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tv   [untitled]  CSPAN  June 5, 2009 3:00am-3:30am EDT

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but they're not driving this one. >> i'm not asking who's driving it. i'm asking were they aware. > the auto task force would include in my case, steve ratner, ron bloom, harry wilson, and then they have a fairly small group, so we have gotten to know them pretty well but those would be the three
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principal people. >> they wanted you to be more aggressive than you displayed? >> across the board, the view of our plans was that it was not aggressive enough. >> how much money are you going to save when the dust settles and i guess these people are forced out of business and a whole bunch of people like them? tell me on your books how much money you will book as a savings. >> this is an area as i said before, it's about $1,000 per car of total distribution costs. we need to work that down over time. you can't -- there's no way you can point to one individual dealer. it can't be done that way. you have to look at it and say if you can take -- if you have $1,000 per car, you can over time economize that to $900 per car. that's a lot of money in our case. finally, this is all about actually then attracting capital to the dealer body over time. >> did you do any cost analysis where you looked at the jobs lost, the pain caused, the impact on local communities, and
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said boy, dollars and cents, we win on this one. >> i think gm's brands win with the right -- >> no. not asking that. just asking did you do a cost benefit and analysis, an economic analysis of any kind? is there something you can send to me where i can go back to these people and say you know, gm looked at this, they're going to save x dollars? >> individual location by location, no. >> chrysler, did you do that? >> we did not go by location. we have it for the total and the new companies dealer network. >> what's the total? how much is chrysler going to save by shutting down all these dealerships? >> we are going to save approximately $1.4 billion in development costs, $200 -- per year, $200 million per year in marketing and advertising costs and about $1.5 billion of additional revenue from the substandard market shared dealer representation and about i think
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it's around $41,000 per dealer affected in terms of cost of actually going out and calling on the dealer and having people come and make records and do all of that support. >> would you be willing to supply that document to the committee? >> sir, it's included in the written testimony that i submitted. >> okay. let me ask a question about kind of the net effect of what you guys are all about. if i had a share of chrysler or general motors stock today, what's its value? >> its value today for general motors would be almost zero. >> chrysler? >> also, we have no net worth. we're out of business at this time. >> and how many shareholders did chrysler have? >> two. >> and how many shareholders did general motors have? >> we had 550 million shares outstanding so thousands and thousands of shareholders.
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>> they're just out today? >> yes. >> okay. these dealers, what's their dealership worth without the brand and maybe somebody from the dealership can give me that. >> practically zero. >> practically zero. >> senator, the value of their business would be the franchise value and the real estate, essentially, real estate has been seriously devalued because these are single purpose buildings that will not be reoccupied and the value of the franchise are what we call good will or blue sky is virtually gone. >> let me ask chrysler and gm, what's the value of the bonds today? the indebtedness? is it ten cents on the dollar, 15 cents on the dollar, five cents on the dollar? >> in the caves our bonds, they have generally traded less than 20 cents on the dollar. in some case less than 10 cents on the dollar. >> chrysler? >> we have no bond. the equity holders will receive approximately 29 cents on the dollar. >> 29 cents on the dollar.
