Trump Orders GM to Make Ventilators Under Defense Production Law
Trump said at a news conference later that he might reconsider the order if GM could agree to a deal.
(Bloomberg) --
President Donald Trump on Friday ordered General Motors Co. to make ventilators for coronavirus patients, invoking a federal law that gives him vast powers over industry in crises, just as the company is within weeks of starting production on the equipment.
Trump said in a statement that he had signed a memorandum “directing the secretary of Health and Human Services to use any and all authority available under the Defense Production Act to require General Motors to accept, perform, and prioritize federal contracts for ventilators.”
GM has already been moving to manufacture ventilators at some of its factories in partnership with Ventec Life Systems Inc., and both companies were caught off guard by Trump’s move and skeptical it would change their plan. Trump said at a news conference later that he might reconsider the order if GM could agree to a deal. “I think we might be able to pull it,” he said.
Still, the decision to single out a company under the Defense Production Act marked an important shift for Trump, who until Friday had spoken glowingly of the government’s partnership with private companies to ramp up production of medical equipment.
The president also announced the appointment of White House trade adviser Peter Navarro to coordinate actions under the act and issued an executive order authorizing the government to guarantee, extend loans and commit to purchases that increase the nation’s manufacturing capabilities.
“This invocation of the DPA should demonstrate clearly to all that we will not hesitate to use the full authority of the federal government to combat this crisis,” Trump said Friday. He praised other companies, including Ford Motor Co. and General Electric Co., for their efforts, and announced a new initiative by Boeing Co. to make face shields.
Reluctance to Invoke
The president issued an executive order last week laying groundwork for him to invoke the DPA, but since then he has expressed reluctance to use its powers. He has repeatedly said manufacturers had volunteered to produce coronavirus materials.
But on Friday, his patience appeared to have run out with GM. He assailed the company and its chief executive officer, Mary Barra, in a series of tweets in which he accused the firm of moving slowly and demanding too high a price for its ventilators.
It wasn’t clear what prompted the tweets, which took the company by surprise, according to people familiar with the matter.
“Our negotiations with GM regarding its ability to supply ventilators have been productive, but our fight against the virus is too urgent to allow the give-and-take of the contracting process to continue to run its normal course,” Trump said in the statement. “GM was wasting time.”
Just hours before his tweets, Trump said in an interview on Fox News that companies -- including GM -- were responding appropriately to the coronavirus outbreak.
A little more than an hour after Trump’s first tweet, GM and Ventec announced they would build ventilators at the automaker’s parts plant in Kokomo, Indiana, where they’ve been working around-the-clock for a week to convert it into a medical-device facility.
The use of the DPA doesn’t change the plan for manufacturing ventilators, Ventec Chief Strategy Officer Chris Brooks said in an interview. The White House’s action might streamline where all the ventilator orders go, perhaps sending them to one centralized distribution center for the federal government to manage and triage based on need, he said. But there’s a lot still unknown about how the use of the DPA will affect the partnership with GM, he said.
Biden Urges Trump
By having the federal government handle that distribution aspect, it allows Ventec “to do what we do, and that’s make ventilators,” Brooks said.
The president’s action might simply allow the government to more quickly take orders from GM and others. The automaker can still sell its production to the federal government if asked, said a person familiar with the matter. GM had planned to start production in April regardless of whether there was a federal contract in place, the person said.
Democrats, including former Vice President Joe Biden, Trump’s likely opponent in the November election, had urged Trump to invoke the DPA earlier. Many U.S. governors have complained they’re unable to obtain sufficient supplies of ventilators, respirator masks and even basic medical supplies like gloves and gowns.
“That’s really good news,” Biden said Friday after Trump’s statement. “Now, we were suggesting to do that over a month ago. But the point is, he’s done it, and I congratulate him for it.”
A Korean War–era law, the Defense Production Act of 1950 gives the president the power to require businesses to set priorities or accept contracts to promote the national defense. It also allows the president to incentivize expanded production through “loans, loan guarantees, direct purchases and purchase commitments, and the authority to procure and install equipment in private industrial facilities,” according to a March 2 report from the nonpartisan Congressional Research Service.
Companies have come forward to help meet the need for health care supplies voluntarily, which Trump had touted as a reason not to use the law. But the businesses, such as Ford Motor Co. -- which is collaborating with 3M Co. and GE Healthcare to increase the production of ventilators, respirators, and plastic face shields -- are having trouble getting some parts, especially chips and other components for ventilators, delivery of which could take months.
Experts say the act would be especially helpful for complex goods such as ventilators, because it allows the government to find domestic substitutes and direct goods to where they’re most needed.
Governors and mayors have complained that they’re competing against each other, and foreign countries, for ventilators, as well as masks and testing supplies.
©2020 Bloomberg L.P.