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tv   [untitled]  CSPAN  June 12, 2009 8:30pm-9:00pm EDT

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deserve an explanation. i want to mention one other thing that is not the subject of this hearing but might be worth further investigation. as part of the administration's bankruptcy plans, they are putting all of the product liability court claims into the bankruptcy court, which is going to wipe out the claims of victims who have had defective products. talk about leaner and meaner. this is something that is going to hurt millions of americans who have been injured by these cars and who do not have some kind of fund set up through the bankruptcy. in the past, when the government has helped companies like gm and chrysler through their bankruptcy plans, like with the asbestos, we set up a fund to compensate victims. but here, there is no fund whatsoever that has been set up to compensate victims. i think this committee needs to
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look at this. i also think the administration needs to revisit their policy of not setting up this kind of fun. thank you very much, mr. chairman, and i yield back. degette. mr. green from texas opening statement, please. 3 minutes. >> thank you, mr. chairman. like my colleagues i'd like my full statement placed in the record. >> without objection. >> i'm glad you're holding this hearing because it's one of the biggest hearings we've had in our district in a long time. i guess the problem i have is the lack of transparency on how the decisions were made. and i think that's hopefully the witnesses today will make some discussion -- or provide that to us. i didn't vote for the t.a.r.p. bill last fall, either time. one of the reasons is i thought it was more of a bailout of wall street, not main street. and now we're seeing what's happening on main street 'cause our dealerships are on main street in our area. and i'll give you a great example. the houston market where i'm
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from already lost three large volume chevrolet dealerships and yet knaap chevrolet close to the central business district which opened on december 6th, 1941, the day before pearl harbor today received their letter and their appeal was denied. it's the only chevy dealership in the downtown area. in fact, it's the only one inside what we call 610 loop and there are only two inside beltway 8 which is miles and miles away. so now people in my district who live in the inner city will have to definitely go to the suburbs to have their car serviced or to buy a vehicle. more than 4,000 people live in the core of downtown houston and 74,000 people live within a two-mile radius and rapidly growing population of 400,000 live within that 5-mile raidiasious and 140,000 live in downtown houston and hundreds of thousands of students in downtown campus.
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and knaap chevrolet was one of the highest profitability in the top 20% for many years. i guess that's frustrating how that decision was made. people working in downtown houston could drop their cars off and trucks and get serviced and then they would shuttle them back and forth and again, on wednesday of this week, knaap chevrolet received the denial of their appeal for no reasons at all, nothing -- just your appeal was denied. we're losing a lot of high-paying jobs. we have a lot of high-paying jobs in downtown houston. i don't know why it is. and that comes from someone who buys chevrolet and gm products. i drive chevy trucks. i'm kind of texas that way and i will continue to buy them and i'm glad they're made in mr. barton's district. i know the witnesses won't be able to answer individually why that happened, but when you lose in the last year we've lost three huge chevy dealerships in the houston market, why we would go in and pick one of the oldest and the only one within the inner city to close, it just kind of boggles my mind.
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and so with that, mr. chairman, i'll yield back my time and i appreciate you calling this hearing. and like other members, i'm getting ready to go down to the transmission hearing down in the room below us but i'll be back. thank you. >> thanks, mr. green. mr. doyle for an opening statement, please. 3 minutes. >> thanks, mr. chairman. thanks for holding this hearing and i want to thank you personally for allowing jim goalic from goalic jeep chrysler a constituent of mine and someone in my district for allowing him to testify today. i didn't have a prepared statement, mr. chairman i just want to make a few comments. my friend joe barton says maybe we're in a new era and i fear that maybe he's right, you know, growing up in pittsburgh, i've had the privilege of representing pittsburgh, pennsylvania, and the turtle creek in congress. we're blue collar kids. our dads and grandfathers made the steel that go into a lot of the steel in your cars. we look after one another from pittsburgh. we buy from our own.
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we were taught never to buy foreign cars where i grew up. the thought never would occur to us. we buy american and we buy from the people we know. i remember mr. gatti had the local pharmacy on the corner. he's long gone. there's no more family pharmacies left. it's all the big box stores. mr. tamerello had the hardware store when i grew up. no more family hardware stores, now it's home depot, wal-mart. we always had our car dealerships, jim's family has been in business at the same location since 1935. an institution in the turtle creek valley. i wouldn't buy a jeep from anyone else beside the gollaks. i don't care their showroom isn't fancy. i don't care that it's not the newest most modern-looking place or they don't have a giant floor. what they have is service. they know you when you come in. you don't have to have -- they
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don't take that little piece of paperback to the manager and say i'll try to get you a better deal and go through that whole dog and pony show they pull with these big places. they give you a good price up front and they take care of you. that's why i buy jeeps there. i wouldn't think of going anywhere else. i raise my family on dodge caravans. my wife susan and i -- we have four children. that car took care of our family for years. i owned a budget of them. got it from another local family dealership. we're losing that. we're losing that in this country. this idea that you can buy from people you know and trus that you know will take care of you. you don't have to guess they will take care of you you know they will get take care of you. that's why i buy the cars that i buy. jim told me he met his quota plus every year since he's been in business. he started out 1945 a hudson dealer and then it was jeep eagle, you know, then jeep chrysler when chrysler come through.
