Industrial Reconversion: Changing Production Purposes

In January 1942, a month after the Japanese attack on Pearl Harbor, U.S. President Franklin D. Roosevelt established a War Production Council.

The Council’s main objective was to convert peacetime industries to arms, munitions and equipment factories for the war effort. A second objective was the conservation of materials such as metal, which the military would need for everything, from guns and ammunition to tanks, ships, and aircraft. Other inputs considered essential for the war included petroleum products, rubber, and paper. This meant strict rationing for civilians, including cutting back on driving and limiting the purchase of luxury items.

In addition to transforming industries for wartime production, U.S. industries would also supply much of the military equipment needed by the Allies, including the U.K. and U.S.S.R.

The emergence of the novel coronavirus precipitated a similar reconversion movement, as in all countries it created a need for different hospital supplies and equipment.

In Brazil, since the beginning of the pandemic, public and private hospitals have suffered from a lack of PPE (personal protective equipment), like masks, gloves and coats, and medical equipment needed to treat the infected, like respirators.

This adjustment or adaptation of industries as a result of a given circumstance is called industrial reconversion.

Industrial reconversion can be defined as economic policy measures designed to restructure a certain sector, due to a crisis or some special contingency, by reducing or reorienting its productive capacity to adapt it the new, unexpected demand. It is the changing of the production purposes of a certain industry with the objective of meeting the social and economic demands during a specific period, or to adapt the industry to a market demand.

Because of the Covid pandemic, several companies have gone through this process at some point in recent months.

By way of illustration, automaker Ford began producing respirators to mitigate the risk of equipment shortages. According to Jim Hackett, Ford’s president and CEO, “The creative and tireless teams at Ford and GE Healthcare have found a way to produce respirators quickly and in significant quantities.”

Another example was that of Fiat Chrysler Automobiles (FCA), which produced protective masks for professionals in the health and emergency services area.

Toyota Motor Sales announced production of 3D face shields, while looking for mask filter suppliers. In addition, Toyota partnered with two respirator manufacturers to help them increase production volume.

Tesla at one point restructured facilities to build respirators. Like Ford and General Motors, Tesla engineers-built respirators from auto parts available for their vehicles and developed additional components for final assembly.

Seat’s assembly line, in Martorell, Spain, produced emergency respirators with eighty electronic and mechanical components that underwent exhaustive quality control. They are also analyzing the feasibility of other projects to contribute to the fight against the coronavirus.

In Brazil reconversion is an alternative for industries that lost market in recent years, in addition to its importance in the fight against the pandemic. It presents itself as an opportunity to be evaluated.

With the significant reduction in industrial activities, due to social isolation, industrial reconversion is an avenue for companies to maintain operations; however, reconversion presents a series of challenges.

  1. The first is economic. Converting an entire production line and reorienting its processes come at a cost. In addition, there is the challenge of marketing the items produced.
  2. The second is regulatory. Selling products, especially related to the health area, requires compliance with a series of specific regulations and certifications, usually mandated by a federal agency, such as Brazil’s Anvisa (National Health Surveillance Agency).
  3. Finally, there are issues related to the restructuring of the production line itself. It is necessary to think about the regime of safety protocols that changes with the production of different health and hygiene products and tends to be more rigorous than prior regimes.

There is no doubt that industrial reconversion in the Brazilian context of deindustrialization involves a deep debate around several variables, but it can bring benefits for both society and the companies involved. The moment of crisis caused by the coronavirus requires that industries rethink themselves, in order to ensure financial health and contribute to mitigating the risks and damages caused by the pandemic.

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