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Large Caps Fight Coronavirus Under Defense Production Act

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On Apr 11, the Pentagon announced that it is using its powers under the Defense Production Act to ramp up production and supply of N-95 masks. President Donald Trump invoked the Defense Production Act a couple of weeks earlier to boost production of N-95 masks, ventilators and other medical equipment in the wake of the coronavirus pandemic.

The United States has been facing acute shortage of N-95 masks and other personal protective gear to fight COVID-19, which has taken an ugly turn in the country claiming more than 22,000 lives. The Defense Production Act allows the government to pressure companies into manufacturing supplies for national defense purposes. A number of companies like 3M Company (MMM - Free Report) have already responded to the situation and boosted production of protective gear.

U.S. to Increase Production of N-95 Masks

The Pentagon on Saturday said that the U.S. military will pump in $133 million to boost N-95 mask production. This will see production of 39 million masks over the next 90 days. The Pentagon also said that it will indentify the companies in the coming days and award the contract.

Last week, 3M Company and White House announced that the company will be importing 166.5 million N-95 masks over the next three months to help healthcare workers fighting the deadly coronavirus. This is over and above the 35 million N-95 masks the company currently produces every month domestically.

U.S. Resorts to Defense Production Act

Trump is using his authority under the Defense Production Act to make up for the shortage of protective gear being faced by healthcare workers in the United States. The President had earlier invoked the act to push General Motors Company (GM - Free Report) to help boost production of ventilators to treat those suffering from coronavirus. Following that, the carmaker announced that it will start production of ventilators by mid-April.

The U.S. President was also critical of other big companies that were not speeding up production of equipment required to fight the virus. Following this, Ford Motor Company (F - Free Report) along with General Motors announced plans to produce more than 80,000 ventilators by late summer. Last week, the U.S. Health and Human Services Department announced a $646.7 million contract with Netherlands-based health technology company Koninklijke Philips N.V. (PHG - Free Report) for the production of 43,000 ventilators. Ford carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While frontline players like 3M Company and Honeywell International, Inc. (HON - Free Report) are already bogged down by the increase in demand for N-95 masks, retailers like HanesBrands, Inc. (HBI - Free Report) and Gap, Inc. (GPS - Free Report) and Ralph Lauren, Inc. (RL - Free Report) have chipped in to produce masks and other protective gear.

Ralph Lauren is already in the process of making 250,000 masks and 25,000 isolation gowns. It now needs to be seen how the Trump administration uses the Defense Production Act to involve other companies in its fight against COVID-19.

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