Ford CEO: Ventilators will be built across a big supply chain

(CNN)US automakers have come to the rescue when the nation has faced supply shortages during wartime in the past. Ford built heavy bomber airplanes and GM built amphibious assault craft, among other things. So it seems only natural that, in the rush to address the critical shortage of ventilators in the US due to the coronavirus pandemic, automakers would again be among the first to answer the call to help.

Last week, President Donald Trump tweeted that automakers have the green light to make ventilators, although he stopped short of issuing formal orders to do so under the Defense Production Act.
Nevertheless, Ford, GM, Toyota and Tesla, which have all temporarily shut down their factories in recent weeks, have pledged to help.
But switching from cars to ventilators is not so easy. Ventilators are complex machines that use sophisticated software and specialized parts, and companies that seek to manufacture them face several hurdles — including intellectual property rights, the need for specially trained workers, regulatory approvals and safety considerations.
Ford is working with 3M and GE to make respirators and ventilators
So far, automakers have announced they’ve been teaming up with existing ventilator makers to help them ramp up production. And some, like Ford (F), are exploring producing their own ventilators.

But it’s a race against time.

    Already, sick patients are overwhelming hospitals in New York. The state fears it is headed for a situation like the one that played out in Italy, where ventilator shortages forced doctors to choose which patients get to use the potentially lifesaving machines.
    “The number of ventilators we need is so astronomical,” New York Governor Andrew Cuomo said Thursday, adding that hospitals have resorted to using experimental solutions, such as putting two patients on one machine.
    There are about 160,000 ventilators available in America but as many as 740,000 could be needed, according to the Johns Hopkins Center for Health Security.
    Ventilators can help some of the most seriously ill COVID-19 patients who start losing the ability to breathe on their own. The devices offer gentle breathing assistance so a person’s lungs can rest while they fight the virus.

    The best way automakers can help fast

    Not all ventilators are exactly alike. Some are more complex than others. The sickest COVID-19 patients’ lungs can stiffen, requiring high-end machines that cost up to $50,000. Those machines can be precisely tailored for patients and must be operated by trained medical professionals.
    Production and assembly of these high-end devices are best left to traditional ventilator manufacturers, according to Vafa Jamali, a vice president at Medtronic, which is one of only a handful of companies that manufacture ventilators.
    Key components are made in-house by experienced workers. Medtronic said. Not only does it not want to outsource that production, but auto makers aren’t capable of making these high-end machines — at least not quickly.
    “Because this is a lifesaving device, it can’t be off. Practice and experience making the parts is really, really critical,” Jamali said.

    One of Medtronic's premium ventilator machines. Some of its components are highly specialized, and, the company says, require trained in-house workers.
    On its own, Medtronic said it has already boosted its weekly ventilator production by 40% since January, in part by putting its assembly lines on a 24-hour schedule. And the company plans to ramp up production by another 200% over the next several weeks by doubling the workers on existing production lines.

      It’s goal is to ramp up output of top-of-the-line ventilators to 500 per week, a five-fold increase.
      Still, the company will only be able to manufacture ventilators by the hundreds — and doctors need them by the thousands.
      That’s why the company says it is welcoming ideas from automakers to help fill the gap.
      Medtronic has spoken with Tesla, GM and Ford, though the companies don’t have any formal plans to work together yet, Medtronic told CNN Business.
      General Motors (GM) said last Friday that it was working with another ventilator maker, Ventec Life Systems, to help increase Ventec’s production. The companies plan to increase production from hundreds of machines a month to as many as 20,000 a month, according to Todd Olsen, CEO of Twin City Die Castings, a company that’s working on ventilator parts. But the company didn’t say how long it would take for the ramp up to occur.
      'Desperate' shortage of ventilators for coronavirus patients puts manufacturers on wartime footing
      The New York Times reported late Thursday that the White House was about to announce the venture between GM and Ventec, which the report said would allow for the production of as many as 80,000 ventilators. But the Federal Emergency Management Agency said it needed more time to assess whether the venture was too costly.
      GM responded to the report in a statement, saying “efforts to set up manufacturing capacity at the GM Kokomo facility are already underway to produce Ventec’s critical care ventilator.” It also said it had begun hiring workers for the venture.
      For its part, Ford has announced it is working with GE Healthcare to increase production of GE’s ventilators.

