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tv   [untitled]  CSPAN  June 7, 2009 12:30pm-1:00pm EDT

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dealing here. there was an imposition placed on dealers by chrysler, who said that they had to buy in january of this year, that dealers collectively would have to take another 78,000 cars to be sold in the month of february to help chrysler protect its viability and to get additional loans. to get additional loans from the government. i remind you that $4 billion went to chrysler in december, $3 billion in financing helped in 345r. when chrysler restructures, $4.5 billion is committed to restart operations. and frankly, i think it's pretty simple. in the bankruptcy proceeding what will ought to happen is a plan to say to the dealers, ok, we shoved this down your
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throat, and now we'll take them back. that's part of the government what ought to be done to relieve the dealers of additional burdens besides closeding their businesses and smashing their dreams and hopes. so it's tough. and i know you don't like it. but whether or not you like it, the burden that you're passing on to the dealer network is absolutely unconscionable and there ought to be a way to redeem to problems that you've turned to the dealers of chrysler, general motors, all of you who are part of the bankruptcy process for which the united states government and its taxpayers is providing the way out. thank you, mr. chairman. >> thank you. >> mr. chairman, thank you, very much. this is about the
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restructuring, and we've heard a lot about restructuring recently, restructuring the autofans industry, and watching it all i'm wondering who is making the decisions in this country about who is too big to fail and who is too small to matter? the decisions about the autodealership network, those decisions belong to the manufacturer not the government. i understand that. i don't think that's the point of this hearing to decide that we want to create some sort of vision of your network. >> but there are questions, pit seems to me, serious question that is are in order. i understand a desire to eliminate overlapping dealerships of the same brand of automobiles so you don't have two cars competing. -- with respect to rural areas. among the questions i think is how does it square that
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automanufacturers who have been losing a great deal of money order ter closing of dealerships that have been making profits. seems strange to me and in rural states the important question is what is the impact the real impact on smaller automobile dealerships? what is the impact on consumers with respect to the dealerships, what is the impact with respect to inventories. automobiles that they have on the lot? parts inventories. some dealers have shown me that in january of this year, they were encouraged by their particular manufacturer to buy more cars, get more cars on the lot. do that. it's very important that we be able to move cars out and get them on your lot, so now they discover wait a second. so i brought the cars into your lot and i'm told i'm not to exist anymore. what about customers in rural states? in my state a customer that's
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bought a pickup truck for example or a car have done so because they are brand loyal. they have done that for years and their parents did it for years and they bought it with a warranty. now the question is who is going to service the warranty? and at least with respect to the closer of two dealerships with respect to north dakota it appears to me those folks will get in their pickup trucks and cars and drive a three-hour roundtrip we don't exr three miles very much but a three-hour roundtrip to get serviced. i think those questions need to be asked of you, did you consider all this until and finally sthrl a process for a dealer having heard from on high at 30,000 feet that your view was as described on ground. was there a process to say you know what? you made a mistake and we want to make a case to you and
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perhaps you have made some mistakes. i think it's important for you to answer those questions to dealers many of whom have been loyal for many, many decades to the automobile representatives here. >> thank you. senator snow? >> thank you. chairman rockefeller, welcome back. and thank you for holding this very critical hearing today, mr. chairman, because obviously we're all grappling with the devastating effects of the sad state of affairs when it comes to the domestic autosthri, the past leadership that did not provide the rec we sith thoippings -- and more than $70 billion to chrysler and general motors. now we're coming up on the
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worst economic recession since the depression, and now we hear in the news more than 2,000 autodealerships that are facing closures nationwide more than 18 in my state are going to be disenfranchised arbitrarily through no fault of their own, they are loyal long-standing businesses in the communities as we've already heard yet the companies represented here in afternoon have provided no clarity toronto how or why they have come to these specific decisions that they have made let alone provide any transparency twropt these decisions or the arbitraryness of the time frame in which these autodealers are compelled to make these decision stotts a very heavy-handed approach. more than that they are not providing any significant significance winding down as they were providing three weeks