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okay. here's my question. shareholders basically out of luck. bond holders, pennies on the dollar. dealers, not doing any better. i could go on and on. does it occur to you that in this process, as you were putting this together with the very large investment of tax payer dollars, in chrysler's case, that would be how much? >> well, we have received $3 million and $4 million for debt financing so far. there will be additional funds coming for the outlaying company. >> don't you think there was some justification for congressional oversight here? >> from our standpoint, the reality is our relationship with treasury has been one of -- as being a bank, being an investor
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in our company. they have been excellent to work with in terms of assisting us as an equity fund would, and the funds have really been invested in a way that the taxpayers' interests have been looked at very carefully. >> you side-stepped my question. go ahead. >> in our case, it's $50 billion is what we expect to receive in total from the u.s. taxpayer, number one. number two, our primary relationship has been with the automotive task force. number three, as i said in my opening remarks, our commitment to remain very transparent because we need to be, not only because we're a company in bankruptcy but because the u.s. taxpayer is our largest shareholder. >> thank you for your indulgence. >> senator begich? >> thank you very much, mr. chairman. mr. mceleney, can i ask you a question first just so i understand? of the gm and chrysler dealerships, what percentage does your association represent? >> 50 -- >> 92% -- excuse me. senator, we represent about 92% of the dealers of all brands,
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both domestic and international. >> to -- thank you very much for that. i just want to make sure i was clear on the stats. to the two gentlemen from chrysler and general motors, did you ever have any inclination as you developed, i will turn to both in regards to the documents that are required by dealers to sign, did you ever have any inclination to work with the association to figure out what's a decent agreement that the dealerships could sign? >> let me see if i can't deal with both of the agreements. in the case of the wind-down agreement, as i said, we had done a similar exercise in canada just recently and our early returns from our dealers who are going to be wound down and with the appeal process, we think we have a workable approach for those dealers. >> if i can interrupt, it's kind of a no choice deal. >> it is, but in our judgment, the benefits that are provided in this agreement are vastly superior to the alternatives. >> which is death versus life support? >> the alternative is -- well, no, sir. in this case, what we're going
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to provide them is the ability to wind down their franchise through october of next year. so they have plenty of ability to take care of customers and we provide compensation to them. >> let me ask you that on october of next year, is that still the same status in the bankruptcy process you are going through today, you will continue to uphold that to 2010, october? >> in the case of a dealer that chooses not to sign the wind-down agreement, they won't have a contractual relationship with the new general motors. >> so no to that? >> the old general motors would reject their contract. >> senator, can i -- >> if i can get from chrysler, then i will come back. >> we do not have an agreement specifically. what we did for our process, for redistribution and for the dealer soft landing is we worked with our dealer counsel, we worked with a group of other dealers within the company that were intimately familiar with our situation, and we were able to achieve good input and we then applied it. >> let me, if i can, if i can hold the dealers just for a second, i have to watch my time
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but i want to get a couple quick questions in here. with regard to the dealers as i asked my opening questions, there is four components, from my understanding. i can only tell you this as a former mayor. they are large property owners. large property owners. so you take care of to some degree their inventory, parts, tools, but what happens to the investment on their building as well as their lots which basically come very obsolete facilities. i was also 25 years in the real estate business. these are properties that in today's market are going to be very hard for them and that's a big size amount of their long term investment. do you have any compensation or opportunities for them in that regard? mitigation in any of that front? from either one of you. it's a simple yes or no. it's not a complicated question. >> it's a bankruptcy. we have none. >> none. okay. gm? >> yes, we do. >> you have some compensation,
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mitigation for investment they have in their land or building? >> eight months of rent support in their wind-down agreement. >> rent support. okay. let me turn to the dealers. you wanted to respond very quickly to either one of you. >> yes. i want to tell you a small dealership like us, we pay anywhere between $1200 to $2300 a month to chrysler and gm for software to order our parts. we rent signs, i rent signs that are 30 years old that put new faces on them but like $620 a month. you as a consumer, when you buy that car, it's on the maroney label to be delivered to us. it doesn't cost them one thing to send us a car. we pay for the advertising. we pay for even the pamphlets that you come in our dealership showroom and take. >> i understand that. >> okay. we pay for all that. we do not cost them one penny. >> let me go --
