President Trump Apparently ‘Orders’ GM To Make Ventilators Under Defense Production Act
The move comes after a very curious war of words—and tweets—between the president and GM.
Mere hours after General Motors confirmed it will produce critical care ventilators with medical equipment company Ventec Life Systems, President Donald Trump issued orders for the automaker to build the devices under the Defense Production Act—a Cold War-era law now being used to ramp up medical supplies as part of the ongoing battle against the coronavirus pandemic.
The move, however, comes merely a day after Trump questioned the need to acquire tens of thousands of ventilators, and after news reports emerged that the White House and GM had reached an impasse over the billion-dollar cost of production. Trump was also sharply critical of GM and its CEO Mary Barra on Twitter this morning in the lead-up to his decision this afternoon.
"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 remarks quoted by The Hill. He added, "GM was wasting time. Today’s action will help ensure the quick production of ventilators that will save American lives."
GM spokesman Jim Cain told CNBC that "the order does not change GM’s previously announced plans or schedule to produce the ventilators."
And it appears GM was, in fact, already in the process of moving on the ventilators. The automaker released a statement this morning saying it would make the ventilators at its Kokomo, Indiana manufacturing facility and begin shipping them as soon as next month. GM also said it was covering the costs of the effort.
Trump has often had a contentious relationship with GM—and has frequently turned the automaker into a punching bag on Twitter—but what has transpired over the past 24 hours has felt especially unusual.
Hospitals across the U.S. have expressed a critical, life-or-death need for more ventilators, which are used to treat COVID-19 patients with respiratory dysfunction. New York Gov. Andrew Cuomo, whose state is currently the epicenter of the viral outbreak in the U.S., has said they may need as many as 30,000 ventilators.
However, when Trump called into Sean Hannity's show on Fox News Thursday evening, he was dismissive of that request. "I have a feeling that a lot of the numbers that are being said in some areas are just bigger than they're going to need," the president said.
Then on Thursday night, the New York Times released a story saying the White House balked at GM and Ventec's planned announcement to build the ventilators, apparently over the $1 billion cost, which included several hundred million dollars up front to retool the Kokomo plant. The White House and the Federal Emergency Management Agency were then said to be shopping around.
After that story ran, Trump lashed out at GM, Barra and the media on Twitter. The president also implored GM to produce the ventilators at the Lordstown, Ohio factory, a plant it sold last year and no longer owns.
The president later clarified:
Sometime after or around those tweets were loosed, GM made its announcement about moving forward with Ventec to produce the ventilators. Afterward, however, Trump said he was invoking the Defense Production Act to order GM to do so.
It's not clear yet whether this order involves GM's other plants.
The Defense Production Act was enacted in 1950. Broadly speaking, it grants the president several powers, including the ability to direct the private economy to meet emergency civil and defense needs. Used sporadically during the Cold War, it has been deployed for certain natural disasters like hurricanes.
Trump invoked the act on March 18 "just in case we need it" to meet the demands around the viral outbreak. But amid criticism from the U.S. Chamber of Commerce and others, Trump seemed to be stopping short of fully using DPA to compel manufacturers to make ventilators.
The politics and sports website FiveThirtyEight has a good explainer on the act, and its limitations:
Those familiar with the workings of the DPA are quick to note its implementation is not a panacea. Dave Kaufman was in charge of DPA authorities in his role at FEMA during the Obama administration. He told me that there seems to be a fundamental public misunderstanding of what the law can do. “It’s being talked about in the media as restructuring the economy a la WWII. It’s not actually really that — it’s a powerful authority, don’t get me wrong, but it’s not nationalization of industry, which is kind of the way we’re talking about it.” Industrial leaders like General Motors Co. reportedly balked at the idea of the White House invoking the DPA.
The kind of DPA powers that Cuomo and the media have largely been talking about are the ones vested in Article III of the act. That portion of the law is meant to “create, maintain, protect, expand, or restore domestic industrial base capabilities essential for the national defense.” To go about that, the government is authorized to provide loans and loan guarantees to stimulate domestic production of needed goods, to make agreements to purchase products on a long term basis in order to encourage the production of needed goods and “to procure and install equipment in private industrial facilities,” in the words of a Congressional Research Service analysis of the DPA.
In other words, it can be a useful tool to mitigate disasters, but it's not the full-on nationalization of private industries or the supply chain. And FiveThirtyEight journalist Clare Malone reports the DPA move doesn't nationalize GM or give it extra loans or financial backing—it just lets the government jump the line to secure ventilators in production above other bidders.
What's clear is that GM is, in fact, making ventilators to help treat coronavirus patients, and it seemed to be doing so before the president invoked DPA. It's another sign of Trump's fraying relationship with GM, but I'm not sure the sequence of events will matter much to the projected 100,000-plus coronavirus patients in New York alone or the medical professionals working around the clock to treat them.
Meanwhile, Trump also signed the $2.2 trillion stimulus package into law today, an unprecedented large effort to bolster businesses and private citizens alike as the economy grinds to a halt with extreme social distancing measures underway.