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Corona Crisis Corporations: America's War Economy

The Californian liquor distillery Amass produces gin, vodka – and recently also disinfectants. Everything based on herbs and at enthusiastic prices. Just under half a liter of the "alcohol-based botanical hand wash" costs $ 38. The product was inspired by the "four thieves" herbal mixture, which according to a legend from the Middle Ages could prevent the infection with plague, Amass praises his product and promises to donate a part of the income to bartenders who would have lost their job.

America's economy is switching to pandemic production because of corona – and the boundaries between profit and public service are blurring. Not only is there a lack of disinfectants, but also protective clothing, face masks and respirators, which often determine life and death in hospitals. The state of New York alone needs 30,000 additional devices, according to its governor Andrew Cuomo, and he has only about half of them together.

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Many companies have announced that they want to help. Patriotism is part of the business model in the United States. Just as General Electric or the Kaiser shipyards built ships and engines 24 hours a day during the Second World War to support America's war effort, the economy had to act in this crisis as well, a number of CEOs under the name StopTheSpread said. Org have merged.

GM, Ford and Tesla have pledged to manufacture respirators and ventilators while auto production is at rest in their factories. "Project Apollo" Ford calls the project grandly in reference to the rescue operation after the failed Apollo 13 moon landing. The financial aspects are irrelevant, said Bill Ford, the great grandson of the company founder: "This is a national emergency and we will sort out the rest later." Respirators instead of refrigerators? This is not even done. Several textile manufacturers want to make mouth masks. The luxury brand Brooks Brothers is converting production facilities in New York, North Carolina and Massachusetts to produce up to 150,000 protective masks for medical personnel every day. "We consider this to be our duty and part of our DNA," says Claudio Del Vecchio, CEO.

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The problem: Many of the plans can hardly be implemented quickly: It is not so easy to "convert a refrigerator factory into a ventilator factory," warns Chamber of Commerce Vice President Neil Bradley, US President Donald Trump doesn't care. He must demonstrate the ability to act. That is why he reactivated a law from the time of the Korean War, which he himself had recently discredited with the remark that one could see in Venezuela where the "nationalization" of economic activities leads. But now the "Defense Production Act" is to force General Motors to produce faster. Trump indirectly accused GM boss Mary Barra of wasting time and trying to rip off the government. "Always a fiasco with Mary B.", he scolded and also immediately had a solution ready: GM should simply put his shutdown assembly plant in Lordstown back into operation.

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However, one thing escaped the commander-in-chief in the war against Covid-19: GM had long since sold the plant. And according to their own statements, the company has been working "around the clock" for weeks without any government pressure to start building ventilators in Kokomo, Indiana. GM is "at the speed of light" to find suppliers, to acquire the necessary know-how and to equip the factories, praises Kaitlin Wowak from the University of Notre Dame. "It can hardly be faster," said the Washington Post supply chain expert.

Trump needs a culprit – and is openly threatening his advisorA official agreement from GM with the government failed, according to US media reports, not because of the company's resistance, but because the authorities were undecided how many devices they really wanted to order and whether the estimated ones Total costs of more than $ 1 billion – around $ 18,000 each – are reasonable. GM has stated that it intends to hand in the devices at cost price. However, it remains to be seen how quickly the company can actually achieve the production target of 10,000 pieces per month.

Trump's goal is clear: he needs a scapegoat if things go badly. And if things go well, the Americans owe it to him, and this strategy is to be carried out by his economic adviser Peter Navarro, who, from the boss's perspective, has already proven himself in the loss-making trade war against China. Navarro announced that they would use all their might to force the companies to fight the pandemic. This could include the retrofitting of factories, but also raids in warehouses. Wherever hurdles appeared, "President Trump would immediately and mercilessly knock them down," Navarro threatened in an interview with the Wall Street Journal.

Trump himself promises that the government will procure more than 100,000 additional ventilators "within the next hundred days". A manufacturer has taken precautions – and can now react quickly, but experts point out that martial law does not help if production does not comply. It "doesn't really solve the problem if you're the first to get something that doesn't exist," warns Dave Kaufmann's law enforcement expert Dave Obama.

At least one company seems to be ready for the crisis: 3M. After the Sars epidemic at the beginning of the century, the manufacturer of N95 masks realized that he was not prepared for a sudden surge in demand, the magazine "Bloomberg Businessweek" reported. The management therefore started to build up reserve capacities in order to be able to ramp up production if necessary. According to Bloomberg, 3M has now doubled production to 100 million a month within two months. This has a double effect: The company can supply more customers – and it at least partially compensates for the crisis-related sales losses in aircraft paint, for example : "We will hear the term surge capacity in conference calls on the quarterly results in ten years."
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