Detroit can build it, but can Detroit source it?

0:01Hi, I'm Kelly Barner and this is the Art of Supply Podcast. Every business story has a supply chain angle, and those stories deserve to be told. This show digs deep into news headlines and interviews thought leaders, executives, and newsmakers to capture their perspective in their own words. With no agenda to lead us in any particular direction, we'll offer you objective coverage of geopolitics, innovation, and competition. Facts will always take precedence over hype. The rest is up to you. On July 20th, 2026, President Trump signed an executive order making it dramatically harder for defense contractors to buy critical materials from China, Russia, Iran, and North Korea, sort of the usual suspects.

0:56Now, seven days later, the Army awarded prototype development contracts for a new heavy infantry squad vehicle to GM Defense, Ford, and a Utah company called BC Customs. So the same government that just told contractors they can no longer lean on Chinese sourcing handed these automakers a contract to build military trucks on the theory that Detroit can do it faster and cheaper than they can. Now, those two things are in tension, and I have not seen any sources say out loud how they're going to be resolved. Here's the thing about rules and schedules. A rule can take effect on a certain date, but the schedules that govern that supply chain can't necessarily.

1:45So in this episode of Art of Supply, I'll cover what the Army asked Ford and GM for, and what the new rules now forbid them from buying in order to build it. We'll talk about what a bomber plant outside of Ypsilanti is one of the most interesting parts in this story, and why the lesson everybody takes from it is something backwards. We'll also look at the second rulebook already running on the same clock, one that is quietly testing whether any of this is actually achievable. Now let's start with the details of what the Army has asked for. The vehicle is called the ISV-H. That's ISV Heavy, an infantry squad vehicle.

2:28Three prototypes each from GM Defense, Ford, and BC Customs for use in field testing. There hasn't been a production award yet. Now, critically, these are not clean sheet designs. GM has been developing the ISV Heavy for years based on its Silverados, and Ford is adapting the F-Series Super Duty for the same reason. Ford's own framing is that off-the-shelf products from Ford Pro offer capacity and scale cost-effectively for both governments and commercial customers. And that's the whole premise here. The Pentagon is not asking Detroit to invent a weapons system. It's asking Detroit to sell it a truck that it already builds.

3:14These talks all started back in April when Pentagon officials met with senior Ford and GM executives to figure out whether the auto industry could help acquire the vehicles, munitions, and other hardware faster and cheaper. So these are components, not entire weapon systems. And part of what's driving the urgency, especially around speed, is depletion. The war in Iran and U.S. support for Ukraine have both drawn down stockpiles. There are some estimates that it could take five years or more to replenish what's been used in the last 40 days. Retired Army Major General John Ferrari, now at the American Enterprise Institute, put the munitions position this way, quote, we are on borrowed time.

4:03And he added that Russia, China, and Iran all know the U.S. does not have enough munitions. It also fits the stated strategy. Defense Secretary Pete Hegs' procurement approach favors widely available off-the-shelf components over specialized systems. And he describes the defense industrial base as somewhat stagnant. Exquisite weapons made at low volume using obsolescent parts. So the logic here is clean. The commercial industry can move faster, so the government should buy from the commercial industry. Speed is the whole point of this trade. Now if we back up, here's what landed one week before those prototype awards were made.

4:49Executive Order 14415. And the primary mechanism it targets is the non-availability waiver. So when a government contractor genuinely can't get a covered material from an allowed source, that waiver is how the purchase happens anyway. It's something of a pressure valve. Starting on January 21st, 2027, those have to stop being issued except as allowed by the order. Now, waivers can still be issued on accepted mitigation plans, but those plans expect a lot. They have to name the noncompliant source and document, quote, exhaustive efforts that have been made to find compliant materials, and they set a strict timeline.

5:39The interesting thing is that we tried and couldn't find anything is no longer considered acceptable. Each contractor has to show active, adequately funded ongoing efforts to qualify one. White House advisor Peter Navarro summed this up nice and tight. The excuse of having tried nothing and being all out of options is no longer going to work. Now, we've talked about some of the restricted countries to source in, but what exactly counts as a covered material? It's a lot of detailed metals, but what it really comes down to are magnets and hardened metal inputs. So these would affect motors, actuators, sensors, and armor.

6:24It's not exotic weapons-grade material. It's the stuff you make a truck out of if it's going to go into war. Now, the teeth of violating this order are real. A knowing failure to implement a plan can be referred to the attorney general, where false claims act exposure carries the risk of significant damages, and suspension and disbarment are both on the table. Now, the provision of all this that's going to have the most far-reaching impact is not even the crackdown on waivers. By January 16, 2027, the Defense Secretary has to develop guidance requiring prime contractors and subcontractors at any tier to map critical supply chains from raw materials all the way to end-use products.

7:14Now, just pause on that for a minute. There's a lot of exercises and talk around end-to-end supply chain mapping, a lot of them in academia. Actually doing that in a commercial setting and keeping it up to date is a very intense ask. Contractors would have to submit a complete indentured bill of materials. It has to cover every component, part, piece of equipment, software, and material traced all the way back to the raw material origin pint. They also have to vet every single supplier in that supply chain for financial risk, foreign ownership or control, and manufacturing risk, including things like capacity constraints, obsolescence, and sole source dependence.

8:03So putting together this indentured bill of materials, traced all the way back to the raw material origin at any tier, to build a pickup truck. Now the massive question is whether or not this is possible. And there's two ways we have to ask and try to answer it. Can it be done is one. Can it be done on the timeline the government wants is almost a completely separate question. Christopher Tang, a distinguished professor emeritus of supply chains at UCLA, says the order puts many companies, quote, in a bind. He acknowledges that this due diligence is difficult to do and that supply chains can't pivot that quickly while mapping themselves.