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for dealers. as you heard from the senator, that's right a lot were asked would you buy more chryslers last year so we can avoid bankruptcy. thained did, and look where they stand today, they are asked to close their doors. and as senator hutchison has mentioned and we thank her for what she offered on the floor to give a little more breathing room to the autodealers. at least to 60 days. but where does that put them at the end of this whole process? where they have no idea what their futures are. general motors has stated for example, in its wind down agreement that they will still not be buying back two of the parts of the dealerships they are closing, and i got a wind down, it's 12 pages single spaced. it would take a team of lawyers that obviously deviced it to
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make it as difficult and dense as possible so no one could possibly make a decision within the 10 days they are required to make a decision. they have to sign it within the 10 days or they are closed down with no assistance whatsoever. there's been no detailed accounting or disclosures in the companies that will result until dramatic safings. it's interesting to note washington business journal noted dealers who paid for the inventory, shipping of the inventory from the front of cost of warranty work, purchase repair equipment and parrots, they also stated the -- the automake saved some additional expenses by having ad in my opinion straightive costs to oversee but that's it. and i know you mr. henderson claimed in a tv interview that there were economic rational
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and no one's aware of it. how they were determined. so what exactly silent rational for shutting a dealership like the one in maine i had a conversation with a dealership heartbreaking conversation. had one of the most thoroughly trained workforces, highest customer service index in the state and according to general motors they could no longer maintain a productive business relationship. why? this is a business that's been in partnership with general motors for 80 years. third-generation. and g.m. asked this dealer to pack up and relocate and now they are targeted for closure. due in part to that relocation. this is a dealership that has served an area of more than 100,000 people sold more than 2 million in parts and confidently several popular here's the in the entire county
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will go from multiple g.m. dealerships to absolutely none leaving geographic areas without any dealers, without customers having to rely on providing, getting the service that they depend upon, having to drive 100 miles or mohr for service well if you don't have as far as you're not going to have any sales. i go not know how you re-emerge from bankruptcy and establish viability on that basis when you're reducing your market share to virtually nothing. the american taxpayers provided billions of dollars. and ultimately the autodealers are now on the front lines. with the hash consequences of failure at the top. and they deserve better, far better than what they are getting, and i hope we can address the ramifications of these decisions that are having an enormous impact all across the country. >> senator isaacson? >> thank you, very much, mr.
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chairman. you know, i ran a company for 22 years, i had 800 sales people in the real estate brokerage business, they were very much like automobile dealers, franchiseees who made money if they sold and seems like me when you close your dealerships, you're fair toing your sales force. they are not a liability. they are an asset and i don't understand the pervasiveness but i have two questions in case they go long and we have to leave i want to make sure these two get answered mr. press on february 5, 2009 you were quoted as n appealing to your dealers to make additional 15,000 in purchases in order to safe the company and you said the following quote, you can have two choices, help us or burn us down we're a bucket brigade 77% of positions are filled and if we don't fill other 30 if you do not decide to do that we've got a good
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memory of who helped us and who didn't. i think that recognizes the fact that they are the asset i have not seen the list mr. henderson and i appreciate the times you visited my office but in the phone calls i've had in the last three days it appears that what snoort dorgan said was correct there's a dis proportionate closure of dealerships so the question of are they dispro morgs natalie and two what is the rational for sfiring your workforce? and i look forward to hearing the answers to both. thank you. >> as you, senator. senator martinez. >> thank you, very much and ranking member hutchison for holding this hearing at a very, very important time. i will echo the remarks of so many of my colleagues about the importance of dealerships to communities and also the very
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question that senator just asked without a sales force how do you remain viable? but where i want to zero in and the questions i would like answered are very, very specific, which are two examples of dealerships that are closed in the state of florida. one is mr. press, miami tammy amy jeep dodge. he told me his dealership was perhaps the top seller in the south florida area and top in the country seems like the kind of dealership you would want to see continueed the other is in central florida holler chevrolet. i've grown up in central florida, holler is synonymous with chevrolet in the central florida region until bill hurt chevrolet ceased to exist, they were number two. presumed now since they are no longer around they would be the number one dealer in the central florida region how in
