Switch to medical equipment making also shifts labour relations

This week, Ford hit a milestone in the Covid-19 saga.

Back in March, the American automaker had converted part of its (then-idled) assembly line to make medical equipment. The move came amid pressure from US president Donald Trump, including a tweet saying “GET GOING ON VENTILATORS, FAST!!!!!!”

But now, after delivering 50,000 ventilators in partnership with groups including 3M, Ford is halting production. It will focus instead on churning out 100m masks to blanket America as autumn and the flu season approach.

The news highlights a shift in the medical science, as Jim Hackett, Ford’s outgoing chief executive, said this week: “Most of the people who [have been] dying were dying from blood clots, so giving people blood thinner and steroids has reduced the need for ventilators. Masks are the priority now.” 

Doctors are becoming much savvier about containing and treating coronavirus — and industrial production is pivoting in response. And while this therapeutic progress is not attracting as much attention in financial markets as the hunt for a vaccine, it should be. 

The Ford saga also points to a bigger looming debate about supply chains. Mr Hackett said that it was tough for Ford and other big industrial companies to pivot into making medical equipment. Quite apart from the (obvious) challenge of sterilising previously filthy assembly lines, it was almost impossible to find basic manufacturing materials when cross-border supply chains collapsed during lockdown. Indeed, American supplies of medical elastic ran so short that Ford engineers were forced to use car door sealants instead, as a new film shows

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This shock leaves Mr Hackett warning that “those supply chains [for medical equipment] will be redesigned because of this”. Moreover, the “redesign” will probably not stop with medical gadgets, given the rising tides of protectionism. 

“The Covid-19 crisis could become a positive tipping point” in the localisation of industrial production, argue Sridhar Kota and Glenn Daehn, two engineering professors in Michigan. They think that the events have revealed supply-chain vulnerabilities in numerous sectors. Moreover, Ford’s pandemic pivot has inadvertently revealed another point: how creative the industrial groups can sometimes be in reorganising supply chains in a crisis (particularly after a presidential tweet). Politicians will not forget this.

These events also reveal a subtle but striking shift in labour relations. Historically, there have been terrible tensions between unions and bosses in the auto sector. However, when Ford set about converting assembly lines for the Covid-19 fight, Mr Hackett asked the United Auto Workers union to find 1,000 volunteers (out of 50,000 workers) and was flooded with offers, even without offering additional “danger” pay. 

In the aftermath, Mr Hackett praised his “brother” Rory Gamble, head of the UAW — and Mr Gamble is equally effusive. “This was a case of unexpected event management and Rory took control in a way that was so refreshing and impressive,” says the Ford boss.

Mr Gamble responds: “We had one common enemy and united goal and this throws the old stereotypes about us fighting all the time out the window. I hope it will last in the future.”

Such hopes might be over-optimistic: the new detente could be tested if an economic fall leads to job cuts. Ford, which expects to lose money this year, this week announced an early retirement programme as part of a pre-existing $11bn restructuring plan.

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However, this brotherly rhetoric also suggests that US bosses are responding to a shift in the American zeitgeist. Not only are investors in the swelling sustainability sector watching labour relations more closely, but politicians are too. The Democratic presidential nominee Joe Biden this week declared that “I am going to be the strongest labour president you have ever had”. Indeed, Tefere Gebre, a top executive in the AFL-CIO union, argues that “the 2020 platform of the Democratic party is the most pro-labour it has ever been”.

And there is a practical issue, too: if rising protectionism increases pressure to localise production, then rustbelt executives will need union support. A dose of patriotism might help. 

To put it another way, while the production of ventilators and face masks is insignificant in financial terms for a company as large as Ford, the tub-thumping language of localisation and creative pivots might outlast the virus. Think of that the next time you spot a face mask: particularly if it carries a “Made in America” tag.




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