-era GM-Ventec ventilator partnership. 

But the COVID-era proposal to finance Kodak’s production of pharmaceutical ingredients, which Navarro helped spearhead, may prove the more revealing precedent. The proposed $765 million loan was celebrated before its terms were settled or due diligence was completed. The loan was ultimately never issued, and the episode now looks less like an isolated fiasco than an early prototype for the second Trump administration’s governance by deal and governance by headline.

Governance by deal substitutes discretionary, firm-specific bargains for general rules. Governance by headline describes what often follows. The administration announces a triumph, then leaves agencies to settle the terms, conduct due diligence, and sometimes determine whether the deal can happen. 

Consider how Kodak unfolded. 

According to the company’s subsequent internal review, Kodak initially said it needed $27 million to upgrade its facilities and meet federal pharmaceutical manufacturing requirements. Navarro told its executives to “think bigger.” Within days, Kodak proposed a project costing between $435 million and $575 million. The government eventually unveiled a nonbinding letter of interest for a $765 million loan even though due diligence was incomplete, no loan terms had been agreed upon, and officials had not specified which pharmaceutical ingredients Kodak would make. The US International Development Finance Corporation (DFC) nevertheless drove the media rollout and signing ceremony. Kodak shares, then trading at $2.62, briefly reached $60 after the announcement.

The deal came together in “Trump time,” Navarro said. He called it a “big win” and a “huge step” toward pharmaceutical independence. My colleague Scott Lincicome asked the obvious questions: Why Kodak? What would it produce? What market failure justified federal financing? Why the rush?

Less than two weeks later, DFC put consideration of the proposed loan on hold amid investigations. Navarro tweeted that he was “VERY disappointed” that the previous week’s “great deal with Kodak” had been “tarnished by allegations,” while declaring the suspension “Absolutely RIGHT.” The loan was never issued. The DFC inspector general later found no evidence of misconduct by agency officials. Kodak’s internal review found no relevant legal violations by its executives, although it identified governance flaws.

Now consider Vulcan and ReElement. The Pentagon announced $700 million in conditional loans last November. ProPublica subsequently reported that Navarro personally initiated Vulcan’s request, the only deal among dozens set in motion by a top White House aide, and that Pentagon staff were pressed to process it in weeks. Estimates of Vulcan’s valuation grew tenfold after the announcement. Vulcan is backed by 1789 Capital, where Donald Trump Jr. is a partner. (See here for more.)

ReElement later stopped pursuing its $80 million portion. Administration officials told Reuters that the company had struggled to satisfy federal due diligence requirements; ReElement says it decided it did not need the debt. Three days later, the Pentagon announced a separate $25 million “investment” without publicly identifying what type or whether equity stakes are involved.

Navarro’s op-ed mentions the $25 million while omitting the abandoned loan and due diligence questions. He calls ReElement’s technology a “breakthrough,” says it can “outflank China,” and compares its potential to fracking’s transformation of American energy. 

That’s a bold claim. 

Back in 2020 when the Kodak deal was announced, Navarro claimed it marked “the beginning of American independence” from foreign pharmaceutical suppliers, and that “By the time this thing ramps up, 25 percent of the [active pharmaceutical ingredients] for generics we need in the United States is going to be right at that facility … It’s going to be the renaissance of the great state of New York as an industrial power.”