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the world does it make sense for a dealership like that to also be on the the list for close yures and in addition to the top seller they also have excellent customer service they know how to do this business, they've been in it all their lives so the specifics of this is what rhyme or reason is it because of this? because it is people's lifely hoods and businesses so we need to understand that this so we can understand these questions. i think they deserve to understand the rational why a dealership like tammy amy or holler would be closed in these two communities where these dealers to anyone who would see it would seem to be incredibly successful dealers, the kinds you would want for your future company if you want to make it? that's all. thank you. >> thank you. snarlt brownback? >> thank you mr. chairman. i wanted to associate myself with the comments that have
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been made so far andals i want to thank the panelists for being here. this is a tough time for you, too, i'm sure these aren't decisions easy ones you have made or that make lightly and i'm sure everyone is pretty frustrated about what's happen pping and what has taken place. i've had a number of deal ners my state say we don't cost g.m. or chrysler anything. so why are they cutting us off? and seemed to me to be a legitimate question to ask if your sales force isn't costing you anything, why would you cut them off? and the second piece is i'm sure you have numbers saying why this is why we are doing this but why is it that when you look at the numbers when you radedly cli downsize your distribution network you're going to be more profitable in the future by doing that because i understand you've got more dealerships than toyota,
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honda, others that maybe built their dealership network at a later date than what you did, but by downsizing that radically, does it upscale your ability to be profitable? if it really doesn't cost you that much i would really like to understand those numbers on a better basis. the second is you're operating off of one of the most difficult car markets we've had in 50 years. you're locking at 9.6 million in annual sales right now. i think mr. henderson, and thank you for coming by my offers $10.1 million was the latest monthly figure you said you were running at but a normal year would be $14 million, $15 million in colleagues -- in sales. but my colleagues have increased sales of automobiles
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anywhere from 10%-30% in months period of time. so if you get back anywhere close to a normal car sales market, do you need this sort of scruveraging down of dealerships if you get back somewhere close to norm until this is an extraordinary situation we're in. if we don't further with the scrapage program? and just finally, we've got a lot of real deal ners my -- and you noted that you have a 10% market penetration advantage in rural areas. you know, i would hope one would look at that as an asset not a liability and say well, this is where we'd really like to main thainal market share. wal-mart did well going into the rural areas then urban areas with market advantage and here's a place you've got market advantage and i would
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hope you would give deaf trones those dealerships in general. thank you, machine. >> welcome back mr. chairman. i want to follow up to senator brownback's comments and one echoing my other colleague's concerns about the real human effects these decisions have had upon your dealer networks and their employees and families across the country, but also recognizing as senator brownback did the reality that in the last couple of years national autosales hit about 10 million units the economic reality means you've got a shrink. i also have to say at some level of someone who spent 20 years in the business sector if i would have ever naught my business life they would see a group of senators trying to
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micro manage an industry like gm gm or chrysler -- so if there was any more impetus to try to get the government out and your employees back into your business so these conversions don't have to happen going forward today's session ought to be that i mean po 'tis but in asking some of these questions there are shareholders as the american taxpayer being the shareholdering we've got every right to ask that question. what i've heard is not only is it a short time frame but if you wanted to make it an appeal -- the noigs of a dealer trying to put together the whole process or make it back to court maybe the whole process was made. just seems a bit unreasonable. mr. henderson again i come from
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virginia and we've got a broad dealer network and an awful lot of concern about your requirement. i believe the document you sent out said it has to be signed by june 12. my question is not so much to perhaps second-guess the reason why -- the dealer's got a problem with the manufacturer, you can go to the dealer tfrl -- going forward a deal they're signs up on this june 12 date would lose any ability to have a say if you choose to put some other dealer in on top of him, no ability to control the level of inventory coming in and from a business guy to business guy my question would be if somebody signs up to this new june 12 type of agreement what incentive would i have to ever
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reinvest in my business and build up if you at any point could do away with my due process, put another competitor right on top of me or force me to take inventory even if it's not in a good business decision? thank you, mr. chairman. >> thank you, senators. senator? first of all welcome back we missed you, mr. chairman. there's a great deal of anger and dispair, and it shouldn't shock anybody in this room that we're all looking at bad guys, and other considerations voluntary manslaughter going stifel fomple that depending on creating artificial demand. some will say it's the unions
