Mar 20, 2020

Axios Navigate

By Joann Muller
Joann Muller

Thanks for reading. I hope you and yours are staying safe and healthy during these uncertain times.

📺 In this week's must see "Axios on HBO", we dive into how the coronavirus pandemic is upending politics, business and global affairs, including a rare interview, with China's ambassador to the U.S., the CEO of Carnival on its response to the Diamond Princess outbreak, Microsoft's CEO on the remote work surge and more.

  • Tune in Sunday 6pm ET/PT on all HBO platforms.

Smart Brevity count: 1,225 words, a 5-minute read.

1 big thing: Wartime mobilization proposed

Intensive care room with ventilator (right). Photo: Ronald Bonß/picture alliance via Getty Images

Automakers and their parts suppliers are offering to produce desperately needed ventilators to keep coronavirus patients alive, but quickly retooling industrial factories to make precision medical equipment might not be feasible, despite the good intentions.

Why it matters: The U.S. faces a critical shortage of medical equipment to fight the disease, including ventilators that help patients breathe as well as protective gear, such as masks, gloves and gowns, for health care workers.

The big picture: The auto industry has virtually shut down in North America for deep factory cleanings, and if and when they'll resume production isn't clear.

Driving the news: In a call Wednesday to inform the Trump administration of the shutdown, GM CEO Mary Barra told White House economic adviser Larry Kudlow that GM wanted to help and was studying how it could potentially support production of medical equipment like ventilators.

  • That news prompted a similar statement from Ford, and later, Tesla CEO Elon Musk tweeted, "We will make ventilators if there is a shortage."

What's happening: The Toronto-based Automotive Parts Manufacturers' Association is enlisting tool and die companies and parts suppliers to adapt their manufacturing plants on both sides of the border to produce medical supplies.

  • "Their response has been overwhelming .... Just get us the specs," APMA president Flavio Volpe told the CBC.
  • The shift to medical supplies would be easy enough to do, he said, and they could convert back to automotive manufacturing quickly.

Yes, but: Pivoting to wartime footing for ventilators is not like churning out tanks, planes and ships for World War II, says Sandy Munro, CEO of Munro & Associates, an expert in lean manufacturing who has intimate knowledge of both the auto and medical device industries.

  • Production of medical devices requires sterile rooms with much higher standards than those required in a "clean room" at an automotive paint shop, for example, he says.
  • The Food and Drug Administration would have to validate any new facilities, a process that can take up to 180 days, explains the Huffington Post.
  • The technicians who manufacture ventilators also require eight to nine months' training, says Munro.
  • "Medical devices are intricate machines on which people's lives depend. Every step of the production process has to be precise. This isn't just a box with an air hose on it."

One of the biggest challenges is securing components, especially the disposable, single-use tubes and masks made of highly specialized medical-grade materials, experts say.

  • Most are manufactured outside the U.S. — in Costa Rica, Japan, South Korea and China, says Munro.
  • The virus has slowed production in many parts of the world, and even where factories are producing, shipping is complicated by a drastic reduction in cargo carriers and air freight.

What to watch: The federal government could clear many of these hurdles, especially if it activates the Defense Production Act, which would mobilize private industry to assist in "national defense."

Read the full story.

  • Go deeper: 'At war with no ammo': Doctors say shortage of protective gear is dire (NYT)
2. Automakers' silver lining

Illustration: Sarah Grillo/Axios

There's a nugget of good news amid all the dire forecasts for plunging U.S. auto sales in the age of the coronavirus: almost one-third of new cars are leased, and 1.8 million of those leases are due to expire between now and June.

Why it matters: Car owners will need to turn in their car, buy out the lease, or get a new one in the next few months. With air traffic and public transit at a near standstill and car-sharing sounding risky to many people, having a personal car is an advantage.

The big picture: The auto industry's 10-year boom is coming to an abrupt end. Economists are slashing their U.S. sales forecasts, modeling them after the steep declines in China and Europe as the virus spread across the globe.

