UPDATE 2-UAW chief says US carmakers in need of urgent loan

Sat Nov 15, 2008 3:48pm EST

(Adds comments on automakers, details, background and byline)

By Poornima Gupta

DETROIT Nov 15 (Reuters) - U.S. automakers urgently need a federal loan to survive, United Auto Workers President Ron Gettelfinger said on Saturday, but their work force should not be blamed for the industry crisis.

Gettelfinger, in a rare news conference, said General Motors Corp (GM.N), Ford Motor Co(F.N) and Chrysler LLC were a critical part of the economy and needed the aid before President-elect Barack Obama takes office in January.

"We need to get this bridge loan and we need it in this lame duck session," he said, referring to next week's congressional session during which lawmakers will discuss emergency aid for the "big three" car companies.

Gettelfinger said it was unfair to blame UAW workers and retirees for the problems facing U.S. automakers.

"We have made dramatic, dramatic changes," he said, referring to concessions UAW made in its contracts with the automakers.

A health-care trust fund, known as a voluntary employee beneficiary association, is the centerpiece of a cost-cutting contract that the UAW negotiated with the automakers last year.

The trust fund will take effect in 2010 and is expected to cut costs for the automakers by covering health care costs for more than 700,000 UAW-represented workers and retirees.

Detroit automakers have sought emergency assistance to help them survive a steep and worsening drop in sales that they blame on the global credit crisis and slumping economy.

GM has said it could run out of cash by early next year.

Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee, is holding a hearing on Wednesday on legislation to extend up to $25 billion to GM, Ford and Chrysler. GM CEO Rick Wagoner, Ford CEO Alan Mulally, Chrysler CEO Bob Nardelli and Gettelfinger are expected to testify.

'WE'RE ON THE CLIFF'

U.S. automakers have been hammered by the slow U.S. economy, tight credit markets and a decline in consumer confidence, Gettelfinger said.

"If it weren't for these issues, we wouldn't be having this problem," he said.

GM, Ford and Chrysler are burning through cash amid a global credit crunch that has accelerated the decline in U.S. auto sales to near 25-year lows and placed severe limits on corporate and consumer borrowing.

Gettelfinger said there was a real possibility that one of the automakers would fail in the absence of an immediate cash infusion. He characterized any federal aid as a low-cost loan rather than a bailout.

"We're on the cliff here," Gettelfinger said, adding that an automaker bankruptcy would lead to massive job losses.

"During this year General Motors at one time employed more workers than all of the foreign nameplates operating in this country," he said. "The big three spends more money on research and development than NASA."

A bankruptcy at any of the U.S. automakers could lead to the eventual failure of all three Detroit automakers, he added.

"Because of the way they are interlaced with the suppliers, I would say it's a very safe bet that at least two of them would go and possibly all three would go," the UAW president said.

Gettelfinger said that he was hopeful that automakers would get help from the government.

The UAW, which threw its weight behind President-elect Barack Obama during the campaign, was instrumental in helping him win the auto-heavy states of Michigan, Indiana and Ohio. (Additional reporting by Kevin Krolicki; Editing by Xavier Briand)

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