General Motors (NYSE: GM) has secured a contract with the United States Federal Government to produce 30,000 ventilators for the national stockpile. GM's contract will see the company receiving just short of half a billion dollars for the considerable venture.
The contract has been handed to GM as part of an effort by the Federal Government to utilize the Defense Production Act to help support relief efforts as the coronavirus pandemic continues. GM will be paid $489.4 Million for the production, though GM has stated that it will not profit from the venture. The $489 Million being paid out to GM is just enough to cover the $480 million in production costs for the ventilators.
GM had previously announced a partnership with Ventec Life Systems, a medical manufacturer specializing in ventilator products, primarily its VOCSN model. Ventec has lent the design for its VOCSN model to GM for the government contract; the automaker will assemble the VOCSN ventilators at its Kokomo, Indiana. Ventec will continue production at its own factory as well.
The defense production act will reduce the costs and shorten the process of obtaining supplies for the manufacturing of the VOCSN ventilator, which will, in turn, shorten the production process. GM estimates it will have the first shipment of 6,132 ventilators will be ready for delivery in May.
News of the contract boded well for GM, seeing the company's stock closing up after trading ended on Wednesday. GM's share price ended the day at $23.13, about 8.6% up from its previous closing price.
The rush to produce ventilators by GM and Ventec comes as many other major companies are moving to provide ventilators to meet increasing demand. British technology company Dyson designed its own ventilator after being contacted by British Prime Minister Boris Johnson and stated it would have 10,000 units ready by early April. Elon Musk previously announced that Tesla (NASDAQ: TSLA) was seeking to re-open its New York Gigafactory to produce ventilators for the State of New York, which has been hit the hardest of the continental United States by the pandemic.