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you can't take people like this -- you just can't replace people like this. i can't imagine myself -- i've never bought a foreign car but i can't imagine myself ever buying a jeep again if the golics aren't in business in pittsburgh. i don't understand how they're costing you money. i think they are a revenue stream for you guys. and if some reason this has to happen, i want to know why you're not taking care of people who spent 70 years and generations selling your cars and as you tell them that they don't have a business anymore, that you're not doing something to help these guys out in the transition. so i have lots of questions, mr. chairman. i'm just glad that you're holding this hearing today so that i can ask them. >> thank you, mr. doyle. ms. sutton from ohio, please. >> thank you, chairman stupak, for holding the hearing and thank you very much for inviting one of my constituent dealers, ellen spitzer to testify here today.
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mr. spitzer is losing seven of his dealerships. in addition there are two other chrysler dealerships in my district that are being eliminated. across ohio 47 chrysler dealerships are being eliminated in the ohio auto dealers association estimates and 130 gm dealerships may be cut. the impacts of these decisions on families and local economies will be substantial. and we heard from the distinguished gentleman from pennsylvania and i associate myself with his remarks. on average 43 people work at a dealership in ohio where the average pay is $44,000 a year. with these closings, millions of dollars of income will disappear with the jobs and those jobs are lost on top of the 2,000 auto manufacturing jobs that will be eliminated by the closing of the chrysler twinsburg plant, the gm mansfield metal center plant and gm's power train unit in parma. these dealers and their employees, they're not merely
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statistics. they have families. they have mortgages. and dare i have say they have car payments. and in the time that i've been in congress we've been fighting. we've been fighting hard to try to keep those jobs in america. because if people do not have good jobs in the united states, they're not going to have any money to buy things. and they can't be consumers. and over the last few months along with my colleagues, many of them in this room we've been working on the consumer assistance to recycle and save act known as the cars act which passed earlier this week. and through the cars act manufacturers -- it's going to help manufacturers and it's going to help auto related jobs throughout the country while improving the environment and helping consumers. but again, it's called the cars act but it's really not about cars. it's about people. it's about the people who produce those cars. and our job here -- the actions that we've been taking and it's really important to understand have not been taken just to
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preserve the brands of gm and chrysler. it's been preserved -- it's to preserve the jobs, the jobs that our families and our friends and our neighbors and our communities depend upon for their tax base, to fund their police and their fire and their schools and their other city services. it's about people. and the impact of the decisions that have been made have been extreme and they've been decimating to many. now, we've been trying to get answers in trying to understand the rationale that has been undertaken to come to these decisions. and i think you've heard it here today, that we don't get it. we don't understand it. and we want to know why if you're trying to sell more cars, why having less sales people to do it, who have been committed to do it for years and decades on end will result in more sales?
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that just doesn't seem logical to many of us here or logical to many of the people who are out there in our communities about to become jobless or who have become jobless because of the decisions that have been taken. so i'm interested in hearing about that. and i'm also interested in making sure and hearing the commitment, hopefully, from the companies, about how we're going to keep the market share that is of cars that are being sold in the united states from the companies, at its present level or increase it. so that we're not selling more cars from gm or chrysler that are imported because again we haven't been taking these actions to save the brands. we've been taking these actions to save our manufacturing base, strengthen our nation, and to preserve the jobs of so many that are in our districts and across the country. and i yield back.