        Jim Baumbick is the vice president in charge of all of Ford’s vehicle product lines, but lately he’s turned his attention to gearing up healthcare technology production.
        He said Ford, which introduced mass production to the auto industry, has identified efficiencies that can be made to GE’s production processes that will increase output in coming weeks. Ford has also been able to find additional suppliers for some parts that make up the ventilators, Baumbick said, so that GE doesn’t face bottlenecks in its supply chain.
        The automaker has even suggested changes to parts so they could be more easily produced by other suppliers.
        GE Healthcare declined to provide additional details about its work with Ford, but did say it is planning to double its output by the end of June.
        Toyota is also “finalizing agreements to begin working with at least two companies that produce ventilators and respirators to help increase their capacity,” the company said Friday in an emailed statement. Toyota did not say which medical device companies are involved.

        A less complex machine

        Medtronic makes less complex ventilator machines for the less critically ill as well, and the firm is considering making “one or two” of its designs open source. That would allow outside manufacturers to take over production of fully functioning machines.
        Jamali said he is confident automakers could get the job done.
        But, he added, “the question is: What is the time frame of when you start and when you’re meaningfully putting ventilators on the market?” Jamali said.

          As part of its partnership with GE Healthcare, Ford is helping to design a new, simple ventilator that would be relatively easy to produce, Baumbick said. To do this, Ford and GE designers are starting with a machine used for anesthesia. It’s a machine that, at its core, is a sort of ventilator. The idea, Baumbick said, is to strip away anything that isn’t needed for breathing.
          “It’s kind of getting down to first principles,” Baumbick said.

          Medical supplies were displayed at the Jacob Javits Center before a news conference with New York Gov. Andrew Cuomo.
          Once that machine has been successfully designed, he said, it could be manufactured at a facility outside of GE. It could even be made at a Ford factory, he added. But the companies did not give a timeline for when that production could begin.
          The Food and Drug Administration says it has implemented drastic regulatory changes to allow automakers and other non-medical manufacturers to quickly take up such tasks.
          “FDA’s message is clear,” the agency said in a March 22 statement. “If you want to help expand production of ventilators to save American lives in this pandemic, we are going to work with you to sweep every possible barrier out of your way.”
          James Dyson designed a new ventilator in 10 days. He's making 15,000 for the pandemic fight
          For example, the agency said it is not enforcing rules that require ventilator manufacturers to gain FDA approval before making slight changes to their devices.
          That approach “will help manufacturers that want to add production lines or manufacture at alternative sites [that] may have different manufacturing equipment,” according to the FDA guidance.

          Intellectual property concerns loom

          But some traditional manufacturers remain cautious about working with third parties.
          If there is a flaw in production, “it would be a catastrophe if you got those devices out en masse,” said Jamali. “You could cause a lot of damage in the patients that are most acute.”
          Intellectual property rights may also present obstacles. Designs for ventilators, their software or key components are often patented or involve trade secrets.
          The medical device industry has “historically been extremely sensitive about protecting its intellectual property,” said Debbie Wang, a Morningstar analyst who covers Medtronic. “And I can’t imagine that would necessarily go away,” she added — even in the face of a pandemic.
          Patrick Keane, an IP attorney that works with hospitals and ventilator manufacturers, agreed that intellectual property concerns could make traditional manufacturers hesitant to work with third-party manufacturers.
          The Defense Production Act is the most powerful tool the government has to ensure that doesn’t happen. Invoking it would allow the White House to direct production. President Trump’s approach so far has been to encourage automakers to help with ventilator manufacturing, but he has stopped short of issuing directives under the DPA.
          What is the Defense Production Act?
          If Trump takes that step, it would be up to the companies who are given ventilator manufacturer directives to ensure they aren’t liable for patent infringement after the crisis passes, according to Keane.
          The president is under growing pressure to use his DPA powers in order to better coordinate the production and distribution of badly needed ventilators. It could alleviate the concerns of state governors, such as New York’s Cuomo, who are desperate for new ventilators.
          But the issue will continue to come back to a major supply gap and a race against the clock. Current ventilator production levels fall far short of demand — and setting up new production lines is no simple task.
          “You don’t want people who are producing air conditioning units for cars to all of a sudden start producing entire ventilators,” he said.
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          Ford CEO: Ventilators will be built across a big supply chain

          Arthur Herman is a senior fellow at the Hudson Institute and author of Freedom’s Forge: How American Business Produced Victory in World War II. His newest book is “The Viking Heart: How Scandinavians Conquered the World and Transformed the American Dream.” The opinions expressed in this commentary are his own.

