WeWork's toxic phone booths were created in-house by its 'Powered by We' business

• WeWork plans to do more tests on phone booths after discovering thousands of them contained the potentially harmful chemical formaldehyde, according to an email seen by Business Insider.
• The toxic phone booths were designed internally by WeWork and built by a contract manufacturer in China, multiple sources told us.
• WeWork did not have detailed supply chain management systems in place to determine where the Chinese vendor sourced its materials, these people say.
• WeWork originally created the phone booth design with high-end audio booth maker Studiobricks. But Studiobricks did not make the toxic phone booths installed in the US, the CEO told us.
• Those problematic booths were an internal project under WeWork's "Powered by We" program, multiple people said, and came as the company was aggressively expanding into new locations and business ventures.
• Read all of Business Insider's WeWork coverage here.

On July 31, one of WeWork's New York community managers took to the company's #buildingopen_badasses Slack channel and asked,"Has anyone experienced the 'off-gassing' (smell of chemicals) of the phone booths post openings? Have you addressed member concerns on the subject?"

Two other people replied offering ideas as to where the smell might be coming from, seemingly unfamiliar with the problem. But a few days later, in early August, another community manager replied. "yes! Been a major issue for us at 575 Lex."

That person was referring to the WeWork 575 Lexington Avenue building in Manhattan, leased in the fall of 2018, and opened earlier this year.

On October 14, two months after community managers were discussing the problem internally, tenants across the US and Canada received an email and saw signs posted across thousands of phone booths.

The signs warned them that the booths had "potentially elevated levels of formaldehyde," a chemical linked to cancer and known to cause eye, nose, and throat irritation, according to the Environmental Protection Agency.

WeWork has said 2,300 phone books are being removed from locations across the US and Canada.

What WeWork didn't say, but what several sources close to the matter have confirmed to Business Insider, is that the toxic phone booths were not simply the result of a random shipment of defective office furniture - the booths were designed and contract manufactured by WeWork under its "Powered by We" program.

They were a replication of designs created by the company in conjunction with high-end European audio booth maker Studiobricks. WeWork collaborated with Studiobricks to design phone booths last year, and the first shipment of the Studiobricks booths was installed in WeWork locations by September 2018, according to a post on Studiobricks' blog.

However, the phone booths that were contaminated with formaldehyde arrived later.

Although they looked almost identical, these booths were not made by Studiobricks, the Studiobricks CEO told Business Insider. They were built by a Chinese contract manufacture, three people told Business Insider.

That Chinese company has since been shut down, these people said, and Business Insider was unable to determine its name.

"Our booth is made in Spain, using all materials [that comply] with EU regulations. We are not buying anything, anything in China," said Studiobricks USA CEO Miguel Donoso-Cortes Esteve.

"We were working with WeWork on the design. It was a collaboration, a hybrid of our design and their design. Then they chose a different kind of company to manufacturer that booth in China. We cannot complain about their using the design, as it is not our design, not patented," he added.

Studiobricks remains WeWork's phone booth partner for Europe, the Middle East and South Africa, Esteve said, but it has only installed 34 phone booths total in the United States.

WeWork declined to comment on its manufacturing process, the name of the Chinese contractor or the internal teams responsible, but a spokesperson told us:

"The safety and well-being of our members is our top priority. We regret the impact this issue has had on members at some of our locations, and we are working to remedy this situation as quickly as possible. Potentially impacted phone booths were taken out of service immediately and the full removal process will be completed soon."

Another person familiar with the situation said that the trouble seemed to come from the requirement to make the phone booths fireproof and the Chinese manufacturer's choice of glue. Business Insider has been unable to confirm that the glue was the source of the problem.

The 'hubris' of Powered by We

WeWork's choice to use a Chinese manufacturer was due to the company wanting to build booths as quickly as possible to meet demand as the company rapidly opened new locations throughout the US in 2019 and as it signed new enterprise customers, according to one of the sources.

The "Powered by We," program is responsible for custom-designing offices for larger companies including Softbank sister company Sprint.

New WeWork chairman Marcelo Claure, chairman of Sprint and COO of Softbank, told the WeWork troops last week. that Softbank's headquarters in Tokyo will be using this service, and he'll be pressing it on SoftBank's portfolio companies.

However, under former CEO Adam Neumann, the program grew "hubris driven" when this team decided to sell additional services.

They "loved stuffing the Powered by We basket with random services that we are not good at like, HR consulting, random products which we're not good at building," one person said.

Because WeWork is a real estate management company, not a product manufacturer, it had no systems in place for supply chain management, this person said.

Other home grown products in the program, like standing desks, were so poorly manufactured they broke easily and had to be scrapped before being put in offices, sources told us.

Once the design team finished a design, they punted the project to the finance team to handle hiring vendors, another person, familiar with the process said.

When the phone booth problem emerged, WeWork didn't know, and couldn't easily track, the suppliers the Chinese manufacturer used.

So the people trying to determine what materials were used in phone booths couldn't easily determine that.

Pregnant women concerned

The problematic booths look nearly identical to the ones made in Europe by Studiobricks.

The best way to tell the Studiobricks phone booths from the Chinese look-alikes is to look for the Studiobricks logo on the side of phone booth.

The Chinese look-alikes do not have Studiobricks logo, nor do they have any other manufacturer's logo easily visible, one of the sources told Business Insider.

Business Insider heard from several pregnant woman who felt frustrated by the lack of information from WeWork.

"I joined a WeWork location this past January when I was newly pregnant, spent many hours during my pregnancy in the booths and had pregnancy complications that put me on modified bed rest this summer. I've asked the company to send me a list of phone booths affected so I can gauge my exposure and the timing," one woman told Business Insider, who asked not to be identified because she was not authorized by her company to speak.

WeWork did not give her such a list.

On October 28, in an email seen by Business Insider, the community team told a tenant that WeWork still plans to conduct additional tests:

"WeWork does plan to conduct additional sampled testing. But out of an abundance of caution, WeWork has removed all potentially impacted phone booths from service and is working to remove all potentially impacted phone booths from the premises as quickly as possible, and will share updates about this situation as soon as we're able.

If you have any health concerns, we encourage you to speak with a doctor."

Got a tip? Contact Julie Bort on Signal at (970) 430-6112 using a non-work phone, or email at jbort@businessinsider.com. Open DMs on Twitter @Julie188. You can also contact Business Insider securely via SecureDrop.

Now read:

• Leaked messages show WeWork employees internally discussing the toxic phone booth problem in July - and a pregnant tenant is furious
• Read the email from WeWork's new chairman where he confirms layoffs and says: 'What we are lacking is focus' and 'accountability'
• Sex, tequila, and a tiger: Employees inside Adam Neumann's WeWork talk about the nonstop party to attain a $100 billion dream and the messy reality that tanked it
• Former employees from WeWork share stories about Adam Neumann running around barefoot, yelling at employees, and demanding cases of tequila

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