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>> i just wanted to address the vehicle redistribution plan one more time. last week i sent an e-mail to the southwest business center specifically asking for a definite timeline on redistribution. what am i supposed to be doing, what is my plan. the response back was possibly we'll try to have a plan by next week. next week is the last week. we're out of time. >> let me ask, again, i will run out of time here, i can feel it. in the time lines that have been granted, the june 12th timeline, if i get that right, is there any opportunity to expand that? yes or no? >> in our case, senator, no. >> in the parts of the appeal process that they have before june 9th or 12th, whatever that date is on the appeal process, is there any opportunity to extend that beyond the target date of when they have to sign? >> no. >> mr. chairman, i have plenty of questions and i know i have
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to go to another meeting. but i guess two documents i would like to have, if they can present them to us. one is i think senator johanns asked the question and that is in regards to your actual savings that you will achieve and chrysler laid that out in detail. i just looked through your testimony. it's kind of scattered through there. i would like a document that actually shows that. the same thing to gm. i recognize your issue about $1,000 a car. i want to know what you have calculated into the cost factor. the second thing is mr. henderson, you mentioned or both you did, actually, kind of aprocess you went through to determine dealerships and some criteria you used. you made a comment we don't have necessarily a list. you have to have a list. you have to. you just can't say dealer a, dealer b. so i would like, if you can answer this yes or no that you can provide this, a list of how or list of the dealers in order of ranking that you made in order to determine who was there at the end of the day and who
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will not be there. if you say you don't have a list, i will not believe that. there's no way you could do this without a list. >> senator, we have a list but have not made it available to anybody because our dealers would prefer to not be identified as to which ones are winding down versus -- >> well, they are going to be identified. >> they don't want to know today. >> mr. chairman, i would just like to see it. i will leave it to the chairman of what the appropriate way to get that, but i think it's important for us to understand because that seems to be some great conflict here. and how you created the list and who is on the top and who's not. i think it's fair because reality, they're all going to know sooner or later. we're all going to know and we will come back and ask you again. >> the senator has made a request for three sets of documents. i happen to agree with him. i think they should be produced for this committee. i ask you, mr. press, mr. henderson, if they will so do. >> yes. >> yes, sir. >> thank you.
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senator lautenberg? >> mr. henderson, you used the term soft landing. in the short form, would you describe what the soft landing is? >> yes, senator. if the dealer signs the wind-down agreement, they will have until october of 2010 to wind down their inventory so they'll have over 12 months to wind down their inventory, wind down their parts inventory, transition perhaps to another franchise. they will be able to use the gm auction so they can buy used cars and they get compensation in part up front and in part at the end for rent support and invento inventory. >> forgive me, but soft landing ultimately is like a parachute with holes in it, maybe it will slow down the trip but the end is going to be terrible.
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that's a conclusion one has to come to because as people react to the prospect of@@@@@@@@ b@ rr things going but the end is clearly in sight and i think people are going to defer to the time when they're going to have to say to their families look,
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we don't have the income anymore, we don't have the employees, would you expect the employees would hang around until the last day that they can continue working or you think they might look for something else and get out while the getting's good? >> senator, one of the reasons why, with all due respect, we will supply it, we have not been public with the list of the dealers who agreed to the wind-down agreement is because we give them 12 to 16 months to determine what they would like to do with their business without having that hanging over them, sir. >> mr. press, you apparently said to the dealers either help us or burn us all down. would having the availability of some degree of financing, do you think it would be a good idea for the company to take back the inventory that's out there in dealer hands?
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>> yes, that's why we developed the redistribution process so we could accomplish that, sir. >> but you're saying now you don't have the means with which to accomplish that? >> we are. we are 97% complete in the redistribution of product and we will be done before -- by the june 9th deadline. >> mr. henderson, general motors has announced plans to eliminate 1100 dealers under franchise laws in my state of new jersey and other states. the companies must compensate dealers and take back unsold inventory of the franchise. while the bankruptcy proceeding may remove the legal obligation to purchase this inventory, is there more of an obligation beside following the legal line for your company to take back the remaining inventory from dealers?