          Eighty years ago, as Americans came together to defeat the fascism that threatened civilization, American factories poured out the weapons needed to crush Germany and the other Axis Powers.

          One-third of the weaponry and war material the Allied forces used during the conflict came from American factories and shipyards (including an incredible eight aircraft carriers a month) — a miraculous mobilization dubbed the Arsenal of Democracy.

            Today America can do it again and create the arsenal that defeats this latest threat to civilization: the coronavirus. From ventilators and N95 masks, to anti-viral drugs and ICU equipment and hospital beds, American companies are being mobilized in the face of the most serious public health crisis in more than a century. But these companies will only be successful if we learn the right lessons from the industrial mobilization that won the world’s biggest war.
            My book “Freedom’s Forge: How American Business Produced Victory in World War II” explains in detail how the federal government harnessed the energies and innovation of America’s finest companies, to produce what government could not manage on its own.
            These taxpayers won't get stimulus checks. That's unjust
            The secret to winning World War II wasn’t the federal government exercising direct command and control over the mobilization effort, as some critics like New York governor Andrew Cuomo are urging Trump to do by using the 1950 Defense Production Act. Instead, with the help of former GM CEO Bill Knudsen, President Franklin D. Roosevelt put together a plan that looked to the private sector and the productive power of capitalism to arm the world against the fascist threat. That left Washington with the job of coordinating and overseeing the overall effort and making sure critical resources like steel and copper went where private industry needed them.

            The lessons from that experience boil down to five principles, which the administration should start following this week.

            Have a clear objective and a realistic timeline

            When war mobilization began in 1940-41, no one said the goal was to defeat fascism — and no one was able to mass produce tanks or bombers from a standing start. From the beginning, Washington set a more purposeful goal of building a modern, well-equipped military in case war came. GM’s Knudsen and others made it clear that we needed a year and a half to prepare for full armament against the fascist threat, starting with machine tools and aircraft engines, which laid the foundations for the production miracle that followed when war actually did come in December 1941.
            Today, our window of opportunity is much shorter — perhaps as little as 30 to 60 days. In order to mass produce testing kits, antiviral drugs, ventilators, masks and hospital beds in that time frame, the administration will need to set production goals that are both within reach, but also meet our most immediate objective: halting the deadly spread of COVID-19 before it overwhelms our health care system.

            Seek out the best, brightest and most productive

            During World War II, the federal government offered contracts to America’s most productive companies like automakers GM and Ford and electrical companies like GE and Westinghouse to mass produce the engines, planes, tanks, torpedoes and weapons needed to arm America — even though they had never made them before. But Washington also incentivized companies that were already producing planes, like Boeing and Lockheed, to move into a higher gear by steadily increasing government orders while assuming the costs associated with higher production.
            Getting Ford, GE and GM to produce ventilators is a great first step. But don’t neglect companies like Medtronic, Johnson & Johnson and Becton Dickinson that already make the US a world-class leader in medical devices. Getting them to pool their expertise and production lines and to share their patents with firms that could increase production even faster will go a long way toward building a health care manufacturing base. Building that base will help defeat the coronavirus and help us prepare for the next serious pandemic we may have to face.

            Find the right leadership

            President Roosevelt had business leaders like Knudsen and executives from top-flight companies like Sears, GE and AT&T (now the parent company of CNN) to design his mobilization and inspire public trust. The Trump Administration should summon today’s business leaders, including Mark Cuban, Elon Musk and Jeff Bezos to meet (remotely) with the White House, to discuss how to mobilize the resources of today’s economy. Ask Facebook’s Mark Zuckerberg to help establish an interactive national database shared by doctors and hospitals on coronavirus and steps to combat it. Ask Peter Thiel and his company Palantir Technologies to protect its confidentiality and secure it against malicious attacks.