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>> thank you, ms. sutton. and the cars act that she mentioned is cash for clunkers as we call it. she was the lead author, as well as myself and mr. dingell. in fact, it went through the committee. we website to the floor and we had votes on the floor this week and we got it passed. it's actually now in conference so the cash for clunkers, hopefully, next week we can have that done. so this committee has always been supportive of the auto industry, no doubt about that. last but not least, mr. welch from vermont opening statement, 3 minutes, please. >> thank you, mr. chairman. and mr. walden i really appreciate you calling this hearing. i'm going to be reat the pettive. the reason i'm going to be repetitive, this is a catastrophe for every community where we have car dealers that have been doing a good job and you guys know it. i mean, mike doyle was talking about the family dealerships. i was talking to the handys 52 years, providing good service in
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the community and they get a letter telling them no. wade walker is here from vermont, one of other great car dealers who have been playing a lead role. one of the things that's bewilledibe wil bewildering it's amazing. they have to pay for everything. from brochures to signs and i just asked wade to put a few facts. $21,000 for special tools. these are tools you could go down the street and get for next to nothing and they got to pay $21,000 to the manufacturers because that's part of the deal. $2,000 for parts and service promotion. 3200 bucks to put up a sign, your sign they have to put up, they have to sign a contract and i guess it's a 10-year contract they got to pay for that. 3200 bucks to service training, $10,000 to hook up to the
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computer, $5,000 for the brochures. so it's money out of their pocket that supports the manufacturers so it's very hard for us to understand why it is these guys are, quote, a drain on the business model. secondly, i think what you're hearing from all of us is there's something wrong with the business model that basically says in order to survive we've got to crush our local dealers. we've got to take out of the community some of the folks in the cmunity that have been doing the most to create a sense of community and to provide local jobs. i mean, the economy has to be about making a living in our local communities. and we are going dead wrong if we can't have a business model that rewards local success and gives people in a community -- they're willing to take a risk, to do a job, provide a service, related to their customers. if they don't have a place in the economy in the auto future of this country. you know, it's almost as though each one of the manufacturers
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wants to have one dealer on it just is not going to work. mr. chairman, i appreciate having this hearing. my hope is that we can find a way where there is a place that includes our local car dealers who have been doing so much for so many for so long. thank you very much. >> thank you, mr. welch. if you have an opening statement, give yourself a second to get situated and you have three minutes. >> thank you, mr. chairman. i appreciate this hearing and the circumstances that bring us here today are really unfortunate. despite signs that the economic downturn has slowed and maybe
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even turning around, many americans are still unemployed or fearful of losing their jobs, and for some, it this fear is very real. today, chrysler and gm, are closing more than 2,000 dealerships nationwide with potential job losses numbering in the hundreds of thousands. this move will impact every state and city in the united states. on tuesday, 789 chrysler dealerships closed their doors including some in chicago. about where i'm from, about 2500 gm dealers closed by the end of the year. there are three gm dealers in my district and another four nearby that my constituents depend on. there's been no public announcement of whether any of those businesses will close but the employees and their families go to sleep every night wondering what the news will bring in the morning. and i'm glad that this committee will have the opportunity to
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review how the decisions are made to close certain dealerships, closures of local businesses of this magnitude will severely harm communities and local economies that are already strained nationwide and these closures having a larger effect. we have to determine whether the process used for deciding whether and which dealers to close was fair to all involved. we also have to begin to think about how to assist those who have lost or will lose their. in addition we must look to the future of our nation's historic auto industry. i have no doubt that these branches will be able to make a comeback building and selling the cars and trucks of the future. ones that are energy efficient, innovative and uniquely american. also while this may not be the primary focus of this hearing, it has been brought to my attention that there are concerns about how gm and chrysler's restructuring will affect injury and liability for its current customers and it's something we may want to consider in the future. thank you, mr. chairman, for
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your indulgence and i yield back. >> thank you. that concludes the opening statements of all members of the oversight investigation subcommittee. let me introduce our first panel of witnesses, some of the members have asked to introduce some of them. i'll yield to them at that appropriate time and keep your comments brief. but first we have mr. james press who's president of chrysler, llc. mr. fritz henderson, chief executive officer of general motors corporation. mr. braley, you want to introduce john? >> i'm pleased to have john who's president of the auto dealers president in clinton, iowa, in my district and also has another franchise in iowa city, welcome, john. >> mr. spitzer -- betty help me out elyiri a.
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>> he has been in the business a long time in eylira and the surrounding years. 100 years i believe in the auto dealership. [inaudible] >> well, those are pretty deep roots and i am honored and i'm grateful, mr. chairman, that you brought mr. spitzer to share his experience not only in obviously providing our communities with the cars they need to drive but helping to shore up so much within our community by sponsoring organizations and contributing to the quality of life there. >> next we have mr. bob thomas, mr. walden, would you like to say a few words there. >> thank you very much, mr. chairman. mr. thomas is a constituent of mine from bend, oregon. his grandfather formed the dealership for general motors in 1918. he served as lieutenant in the u.s. marine corps from 1969 to 1972. he's a graduate of stanford
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university. serves on the boards of the united way, greater bend rotary, st. charles hospital foundation, boys and girls club, bend chamber of commerce, oregon state university, cascades campus and the central oregon visitors organization. the kind of person you'd want to represent your company in central oregon. >> next is mr. daniel. he was requested by mr. -- am i saying your name right or wrong? [inaudible] >> okay. thanks for being here. and mr. dicks asked that you be here. mr. james gollac, mr. doyle, you want to say a few words. >> thanks, mr. chairman. it's a pleasure to welcome my friend at today's hearing. jim and his family have been at the same location in pittsburgh since 1935. a business that's still owned and operated by his family. they started with a hudson franchise and then they sold cars from amc, jeep, and later
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eagle. several mergers later, they were a successful jeep dealer until 1999 in 2000 they acquired the chrysler franchise and now they are a chrysler jeep dealer and have sold over 10,000 new and used vehicles over the last few decades. they have consistently held the highest customer satisfaction rating for sales and service in the state of pennsylvania. and i welcome you, jim. >> next is mr. duane paddic of new york thanks for being here. last but not least, is mr. frank blankenbeckler iii of waxahachie, texas. frank is here with his son, austin and thank you for coming. joe, do you want to say anything about your witness? >> is it time to introduce them? >> it is. i just did a half-hearted i have. >> thank you, mr. chairman. i've been down in the electricity hearing.
