Ford CEO Announces Company Will Contribute To Manufacturing Medical Supplies
ARI SHAPIRO, HOST:
Three corporate giants - Ford Motor Company, General Electric and 3M - are partnering to produce supplies needed to fight the outbreak of the coronavirus. Health care providers around the country have reported shortages of supplies like masks, face shields and ventilators. President Trump has encouraged the private sector to pitch in and help.
AILSA CHANG, HOST:
Which is where Ford comes in. With the help of GE and 3M, Ford will add medical equipment to its lineup of cars and trucks. The company said today that two factories in Michigan would bring some workers back right away to ramp up production. Ford closed all production facilities last week to keep workers at home during the coronavirus outbreak. Earlier today I spoke to Ford CEO Jim Hackett. I started by asking him how long it would take to retool those factories to produce medical supplies.
JIM HACKETT: Well, it's important in this news to make it really clear how we're attacking this problem, which helps answer the question, how long? To scale up ventilators to the kind of volume that the world needs, we have to subdivide the problem, make a supply chain for it. So GE and Ford are working and consulting with each other, sharing resources. And this problem will get even subdivided further to other suppliers. So it's my instincts today listening to all the reports from our teams that, by mid-May, we should start being halfway up the curve of scaling this; by June, be producing at a rate that would be able to make 900,000 a year...
HACKETT: ...Or something like that.
CHANG: Right. That's working with your partners to reconfigure these supply chains, reimagine them - you say subdividing the different tasks for each entity.
HACKETT: That's right. There's not a line - a ventilator building in the world that can handle this demand, so we have to come at the problem differently.
CHANG: Let me ask you. How many people do you think you will end up bringing back to work in order to provide all these ventilators? Because I know that you shut down production facilities earlier this month.
HACKETT: Yeah. Just to give you - again, the sense of the scale here is - Ford employs over 50,000 workers in factories in America today. But to produce a line like this, you know, we're getting started with 200 people in one location, you know...
HACKETT: ...Three hundred in another. It can scale quite quickly. But if you had more than 2,000 people in the supply chain working, building this, I would be surprised. It probably won't get much bigger than that...
HACKETT: ...To build this.
CHANG: And how involved was the federal government in creating this partnership that you all announced today for 3M and GE Health?
HACKETT: Well, I never got a call to start it. But I was talking to Larry Kudlow in the White House and saying, hey; we have a history at Ford. The arsenal of democracy is a famous story where, at Willow Run, we build a bomber every 63 minutes - that we want to help. And he said, go for it. And the Department of Defense has been involved, so there's been total support from the government. Go for it, Ford. Come back to us. Tell us what you need.
And so we've got a really open line of communication with them. And this is something I prefer, frankly, which is - let the entrepreneur and the innovation team work. Government, help us get through any kind of friction. As we get these things built, they're going to help us distribute them because they - FEMA has an extensive network to get things to people quickly. So it's hand in glove kind of working together.
CHANG: I want to talk about this - how to work with the federal government - because there has been a lot of talk about the Defense Production Act. This would mobilize the private sector to provide the federal government with needed supplies during times of crisis. What guidance have you gotten in general from the Federal Government this week on whether they will end up using the Defense Production Act?
HACKETT: We - I haven't been involved in the policy discussions of the application of that because it's my observation watching the president also in press conferences saying that he's got a business instinct where he thinks letting - turning business loose to let them work through the system the way they know how to compete, you get a better output versus kind of nationalizing production.
CHANG: And you agree with that. You agree that it should be on companies to step up first, and if they eventually need help with - from the federal government, they can ask for it. But in the beginning, companies should act on their own initiative. Is that what you're saying?
HACKETT: Yeah. I more than believe that. I think it's by far proven that it's the best way. And listen; this is the state of America. Every time the country's ever had a challenge like this, businesses came together and responded in amazing ways. It's actually the most responsive, fastest way to get something to happen.
CHANG: I want to talk about - you know, your remaining plants will be shut down until the end of the month. That was announced just a week ago, about a few days ago. Are you considering extending that time period because the end of March is just a week from today?
HACKETT: That's a really fair question. And we always said in joint discussions with Rory Gamble of the UAW that our first obligation is to make everyone safe and that by, you know, sheltering in place and social distancing, flatten the curve. And we can get back to work. As we look at the growth of the curve right now, I think it's probably going to be premature but not by 10 weeks or something that would be really damaging to the economy. We're talking about, you know, maybe twice the time longer. So we may...
HACKETT: ...Be looking at four weeks from now.
CHANG: Got it. I want to switch gears a little bit and talk about the economy. We're already experiencing major job loss across the country, and there are a lot of economists who say that we could very well be headed for a recession. How prepared is Ford to weather a recession at this point?
HACKETT: Well, we've been tutored based on, you know, experience before. I mean, personally, I ran a company called Steelcase through the last Great Recession. So anyone who's been in business the last 20 years knew to get your balance sheet ready for unexpected event management - is what we call it. So Ford did not take any bailout money in '06 to '08, and the company came roaring back. In this case, we kept the balance sheet stocked with more cash than we probably needed. And in fact, last week we took the extraordinary action of pulling down the line of credit 15 billion. So we're sitting on about 37 billion in cash. This is more than enough. This would be much more than we needed in the last great recession. But we modeled what we would need if there was no sales, you know?
CHANG: Well, how worried are you about a major drop in demand for new cars? Is that a real concern?
HACKETT: Here's my optimism. If we can find ourselves to be really disciplined about the shelter in place, we can come out of the economic effects in mid-May, and the country can be turned back on really rapidly. We're certainly in financial shape to keep things going. We aren't going to get rid of workers. We're trying to really take care of them during this period so that when this is over, we just turn the thing back on.
CHANG: Jim Hackett is the CEO of Ford Motor Company.
Thank you very much for joining us today.
HACKETT: Thank you. Transcript provided by NPR, Copyright NPR.