General Motors races to build emergency ventilators

Yahoo Finance’s Alexis Christoforous, Brian Sozzi and Rick Newman break down how General Motors is converting its manufacturing process to build ventilators and its tense relationship with the White House.

Video Transcript

BRIAN SOZZI: --on again, Rick Newman into the mix here this morning. Rick, this battle between President Trump and GM over ventilators, it's kind of hit a new gear.

RICK NEWMAN: Well, President Trump seems to be satisfied for the time being now that there seems to be a deal in place between GM and this other company that actually is the ventilator company. It's called Ventec. So he went after GM and the CEO Mary Barra on Friday. But then, on Sunday, he said, well, it looks like they're finally getting their act together and things are fine at GM.

But it's still going to be awhile before this ventilator production cranks up. They probably will be another month or so before this accelerated pace of production actually produces ventilators that will go to hospitals and everybody else who needs them.

ALEXIS CHRISTOFOROUS: You know, Rick Alexis here. First off, I have to say, what happened to the bow tie look?

RICK NEWMAN: [LAUGHS]

ALEXIS CHRISTOFOROUS: I was liking it.

RICK NEWMAN: I need more bow ties.

ALEXIS CHRISTOFOROUS: Don Johnson look. What happened?

RICK NEWMAN: I need more bow ties.

ALEXIS CHRISTOFOROUS: [LAUGHS] We'll see--

RICK NEWMAN: They're on the way.

ALEXIS CHRISTOFOROUS: --if we can get them shipped to you. You know, along with the idea of making more ventilators, I was reading that that's going to create another issue. Yes, we need the ventilators, but we also need the doctors who are going to be able to work those ventilators because it's my understanding that not every health professional actually has the expertise to work those kinds of things As. President Trump talked about how we're going to get the right people to run the more ventilators.

RICK NEWMAN: That seems to be a level of detail sort of below his focus at this point. I think it's just get these things out there to the hospitals that need them. And we're seeing it in New York, for example, where we all are right now, I mean, we are sort of hitting the crunch point where they're starting to run out of equipment. And this is sort of the test case for other cities where this is likely to happen.

They're just on a pace that is probably two or three weeks behind what's happening here in New York. So that's Atlanta, and New Orleans, probably Chicago, apparently Detroit, and some other cities that are going to be needing these things. And I think this is the dilemma that GM was facing last week when they were trying to put this deal together. How many of these machines are we actually going to need? When are we going to need them?

And what if they make too many? Who's going to foot the bill if they end up making too many? So the way this deal did come together, GM is what's called a contract manufacturer for Ventec. That means it's on Ventec to distribute the machines and figure out who's going to pay for them and who's actually going to buy them.

But they will be paying GM to participate in this deal. And they're hoping to get-- so Ventec is upping its own production from a very small 200 units per month. They think they can do 1,000 units per month on their own. But GM, with its manufacturing expertise and all the supply chain expertise, they're going to try to get up to 20,000 ventilators per month, so 20 times what Ventec can produce on its own.

BRIAN SOZZI: You know, Rick, in defense of GM, making ventilators is tough. It's not like you just take a-- you try to make a ventilator down the Corvette assembly line. It doesn't work like that.

RICK NEWMAN: [LAUGHS] I mean, right. So President Trump and others make this sound way easier than it is. I mean, it's as if, if you manufacture one product, then it's just a simple thing to turn a few switches so you can manufacture some other product. It doesn't work that way.

I mean, for starters, you need to manufacturer of ventilators in sterile factories. And you know, a typical car assembly line is not a sterile factory. So GM did identify one space in Kokomo, Indiana, where it says it thinks it can establish that kind of sterile manufacturing space.

And auto manufacturers know how to do this. I mean, they do the industrial engineers, for example, and the people who know how to set up assembly lines. It just takes time. And what seemed to happen last week is President Trump just lost patience. He didn't understand what was taking so long or particularly care.

I'm not sure that Trump did anything that's actually going to speed the production of ventilators. What you did see last week is GM did jump through a hoop and, basically, within a couple of hours after the Trump criticism came on Twitter, GM did say, OK, we've got this deal with Ventec. We're doing everything we can. And we're going to start getting to work here.

ALEXIS CHRISTOFOROUS: Rick, it's not just GM, though, right? We should mention Ford, Tesla, even, getting in on the act now, trying to make the ventilators. Have they gotten the same sort of slack that GM did from President Trump?

RICK NEWMAN: Ford got a slap. So Trump, he has a love-hate relationship with the auto industry. And when he goes after Ford or General Motors, he usually goes after the other one, too. And he did that last week.

I don't think he's gone after Tesla. Tesla has the luxury here, being kind of a niche player or a bit player. And I'm not sure they're actually going to end up assisting with any ventilator production. Ford, like GM, they're partnering with another company that does this. That's General Electric Health Care division. So Ford is trying to help them crank up production.

I'm not that way that Tesla has said they're partnering with anybody in the health technology industry that makes these things. That could just be Elon Musk doing what he does sometimes and flinging ideas out there.

BRIAN SOZZI: You know, Rick, I think it's also very important to make investors realize here, GM's not making bank off of ventilators. Their car production is pretty much shut down. So I imagine the next couple quarters could be very, very difficult for this company.

RICK NEWMAN: Yeah, for sure. I mean, the auto industry is going to get crushed. We're going to get we're going back to depression level auto sales for at least a quarter or two. Now, that'll bounce back.

These are durable goods. This is the kind of spending that it does bounce back, assuming people have the money to spend and they still are employed on the other side. But Mary Barra, General Motors' CEO, she was-- I mean, Trump put her in an impossible position.

She cannot fight back against Trump because, when your business model is you sell SUVs in middle America, you cannot risk alienating Trump supporters. So Mary Barra has had nothing to say publicly about this. She's keeping a low profile.

But GM is a publicly owned company. We need to remember this. And no CEO of a publicly owned company can just say, OK, we're going to help out. It doesn't matter if we take a loss on this project.

So I'm sure, at GM, they were trying to figure out, look, we have to at least do this on a break even basis, or it's very hard to justify to shareholders. And that's what GM says now. They say, we will not make a profit on this. We're just looking to cover our costs.

BRIAN SOZZI: Yeah, this battle is far from over. Rick Newman, always good to see you. Bring the bow tie back, will you?

RICK NEWMAN: Got it.

BRIAN SOZZI: [LAUGHS]