general motors

Trump invokes Defense Production Act but GM says it’s already moving fast

About eleven days ago, American automaker General Motors put hundreds of employees on an urgent project to build breathing machines as hospitals and governors pleaded for more following the spread of the coronavirus pandemic.

But President Donald Trump, said the company wasn’t moving fast enough, on Friday invoked the Defense Production Act, which allows the government broad authority to direct companies to meet national defense targets.

Experts on managing factory production stated that the automaker is already making an extraordinary effort for a company that isn’t actually in the business of producing ventilators.

“That is lightning-fast speed to secure suppliers, learn how the products work, and make space in their manufacturing plant. You can’t get much faster than that,” stated Kaitlin Wowak, a professor at the University of Notre Dame.

GM expects to produce ventilators at a rate of 10,000 every month beginning in mid-April. The company is working together with Ventec Life Systems, a small Seattle-area ventilator maker, and both stated the Defense Production Act of 1950 doesn’t change what they’re doing as they’re already moving as quickly as they can, fronting millions in capital with an uncertain return.

“I don’t think anybody could have done it faster,” stated Gerald Johnson, GM’s global manufacturing chief.

Peter Navarro, Trump’s assistant for manufacturing policy, stated Saturday that invoking the act was required because the automaker “dragged its heels for days” in committing to the investments to start making ventilators at an automotive electronics plant located in Kokomo, Indiana.

It was only a few days ago that Trump had been holding up GM and Ford as examples of companies voluntarily replying to the outbreak without the requirement for him to invoke the act. Then on Friday, he criticized GM on Twitter and during his daily briefing for foot-dragging. On Sunday, he was back to praising the automaker during another briefing: “General Motors is doing a fantastic job. I don’t think we have to worry about them anymore.”

However GM stated it had been proceeding on the same course all along.

The automaker got into the ventilator business on March 18 after being approached by stopthespread.org, a coalition of CEOs attempting to organize companies to deal with the COVID-19 that has already claimed over 38,000 lives globally. The organization introduced GM to Ventec, which is a ventilator maker in Bothell, Washington.

The automaker pulled together manufacturing experts, engineers and purchasing specialists, and the next day had workers at Ventec’s facility, a short distance from a nursing home where the virus killed about 35 people.

They collaborated to accelerate Ventec’s manufacturing. A few days later, GM assigned more engineers and purchasing experts to find out how it could make Ventec’s machines. Some Ventec parts makers couldn’t produce that many widgets fast enough, so GM went to its own parts bin to discover suppliers to do the job, Johnson stated.

Critics have prompted Trump to invoke the Defense Production Act broadly to keep control over the production, supply and distribution of ventilators and protective gear for hospital employees who are running short. That’s what the act was supposed to do, and it was not for use against a single company, said Erik Gordon, a University of Michigan law and business professor.

Trump, in several appearances Friday, alleged GM of promising 40,000 ventilators, then decreasing the number to 6,000. He also stated the automaker wanted higher prices than previously discussed.

Ventec, which is negotiating with the government to produce more ventilators, stated it only modified numbers and costs at the request of government agencies, which asked for a range of quantities and costs. The company stated it’s selling the ventilators, which can treat serious virus patients, at distributor cost, and it has offered scaled down versions for a reduced cost.

Up until late Sunday, Ventec and GM were not aware about how many ventilators the government would purchase but those details are now being worked out.

Ventec is not sure if it will make any money on the devices, which normally sell for $18,000 – much less than ventilators used in hospital intensive care units that can cost $50,000. Johnson states General Motors has no intention of making a profit.

Ventec will need government money to help pay parts providers and increase its own production from 200 per month to 1,000 or more, stated CEO Chris Kiple.

Invoking the Defense Production Act “shined a light” on the requirement for ventilators, he said, but the company can’t move any quicker.

“We’re still moving full speed ahead,” Kiple stated. “We know there’s a shortage of ventilators.”

About 164,359 people in the US have been confirmed as being infected with the coronavirus. The virus has killed 3,173 people in the country.

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