861.51 Am 3/–
The Vice President of the American Locomotive Sales Corporation (Charles M. Muchnic) to the Under Secretary of State (Olds)
[Received October 19.]
My Dear Mr. Secretary: In compliance with your suggestion I take pleasure in confirming in writing the salient points discussed with you in Washington on October 14th.
- 1.
- The State Railways of the U. S. S. R. are desirous of purchasing locomotives, cars and other railway equipment on the basis of serial payments extending over a period of five years or over.
- 2.
- The railway administration is prepared to offer reasonable guarantees for the fulfillment of the contractual obligations.
- 3.
- The present severe depression in the railway equipment industry makes it extremely desirable—if not imperative—to secure foreign orders so as to prevent a complete shutdown of such highly specialized plants.
- 4.
- The length of credit asked for may necessitate the manufacturers inviting the cooperation of one or more banks in financing such orders on a large scale.
- 5.
- The banks may find it desirable to sell securities to the public, which would be secured by notes or other evidences of indebtedness received by the manufacturers for the materials sold to the railways of the U. S. S. R. and further secured by the manufacturers who furnished such equipment, so that the ultimate risk is to be borne by the manufacturers to the value of their orders or jointly with the bankers.
- 6.
- Such financing of purchases by the railways of the U. S. S. R. could not, therefore, be construed as a monetary loan to that country.
These in substance are the principal points I brought to your kind attention. I do not know whether it would be feasible to consummate such a transaction in the immediate future and on terms entirely satisfactory to our manufacturers, but if it were possible to do so, would the State Department look with favor upon contracts obtained on approximately the terms and conditions above outlined?
The experience of our bankers and manufacturers in their dealings with the various purchasing agencies in our country of the U. S. S. R. involving short term credits has been that these agencies have lived up scrupulously to terms of every agreement and transaction.
From various sources of information we learn that German and until recently British manufacturers had extended large credits to the U. S. S. R. and that the payments on such credits were made punctually when due. It is also frequently stated that German manufacturers are planning to extend still larger credits, than heretofore, to that country which probably will be largely based on loans secured in this country, viz.:—such loans as were recently made to the Deutsche Bank and other German banks. American funds are, therefore, indirectly financing the U. S. S. R. purchases of such manufactures as that country requires.
Russia presents a large potential market for American railway materials. If our manufacturers of such materials can secure a firm foothold in that country at present, if we can induce them to adopt and adapt our standards it will enhance our chances for securing our full share of the large purchases of railway equipment when that country has progressed further along the road of economic stability and development and established a government that would permit of our maintaining a political contact with it.
Very cordially yours,