Masks and hand sanitizer replace iPhones and perfume: Firms redeploy factories to make coronavirus supplies
During World War II, the carmaker General Motors made guns and tanks to support the U.S. war effort. To battle the coronavirus pandemic, GM, with joint-venture partner SAIC Motor, is now making machines to manufacture surgical masks at a plant in the southern Chinese city of Liuzhou.
GM is far from the only company to dedicate factories to the battle against the new disease, an international campaign that’s been compared to wartime efforts. Across industry and geography, firms are redeploying production lines to boost the manufacturing of needed supplies. Machinery usually reserved for iPhones, cosmetic goods, and chemicals is now spitting out surgical masks, hand sanitizer, and medical supplies.
Joining the ‘national effort’
On Monday, Prime Minister Boris Johnson privately met with up to 60 U.K. business leaders to call on companies to help build medical equipment. He told companies “to manufacture as many new ventilators as possible, so we can all help the most vulnerable and our [National Health Service], whose staff have been working round the clock,” according to a government spokesperson. He added that reducing the spread of the virus will require a “national effort,” and set a target of building 30,000 new ventilators “from scratch” in the next two weeks, according to the Financial Times.
The directive is no doubt a tall order for firms that have not produced such devices before.
The carmaker Rolls-Royce was one of the companies the U.K. explicitly asked to make health equipment like ventilators during the outbreak. However, rapidly shifting production lines from cars and jet engines to medical supplies will present logistical challenges. When asked whether such a move is doable, a Rolls-Royce spokesperson said, “As [the government] shapes their plans, we are keen to do whatever we can to help the government and the country at this time.”
The U.K. also asked Ford and Dyson to contribute to the manufacturing of medical equipment. “Ford wants to help where we can in the current situation…and [we] are currently evaluating the feasibility,” a Ford spokesperson said. A representative for Dyson said the company best known for its vacuum cleaners will use its “expertise and resources” to “see if we can provide a rapid solution.”
Medical equipment manufacturers in the U.K. told Bloomberg it would likely be at least two to three months before carmakers and other factories could convert to producing ventilators.
In France, LVMH, the luxury goods company that owns brands Louis Vuitton, Christian Dior, and Givenchy, announced on Sunday that factories that make perfumes and other cosmetic products will shift production to hand sanitizer. The company said the decision was made to address shortages of the product in France, where the coronavirus crisis is escalating. The country reported nearly 5,500 cases of the virus on Monday. “[LVMH intends to] enable a greater number of people to continue to take the right action to protect themselves from the spread of the virus,” said LVMH in a statement.
A spokesperson for LVMH told Fortune that the company has “all the necessary skills” to produce hydro alcoholic gels and aims to make 12 tons in the first week. It started delivering the product on Monday, the spokesperson said. LVMH is giving the hand sanitizer to French authorities to distribute at hospitals at no charge, according to The Guardian.
China’s production campaign
The ramp-up of production of coronavirus-fighting staples in the West reflects the push China made weeks ago, as it experienced the world’s first spike in cases.
In mid-February, as the outbreak in China reached its peak, President Xi Jinping called for a “peoples war” in fighting the virus—and some 2,500 Chinese companies responded by contributing to mask-making efforts.
Apple device manufacturer Foxconn announced in early February that the company would divert production lines in a newly-opened iPhone factory to produce face masks. China’s state-owned oil producer Sinopec recently released a 48-hour long live stream of a chemical factory that it converted to make raw materials for face masks and other medical supplies. And BYD, a Chinese electric-vehicle company, now claims that its car-turned-mask factories can produce 5 million masks per day.
Whether the repurposing of factories can ease the global run on medical supplies remains an open question since demand is so staggering. The World Health Organization estimated in early March that health care workers alone would need up to 89 million masks, 76 million gloves and 1.6 million pairs of goggles per month to fight the outbreak. At the time, WHO estimated that the cost of surgical masks had risen by a factor of six due to shortages.
China accelerated its production of medical face masks, churning out as many as 116 million per day at the end of February. The center of the coronavirus outbreak has shifted from China, but the supply of masks has yet to follow. China has donated some masks to South Korea and Italy, but beyond that, buyers abroad were struggling to import masks from China as recently as last week.
Companies’ support of government interests during national and global crises is not without precedent, says David Ahlstrom, a management professor at the Chinese University of Hong Kong. In the U.S. alone, corporations were mobilized to help the government during the Great Depression, World War I, and World War II. Moreover, before the Federal Reserve was founded in 1913, major banks like J.P. Morgan would often assume a central bank’s role in responding to financial panics, says Ahlstrom.
Beyond addressing the immediate crisis, companies have plenty of incentive to participate in combatting the coronavirus pandemic: prudence, charity, and temperance, says Ahlstrom. “It is just good business to show how responsible your firm is.”
In China, the motivation is somewhat different, since China’s system tends to reward corporations whose goals align with the government’s, says Brock Silvers, Managing Director of Adamas Asset Management in Hong Kong.
“Companies that have failed to exhibit support for Beijing’s policies have often paid a price,” said Silvers. “When Beijing mobilizes resources to address major issues, both foreign and domestic corporates don’t have much choice but to support those decisions.”
More coronavirus coverage from Fortune:
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—3 months before the coronavirus, a war game showed we weren’t ready
—How mainland China’s closest neighbors have kept coronavirus cases so low
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—SARS taught Taiwan how to contain the coronavirus outbreak
—How A.I. is aiding the coronavirus fight
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