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because you talk about when foreign car competition was coming around and it's too bad why the gm leadership at the time didn't see the handwriting on the wall. but is there, again, something beyond the legal obligation to step in and take back the remaining inventory? >> sir, as i said, if a dealer signs the wind-down agreement, they will no question be able to wind down the inventory over that period of time. if they don't wish to sign the agreement, if they floor plan their vehicles or get their wholesale financing with gmac today, they have the right to voluntarily terminate their agreement, return the vehicles to gmac and it's our responsibility to redistribute the vehicles with gmac, a responsibility that was confirmed on monday through the bankruptcy court. >> when i ask either of you, mr. press, mr. henderson, the industry fell behind as overseas companies developed vehicles that were more fuel efficient
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than those made in detroit. oil prices inevitably rose, you were stuck with trucks and suvs that few people wanted, and now president obama has proposed strict new efficiency standards. how can you assure us with a degree of reasonableness that you will be able to make these more fuel efficient cars and trucks to help your companies return to profitability when all of these years, there was no credibility given to your assessment of the marketplace or your engineering to beat the competition? >> senator, in our history, we have never missed a cafe standard or fuel economy standard in the u.s. or -- >> i don't know what kind of fight there was here about cafe standards. >> i understand. secondly, just recently as part of the industry, we threw our weight fully behind harmonizing more aggressive, more stringent fuel economy standards. not only gm but the industry
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pulled together and we're quite confident the men and women of general motors will deliver vehicles will meet all those standards and excite customers. >> i'm sure the men and women will deliver what's put out there. but the leadership showed that it didn't understand what it was going to take to be competitive. mr. press, you want to comment? >> yes, senator. in our situation, our new company has an alliance with fiat and fiat will be the operating entity within the company. they have the highest -- the best performance of all european manufacturers in co2. their technology is all available to us. we are already at work to adopt that technology, to build it in american plants, and in fact, the equity incentives that they have are based on the introduction of very high mileage technology engines and products in u.s. plants. >> lord help us. thank you very much. >> mr. chairman, thank you very
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much. the one disagreement that i have heard here among others is that the auto manufacturers have responded to the dealers by suggesting that the dealers are a cost center or implying that the dealers are a burden. the dealers have said quite the opposite. to quite the contrary. it seems to me to the automobile manufacturers you don't have a business without dealers. you can manufacture but if you don't sell them, you're out of business. so the dealers it seems to me are an asset. i was looking at the statement on page five, mr. press. you talked about examples of lost revenue and cost associated with in this case, discontinued dealers but i assume you would associate them with the continued dealers as well. the overwhelming costs are not costs that are local to mr. lopez or mr. whatley. product engineering and development for sister vehicles, $1.4 billion over four years. those are decisions you made, not the dealers.
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the decision to build a town and country and the dodge version of that, have both of them, that's your decision, not their decision. but lost sales due to dealer underperformance, $1.5 billion annually. someone asked a couple questions on cost burden and so on, but you are eliminating dealers. waco, texas, my colleague says you will eliminate the crieser dealerships in waco, texas. are you going to replace them with new dealers? another question for both general motors and cries already. chrysler. how many are in a position where you will just eliminate the local dealership and replace them with other dealers because you felt the local dealer was underperforming? can you provide us a number? >> first of all, with regard to the multiple sister platforms, we had to do six of those and they are not our request. it's because we have stand-alone dealers. if there's a jeep or a dodge
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stand-alone only dealer and we don't do a dodge version of the van, then they can't be supported. we have stopped making those and the dealer body stand-alone is not viable any longer. that's the reason for it in the cost. the answer is we can provide you with a list. it's not a large number of those points that we are going to be going back into, but i can give you that number. >> would each of the companies provide us with the number of the dealerships that you are going to close and that you will then replace because you felt the current dealerships were underperforming? i want to ask mr. lopez and mr. whatley. you heard the manufacturers suggest you're a burden and a cost center. you say you are not. >> yes, sir. >> they say they advertise for you, they -- >> i have brought dealer billing statements for the last couple of months showing everything that we pay and it's everything from paper clips to signs to training, a whole lot of things. i don't even know what they are. we just pay it every month. >> they send somebody around every now and then to check up on you? >> it's electronic billing