8:48He points out one variable that really matters here. Older technology can be adjusted quicker, while state-of-the-art technology relies more heavily on China. it's going to be harder to find replacements from anything that would be coming from China. And frankly, he predicts that the defense industry is going to need an extension. Brandon Barry, CEO of the Detroit vehicle cybersecurity firm Block Harbor, calls the question of where a part originated incredibly messy to answer. And he says that's going to present a huge challenge. The Aerospace Industries Association has said the industry appreciates the effort made to reduce dependence on adversarial nations, but suggests that the executive order will actually impede efforts to reach those goals.

9:38As for the two companies holding the contract, GM has said the GM defense complies with all applicable U.S. laws and Pentagon supply chain requirements. Ford says it's still reviewing the order to evaluate its impact. They're still reviewing it weeks after winning the award it applies to. Now, this all brings me to that interesting bomber plant outside of Ypsilanti. Everybody is referencing the arsenal of democracy concept in this conversation. Ford's Willow Run plant in Ypsilanti produced about one B-24 Liberator bomber an hour at its peak during World War II. One bomber per hour rolled off the assembly line during its peak.

10:26This is what most people are using as the go-to proof that when the country needs it, Detroit will step up and deliver. But Major General Ferrari adds the part that's almost always left out of this story. That that amazing production speed was only possible because military officials designed the planes they wanted to be built using machinery Ford already owned and was already operating. So his open question is the right one for us to ask. Can the Pentagon adjust its specifications and requirements to fit the machinery carmakers already have in use? Otherwise, he says, this strategy will not work.

11:09Commercial factories are not going to buy new machines, and even if they did, it would take years. If speed is important, this is a critical point to consider. The lesson that most people seem to be taking from the Willow Run example is backwards. The story is not that Ford amazingly retooled because the war gave them a reason to step up. The story is actually that the government retooled their requirements so that Ford could deliver so quickly. Most of the versions of this story assume that Detroit will bend and figure out a way to do it according to the government's rules. Major General Ferrari is saying the buyer has to bend and that the other version of this never would have worked.

11:56So this makes the prototype vehicle, the ISVH, a live test. Is the Army designing to a Silverado and afford super duty? Or is it asking the Silverado and the super duty to become something else? The sourcing rules currently seem to push in one direction. Every substitution required by this executive order forces different things to be used. Different magnets, different alloys, different tier three suppliers. And all of those changes affect a vehicle that's entire selling point was the fact that it already exists with an existing supply chain. Now, the interesting thing here is that we have two clocks running in parallel.

12:41The one rule that takes effect on January 1st that we've been talking about. That process is associated with another clock that, frankly, has not been fully run against this new challenge. The Army contract is looking for vehicles to be compliant with the connected vehicle rule. This requirement was proposed in September of 2024 under President Biden, and it was finalized in January of 2025, kept in place under Trump. What the connected vehicle rule says is that Chinese and Russian software is banned from all internet connected vehicles beginning with the model year 2027. For hardware, that won't apply until the model year 2030.

13:28The rationale for this makes perfect sense. National security. The fear is that vehicle electronics will become a pathway into the U.S. power grid and other critical infrastructure, posing a significant risk. Now, it's different than the new executive order, but the reason it's relevant is because we're talking about the same automakers, the same suppliers by and large, and an overlapping deadline. And that connected vehicle rule is two years further along, so we can do a little bit of homework around how that's progressing. So far, Ford has asked the Department of Commerce for authorization to continue importing the China-built Lincoln Nautilus.

14:13Ford writes that software in the United States, but installs it in the vehicle in China, and that's what brings it inside the rule. GM is moving their Buick Envision production out of China to a Kansas plant from 2028 on. And they have told thousands of suppliers to phase Chinese content out of their own operations. Some of those deadlines are set for 2027. But supplier executives say alternatives are genuinely hard to find. So the early returns that we've heard about the connected vehicle rule are applying for a license for an exception. moving a plant to Kansas, and supplier deadlines those suppliers say they're unlikely to be able to meet.

14:58I'm not sure why we would expect the sourcing-compliant military retooling of pickup trucks to work any differently. So just to sort of pull this all together, the Pentagon went to Ford and GM because the commercial industry is fast and the defense industrial base is not. Speed is the key here. Now, one week before those prototype awards were made, the executive order made the sourcing side of that same trade so much slower. There will be no easy waivers, the requirement for the indentured bill of materials going all the way back to the raw material level, and also supplier vetting at every single tier.

15:41Willow Run, the precedent everybody cites as proof this can work, actually worked because it worked backwards. The government said, whatever you can give us fast is exactly what we're looking for. The bottom line here is that this is going to be a test of whether the government can write a sourcing rule and roll out a delivery timeline and be successful in achieving both at the same time. Right now, the schedule is the piece with no give. So we currently have three dates to watch. January 1st of 2027 when the waivers stop, January 26th of 2027 when the supply chain mapping guidance is due, and April 16th, 2027 when the implementing regulations follow.

16:29Professor Tang from UCLA fully expects the defense industry to need an extension. If we see that, that extension will serve as evidence of the Pentagon conceding that the rule and the schedule were never compatible. Willow Run managed to roll out a bomber an hour because the Pentagon designed the bomber around a factory already in operation. 80 years later, the Army is asking for a truck Detroit already builds, but then they're handing Detroit a rulebook that will change what the truck is allowed to be made of and the timelines it can be made on. The question was here was never really whether Ford or GM could build what the military needs.

17:14The truck was not the hard part. The hard part is going to be the new rules they'll have to follow while they try to build it.

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