            Have an exit strategy

            By D-Day 1944, Washington realized that the US had the production numbers needed to win the war and began planning the transition to civilian production again. Real national recovery means making sure government intervention is temporary and helps get the private sector back to what it does best.

              Stay unified and united

              As a master architect of the Arsenal of Democracy, Knudsen smartly put it: “We can do anything if we do it together.” The same is true of defeating coronavirus: If we hit the right balance between what business can and must do, and what the federal government shouldn’t and can’t, we can do anything.
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              Ford CEO: Ventilators will be built across a big supply chain

              New York (CNN Business)Ford is considering reopening a number of US and Mexican plants in the coming weeks that were closed because of the coronavirus outbreak. But the United Auto Workers union is expressing concerns about that plan.

              Ford (F) says it plans to reopen one shift of its Hermosillo, Mexico, plant on April 6, and four of its eight US assembly plants on April 14, two days after Easter. The plants due to reopen are its Dearborn, Michigan, Truck Plant, Kentucky Truck Plant in Louisville, its Kansas City Assembly Plant’s Transit line and its Ohio Assembly Plant in suburban Cleveland. It also plans to reopen eight stamping, engine, transmission and component lines needed to supply those plants.
              “We will continue to assess public health conditions as well as supplier readiness and will adjust plans if necessary,” said Ford’s statement.

                Ford and other automakers have been doing a deep clean of its plants during its shutdown, but the UAW, which had urged Ford and the other automakers to shut production in the interest of worker safety, voiced concerns about Ford’s announcement.
                “The UAW continues to review with great caution and concern decisions being made about restarting workplaces, especially at advanced dates,” said UAW President Rory Gamble in a statement. “These decisions should be informed by data and where each state is on the contagion curve. The UAW maintains that strict CDC guidelines need to be adhered to at all worksites and that prior to reopening sufficient data and protections are in place to ensure the safety of our members, their families and the public.”

                “The only guideline in a boardroom should be management asking themselves, ‘Would I send my family — my own son or daughter — into that plant and be 100% certain they are safe?'” he said.
                Ford and other automakers announced on March 18 that they would shut production due to the outbreak. Tuesday Ford announced it would join with 3M and General Electric to help make needed ventilators to help hospitals treat coronavirus patients. But it’s not currently planning to build the ventilators at its plants.
                Ford is working with 3M and GE to make respirators and ventilators
                Rival General Motors (GM) said it can’t give any details about when it plans to reopen its plants.
                “The situation is fluid and can change week to week,” said a statement from GM. “We don’t have firm return to work dates at this time.”
                Besides health concerns about workers, the automakers are also dealing with car sales grinding to a near halt during the crisis. Dealerships are closed in many states, and even where they are open many potential car buyers are holding off major purchases in the face of economic uncertainty.
                Ford had previously announced it had suspended its dividend and tapped lines of credit to get $15 billion to help it ride out the crisis.
                “Candidly, though, we need to do much more given the sharp drop-off in demand for new vehicles and the shutdown of our plants worldwide,” said CEO Jim Hackett in a letter to employees Thursday.
                Ford announced Thursday that the top 300 senior executives at the company would defer between 20% and 50% of their salaries for at least five months, starting May 1. CEO Jim Hackett will defer 50% of his pay, while executive chairman Bill Ford will defer all of his pay. Ford said the deferred pay for those executives would not be paid until Ford has paid down $7 billion of additional borrowing.
                “Our goal is to manage through the crisis without eliminating Ford jobs. Our people are dealing with enough challenges without being out of work, too. Plus, on the other side of the crisis, we will need our talented team to quickly ramp up to our full potential,” said Hackett in his letter to employees. But he warned that Ford might not be able avoid job cuts.

                  “If the effects of the coronavirus on the global economy and Ford go on for longer — or are more severe — than we currently anticipate, we may have to take tougher actions,” he said. “But not today.”
                  Worldwide Ford has 190,000 employees, with 56,000 of those staff members represented by the UAW. Most of those UAW members are hourly factory workers.
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