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statements. we are billed every month. >> they take it out automatically. you have no choice. >> you come in one day and your account will be less $6,000 for parts of a vehicle that you have to work on. >> i understand you' are leasin their signs and doing those things. they send the regional or local rep around -- >> we don't have one. >> i don't know who our rep is anymore. we haven't seen one in so long. >> that's not so expensive, is it? >> no. >> we don't have one. they call us on the phone. >> we're billed for everything. >> by the way, i paid $480 for my -- and chrysler's in bankruptcy, paid $480 this month so my certified mechanics could take a test on the computer. $480. >> senator, i just got a bill yesterday for $200 for sales training for next month when i'm not even a dealer. >> all right. well, some things are counter intuitive to me. i understand that you want to
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change your dealership network, that's your responsibility, not the government's. i understand all that. yet i mean, i don't know much about big cities. that's not what i know much about. but i know areas out there where somebody's selling five, eight cars a month. a good small business that some would probably say from up high, too small to matter. but a business in the community that's making a little money, doing some service, brand loyalty on their customers. in my hometown, you got people that stopped at the regional garage, they would only buy chevrolet for the rest of their lives. that's just, they wouldn't stop anywhere else. when it was time for a car, they go back to the chevy. time for a tractor, they go back for the case. never think about buying a john deere. the same was true on the other side with other dealerships in small towns. what i don't understand is if the local dealers are not a burden and it seems to me in this back and forth, boy, they're not much of a burden to you at all. it seems to me they represent the ability to sell what you manufacture, even the smaller
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ones. it's just counter intuitive that you would decide you know what,g to limit the ability to sell out there by reducing the number of people that are going to sell. just, you know, i got, went through masters degree in business and so on. they never taught that. it seems to me that you would want to maximize the opportunity to tinseling a product that has been piling up on the lots. >> may i make one more comment in. >> yes. >> excuse me. if -- say we stock about 65 new cars. the dealer next to me is 30 miles away, he's completely full. he's already stocking everything he can stock. he's up on his floor plan, he's full. by eliminating me, that other dealer is not going to order one extra vehicle. he doesn't frankly care good i'm there or not. he's already doing all he can do. they just lost my 65 cars in production. 800 dealers, how much production are they losing? >> mr. lopez? >> well, i wanted to respond to what he said about the -- as far
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as the cars that they made us take. they are sitting there -- he says 97% that is taken care of. no one has called me. i haven't heard a thing. at that time, i had 41 cars. now i'm down to 24. and i'm selling them and i'm not going to take a loss, i can't afford to. i'm a small dealer. i'm selling them at net and i will do that, no one called me and said can we help you, can we send them to another dealership? we did it on our own. >> we have seen nothing. >> and also, i wanted to tell you, when you talked about the representative, there is no representative from chrysler or gm. it is all done by phone, by computer. how about our inventory that we have in stock? i have $138,000 worth of parts from chrysler and 128 in general
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motors. they're going to be worth nothing, not one penny. how can they say we cost them? we don't cost them a penny. in fact, we are their face. we are out there. we -- and, you know, in our community, i sell cars and i'm delighted to represent them. i want one thing -- one question answered, if they do take our franchise, can they -- will they -- can they and will they give us first option if they decide to open up in that area again? we as a dealer. i am a profitable dealer. i have never been reprimanded. got awards. if they decide two years now to put a chrysler dealership in spencer, west virginia, can it be me? why won't it be me? >> mr. chairman, my time -- i've taken more than enough, but i appreciate the testimony and i
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think we would very much like to get some reports back from you about your inventory, parts inventory, auto inventory, how it is dealt with. >> thank you, senator. senator snowe? >> thank you, mr. chairman. mr. henderson and mr. press, in response to, i think it was senator johanns question about economic analysis, mr. henderson, did you say you did not perform any economic analysis on dealer by dealer in making these decisions? did either of you perform an economic analysis using specific criteria by cwhich you made thee decisions in targeting these dealers. >> the criteria was sales effectiveness so the dealers that were notified for wind down have been consistently underperforming in terms of sales effectiveness. we have


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