Ford and GE Team up to build Ventilators
Production “will start the week of April 20,” a Ford representative said on a Monday afternoon media call. Ford expects to produce 50,000 in its first 100 days of manufacturing and about 30,000 ventilators a month after that.
GE is licensing a design from Airon, which is a simpler model for use in intensive-care units. GE and Airon both produce ventilators but not to the scale Ford contemplates. GE has been ramping up production but this new move is rather like a sledgehammer.
There have been almost 20,000 U.S. hospitalizations in the U.S. related to Covid-19 over the past 10 days, according to the Covid Tracking Project. The U.S. now has the most confirmed cases of any country, at more than 148,000, according to the Johns Hopkins Coronavirus Resource Center.
The risk—as Covid-19 hospitalizations spike—is that peak ventilator demand exceeds the available supply. That is why so many firms are focused on producing the machines.
In another pairing, General Motors (GM) and Ventec Life Systems are teaming up to build ventilators. GM also said it would start producing masks for health-care professionals. It’s an impressive thought—having huge manufacturers flip capacity from cars to medical products.
Many machines, including car engines, use principles and parts similar to what’s in a ventilator. Car companies know all about vacuum seals, fuel delivery, exhaust management, fluid displacement and pistons. In other words, car makers can help.
There is another reason turning to car maker makes sense. “The entire auto food chain—suppliers, manufacturers and dealers—are very efficient with logistics,” Benchmark analyst Mike Ward tells Barron’s.
Making cars is complicated. It is easy to forget the scale of automotive manufacturing. It dwarfs most other industries. The largest car companies in the Western Hemisphere generate about $1.3 trillion in sales and spend more than $1.2 trillion building roughly 44 million cars a year.
The pulling together of disparate parts of the manufacturing value chain to fight a common enemy is reminiscent of World War II and Franklin Delano Roosevelt’s “Arsenal of Democracy.”
Ford switched, in part, from building cars to planes in the 1940s, constructing a bomber plant from scratch in late 1941. Ford churned out 56 bombers in 1942. By November 1943 Ford had made its 1,000th bomber. Eventually, a B-24 bomber rolled off a Ford assembly line every 63 minutes.
The news might help Ford and GE stock, but the partnership isn’t really a stock story. Ford will be compensated for building ventilators, but the company isn’t doing this to generate profit. At the margin, it will keep some workers on the job and prevent plants from sitting idle.
He thinks the stocks are pricing in something more dire right now. Ford stock is off more than 40% year to date. GE shares have fallen almost 30% over the same span. Both declines are worse than the 23% drop of the Dow Jones Industrial Average and the 20% decline of the S&P 500.
Ford shares haven’t been around $5 since 2009.