Subject: Assistance to Auto Companies
From: "Alan Reuther" <[email-masked]>
To: [email-masked], [email-masked], [email-masked]
Date: Fri, 31 Oct 2008 09:26:14 -0400

I saw in the press today that Senator Obama has again backed another $25 billion in assistance to the automakers, and has pledged to meet with the leaders of the companies and the UAW soon after the election.   We very much appreciate these statements.    
 
We do believe it would make sense to have such a meeting as soon as possible after the election.   As you may recall, President-elect Clinton held such a meeting back in December, 1992.
 
The situation at the companies may deteriorate dramatically very quickly.   My understanding is that GM and Ford will release their earnings reports a couple days after the election.    The reports will be terrible.   In particular, GM's report will show that it only has enough cash to last a couple of months.   This could trigger a wave of suppliers demanding that they be paid on delivery, rather than within the usual 60-90 day time period.   At any point in time, GM has about $16 billion owing to suppliers.   If it is forced to immediately pay these amounts up front to suppliers, this could lead to an immediate downward spiral and liquidation of both GM and Chrysler.   
 
It is also my understanding that the Treasury Department has refused to provide an immediate infusion of cash into GM/Chrysler.    They are trying to pass the buck to Congress, saying it should amend the Section 136 advanced vehicle retooling program to make the money available right now for any purpose.   This is a non-starter on the Hill.
 
The UAW believes two things need to happen.   First, Treasury needs to provide an immediate infusion of cash to the companies (probably at least $10 billion), to get them through the immediate cash/credit crunch.    
 
Second, to get the companies through 2009, we think Congress needs to pass another $25 billion loan program, with the loans to be used by the companies to fund the retiree health care VEBA.   Helping the companies with this liability will then free up private sector financing for the companies.   And it will ensure that the retirees receive their health care.    
 
As you may have seen, the lead editorial in today's New York Times supports additional assistance for the automakers.   It specifically refers to our VEBA proposal, as well as the need for additional assistance.   It also talks about prohibiting dividends, curtailing executive comp, and requiring Cerberus to open its books.   We would be supportive of all of these strings.   Attached is a copy of the editorial.
 
Happy to talk further if you want.