  • Instead of another strong year of 16.5 million to 16.8 million vehicles sold, some see sales falling as low as 14 million.
  • J.D. Power is carefully tracking the trend. In the first week of March, sales remained strong, and then they fell off a cliff, tumbling from an 8% drop at the beginning of last week to a 36% decline by the end of the week.
  • In China, car sales reportedly fell 80% in February during the height of the pandemic.

It won't get that bad in the U.S. because leasing will provide a cushion, says Tyson Jominy, vice president of data and analytics consulting at J.D. Power.

  • Even if people are sequestered at home, enterprising car dealers will find a way to complete customers' lease trade-in, he said.
  • Most of the paperwork can be done online, and the dealer can deliver the car without coming in close contact with the customer.

What to watch: Automakers and the National Auto Dealers Association are asking President Trump to designate vehicle repair, maintenance, and sales facilities as "essential operations" in the midst of government-imposed restrictions.

3. New rules proposed for driverless cars

Illustration:Rebecca Zisser/Axios

The National Highway Traffic Safety Administration this week proposed sweeping changes to U.S. safety requirements to allow the deployment of self-driving vehicles without familiar features like steering wheels or pedals.

Why it matters: It's an important step toward the driverless era, and comes about six weeks after NHTSA granted an exemption from existing regulations to Silicon Valley-based Nuro, a manufacturer of self-driving delivery vans.

Details: The agency said it is proposing to rewrite 11 safety standards "by revising the requirements and test procedures to account for the removal of manually-operated driving controls," reports Reuters.

  • The affected rules govern occupant protection, steering controls, glazing materials, door locks, seating systems, side impact protection, roof crush resistance and child restraint anchorage systems.
  • "We do not want regulations enacted long before the development of automated technologies to present an unintended and unnecessary barrier against innovation and improved highway safety," said NHTSA acting administrator James Owens in a press release.

Yes, but: Jason Levine, who heads the Center for Auto Safety, told Reuters NHTSA should not "remove regulatory safeguards for technology even DOT acknowledges has not been proven and may in fact be unsafe."

4. Driving the conversation

Boxy: Driverless cars have arrived, and they all look like loaves of bread (Chester Dawson and David Welch — Bloomberg)

  • Why it matters: With utilitarian designs, developers of self-driving cars risk repeating the same mistake the industry made with electric cars a decade ago, writes Bloomberg.

Plea: Ex-Uber engineer pleads guilty to trade secret theft from Google (Kia Kokalitcheva — Axios)

  • Why it matters: Anthony Levandowski was at the center of a year-long legal dispute between the companies that exposed Silicon Valley's ruthless competition in the quest to build future technologies and reap their financial rewards.

Pedals: A surge in biking to avoid crowded trains in NYC (Winnie Hu — The New York Times)

  • The bottom line: "A growing wave of New Yorkers are embracing cycling to get to work and around the city as their regular subway and bus commutes have suddenly become fraught with potential perils, from possibly virus-tainted surfaces to strangers sneezing and coughing on fellow passengers."
5. What I'm driving

2020 Toyota Prius hybrid. Photo: Toyota

This week I'm driving the 2020 Toyota Prius XLE AWD-e hybrid-electric sedan.

The big picture: The Prius has always been synonymous with hybrids, and more than 4.4 million have been sold worldwide since the model's introduction two decades ago.

Yes, but: Sales have been sliding for years as new hybrids hit the market, touting their sporty, premium characteristics over the Prius' traditional tree-hugger image.

  • Toyota sold 69,718 Priuses last year, down 20% from 2018.

What's new: For 2020, the Prius gets a larger touchscreen, Amazon Alexa and Apple CarPlay, plus Toyota's Safety Connect, which offers automatic emergency response.

Pricing: The Prius starts at $25,155, and my XLE AWD-e is $31,757, which includes power heated seats and heated steering wheel, among other features.

The good: It gets up to 56 mpg (in the most efficient ECO model) and is among the few hybrids that offer optional all-wheel drive. Plus, it's a Toyota, so you know it's reliable.

The bad: Its styling is unattractive and driving dynamics are anything but performance-oriented.

The bottom line: The Prius' best days are over, but Toyota has a full lineup of more inspiring hybrids.

Joann Muller