Trump orders GM to start ventilator production for COVID-19 amid contract dispute

President Donald Trump signed Friday a presidential directive ordering GM to produce ventilators and to prioritize federal contracts, just hours after the automaker announced plans to manufacture the critical medical equipment needed for patients suffering from COVID-19, disease caused by coronavirus.

The order, made under the Defense Production Act, marks a sudden reversal by Trump, who has touted the efforts by GM and other manufacturers to try and ramp up production of ventilators and and personal protective gear that is in short supply as COVID-19 cases continue to rise. The order came amid a dispute with GM over a contract to build the ventilators.

GM and its partner Ventec Life Systems had already announced plans to start producing the ventilators “at cost,” despite the lack of a federal contract. The order would force GM to prioritize federal contracts, which would prevent the automakers from selling to states.

“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. GM was wasting time. Today’s action will help ensure the quick production of ventilators that will save American lives,” Trump said in a statement.

Earlier Friday, GM said it would start producing Ventec Life Systems ventilators even as a purchase order with the federal government remained in limbo. The companies said Friday that the ventilators will be produced at GM’s engine plant in Kokomo, Indiana, using about 1,000 workers.

The GM and Ventec announcement followed sharp criticism by Trump via several tweets that blasted GM and its CEO and Chairman Mary Barra via Twitter, accusing the company of falling short of its promised capacity and asking for “top dollar,” a term that seems to imply the automaker was trying to profit off of the contract.

GM, which is a contract supplier for Ventec, has said it is “donating its resources at cost,” a term that means it will not profit off of any sales of the masks and ventilators it produces. Whether the federal government would sign a purchase order with the companies has been a lingering question that looked less certain as talks unfolded, according to sources.

Efforts to set up tooling and manufacturing capacity at the factory are already underway to produce Ventec’s critical care ventilator, VOCSN, according to GM. The automaker said production will begin in the next seven to 14 days with the first shipments of the FDA-cleared ventilators scheduled to begin in April. Ventec is also trying to ramp up production at its manufacturing facility in Bothell, Washington.

Separately, GM also said it will start next week producing Level 1 surgical masks at its Warren, Michigan manufacturing facility. The automaker expect to ramp up mask production capacity to 50,000 masks per day within the next two weeks with the potential to increase to 100,000 per day.

Trump’s tweets came after the New York Times reported that U.S. government officials cancelled a planned announcement outlining the GM and Ventec deal to produce as many as 80,000 ventilators for the Federal Emergency Management Agency. The announcement, which was supposed to happen Wednesday, was cancelled after FEMA balked at the more than $1 billion price tag.

TechCrunch has independently confirmed that the federal government cancelled the announcement because of reservations over the cost. FEMA and White House trade adviser Peter Navarro had balked at the cost, according to a source at GM.

Trump’s tweets attacking Barra and GM — as well as calling for the automaker to start production at an Ohio factory that the automaker no longer owns — lies in stark contrast from public comments the president made earlier in the week when he touted efforts by companies to mobilize their resources to help alleviate a shortage of medical supplies such as face masks and ventilators.

Trump has repeatedly said he does not need to use the Defense Production Act to compel companies to help in the effort to manufacture needed supplies. But that changed Friday when he said he would use it because of the GM ventilator purchase order.

The cost of ventilators

As COVID-19 spread and health and government officials grew increasingly concerned about a shortage of ventilators and personal protective equipment, a number of manufacturers announced plans to ramp up production capacity or donate any existing supplies. GM was among that group.

On March 20, GM and Ventec announced plans to work to increase production of respiratory care products, a partnership that grew out of  StopTheSpread.org, a coordinated effort of private companies to respond to COVID-19.

Before that announcement was made, GM investigated the feasibility of sourcing the more than 700 components needed to build up to 200,000 of Ventec’s critical care ventilators called VOCSN. Ventec describes these VOCSN devices as multi-function ventilators that were cleared in 2017 by the FDA.

GM identified the Indiana plant as the likely location and determined it would need to build a new clean room within the factory that was large enough to produce the ventilators, according to the source. GM estimated it would cost about $750 million, a price that included retrofitting a portion of the engine plant, purchasing materials to make the ventilators and paying the 1,000 workers needed to scale up production, the source said. The remaining $250,000 of estimated costs came from Ventec.

GM estimated that it could ramp up production in time to deliver ventilators by mid-April, a time when states are expected to be dealing with a surge of COVID-19 cases. The companies said they are poised to deliver the first ventilators next month and ramp up to a capacity of more than 10,000 critical care ventilators per month with the infrastructure and capability to scale further.