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to have get -- that has allowed us to consume a lot of goods in this country and allowed us to have the trajectory of economic growth in this country. some will say it's the president. some will say it's congress for authorizing the funds in the first place that are being utilized to be invested in these companies, some will say it's the people who sold subprime mortgages to people who couldn't afford them. the bottom line is we're all going to indulge today in a little monday morning quarterbacking. the alternative to what's happened is a much more drastic result, and if we're all honest about it we woif to acknowledge in the actions had not been taken takeover past 30 days two giant american manufacturers would cease to exist and there would be no one left standing and tpwhoun would go twork
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proudly -- and i think all of us are trying to struggle with how we work through this situation full of pane and dispair and anger to come out at the other end with companies that are free of government interference and profitable. we want you guys to go make some money, but this hearing is very important today so that we understand the process that has occurred better. these people deserve a full vetting or what happened and why. and most importantly, we need to understand a lot better than we understand right now, what happens so we make sure we have not set a precedent. thank you, mr. chairman. >> thank you sarah. senator mccaskill. >> thank you, mr. chairman. i think you're start it's starting to hit all of us in the face what government-managed economies feel like. if this was a normal bankruptcy
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situation it would be none of our business what you did with your union contracts or whatever but this is a political bankruptcy and the government has been a part of picking winners and losers. so we're concerned. but also strotch blame for the process that's taken place if we want to look at who to blame as far as how we ended up in bankrupt sifment certainly we have to look at management, maybe the government policies, high levels of taxation and at federal and state levels, regulation that is we put on our companies. certainly union contracts have to be in with that mix because some of it got way over board as far as what was affordable. we can see those are some of the mix that maybe caused some of the problems, but we can't blame the stock holders, the ones who believeed in your
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company and put money in it and we can't blame the customers who trusted the brands and bought the cars and certainly can't blame the investors who invested their life savings, generation of the family work. these were private companies out there extending the values of your companies and now we look at winners and losers as the private doors open up. those who caused the problem are owning 80% now, nearly 80% of general motors. those that believed in risk and paid into it, the stock holders, customers, dealers, they lose everything. that's what political decisionmaking does. because that's not an economic decision. and again, i wish it was none of my business, but i'm afraid that the political side of it has made it our business, and now we've got the same questions everyone else has. some made the case dealers cost
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you money because of the incentives and deals organization we've all gotten calls like i got yesterday. just moved into one deal they are in south carolina just moved into a $iv.5 million showroom. general motors >> this is a dealer who is selling a whole lot of cars. and investing a whole lot of money. so my questions are this panel, too, obviously is there any way to take a look at this that would actually reward those who have made the businesses work and maybe take a little bit more out of those that brought the company down? but it hurts me to look at this pie chart that shows the ownership of general motors today and see that those who really helped fwilled company
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on the outside are not even in that pie. so mr. chairman, i am just outraged out as one of my constituents said, so i yield back to you. >> thank you. senator? >> thank you. and i'm sure our witnesses realize that eventually they are going to get a chance to speak also. but by way of opening statement, i want to read an email i got last week from a dealer in mississippi. and i won't read all of it, mr. chairman. but it dramatically outlines the real-life situation that this hearing is about. the email says i learned on may 14, that chrysler is terminating my franchise. and giving me less than 30 days to sell off an inventory that
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is bloated as a result of ordering cars at their request to keep them afloat. they are not buying back inventory, parts, special tools or specialized service equipment that i was required to buy. this is in violation of state laws in all 50 states but is being done under bankruptcy because they can get away with it. my brother has a chrysler jeep next door and stands to be handed my franchise for free that i've spent 21 years developing. this is not the way free enterprise is supposed to work. i am solven't, well capitalized, profitable and employ over 50 people. i have millions in investment in dealership-specific real estate to sell and service dodge vehicles. i have been the number one dodge dealer in mississippi for 15 straight years.
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this is a dealership that has been terminated. have an open-floor plan line with j.p. morgan chase. nearly all great facilities great location and have won every major award from chrysler over 20-plus years and currently five-star certified. unquote. so i would simply add he's certainly hoping to be pulled off the quote rejected list. wants to be given time for his brother and him to work out a reasonable deal between them. and operate the three brands under one roof. mr. chairman, and my  colleagues, this is the type of real-life situation that we've that we face today, and i hope the testimony will answe


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