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it is my honor to introduce frank blankenbeckler. he is a native of waxahachie, texas, graduated from waxahachie high school. went to the university of texas where he lettered in basketball. he came back home to waxahachie and entered the business that his grandfather started in 1926. he is one of the civic leaders in waxahachie. they have -- he and his family have been major donors to every civic improvement in the last 50 years in that community. and as i said in my opening statement last year, his business and the 40 employees generate revenues in interrupted $1.3 million in taxes to various state, local and federal entities. he is considered one of the leading entrepreneurs, businessman, philanthropist of his hometown and i consider him to be a personal friend so we're honored to have him here and as i said earlier, i think he represents hundreds if not
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thousands of family-owned dealerships that have been in business for decades and most of those dealerships, hopefully, want to continue in a positive business relationship that is positive for themselves and for general motors and chrysler and ford who's not here. thank you, mr. chairman. >> thank you. and it's also my understanding, mr. blankenbeckler's son austin is here. he's also in the car business. thank you. okay. that's our first panel of witnesses. it's a policy of this subcommittee to take all testimony under oath. please be advised that you have the right to be advised by counsel during your testimony. do any of you wish to be represented by counsel? everyone is shaking their head no. if any at time wish to be advised by council let me know before you answer a question. we'll accommodate that. therefore, since we take our testimony under oath i'm going to ask you all to rise, please raise your right hand to take the oath.
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do you swear or affirm the testimony you're about to give to be the truth, the whole truth, and nothing but truth in the matter pending before this committee? let the record reflect that the witnesses replied in the affirmative. you're all now under oath. we're to start with our opening statement, which would also be under oath. i'm going to ask you to please limit it to 5 minutes. we have an unusually panel because of all the interest in this hearing. mr. press, we'll start with you and then we'll do mr. henderson, then mr. mr. paddock and mr. kekanap. mr. spitzer and mr. golic. that will be the order. mr. press, 5 minutes. >> thank you. chairman stew pack, ranking member walden and members of the committee i appreciate the opportunity to discuss why a dealer realignment is important to the new chrysler group. despite completing a painful
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restructuring, the new chrysler group will retain 86% of its dealers by volume and 75% by location. i empathize with the dealers who are not the brought forward into the new company and i surely understand their disappointment. this has been the most difficult business action i've ever personally taken. i'd like to begin first by answering the four questions that i have been asked most often while i've been here in washington. first, was distinct these dealers really necessary for chrysler's survival? the answer is absolutely yes. today's automotive industry cannot support the number of dealers currently in the marketplace. we've gone from 17 million new vehicle sales in 2006 to less than 10 million today. as a whole the chrysler dealer network is not profitable. it's not viable. in 2008, the average u.s. auto dealer sold 525 vehicles and made a profit of $279,000. the chrysler dealer average was 405 vehicles and lost $3431. without profits, dealers can't
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invest in people or training, facilities. as a result sales and customer satisfaction suffers. the old chrysler's multiple dealer channel was too costly to support. i'll give some examples of that in a moment. and to complete our bankruptcy process and our alliance with fiat we needed a realigned new dealer network for the new company to emerge on day one on june 9th the bankruptcy court authorized the discontinuation of our dealer agreements as part of optimumization plan. the judge said it was, quote, an exercise of sound business judgment made in good faith and for legitimate commercial reasons, unquote. the judge also said in his ruling the dealer reorganization was, quote, appropriate and necessary. on june 10th, the fiat chrysler alliance was launched with a right sized new dealer network. second question, dealers don't cost the company anything, do they? well, in fact, they do. the cost to chrysler of an
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oversized dealer network includes both lost sales and excessive spending. first of all, dealers have a minimum sales responsibility every year. it's realistic and conservative and based on their average sales of chrysler sales. underperforming dealers cost unit sales as well as in 2008, of the 789 discontinued dealers, 80% of them were below their minimum sales responsibility which translated into 55,000 lost sales, $1.5 billion in lost revenue. second, the old chrysler dealer network included many dealers that sell only one or two of the three brands. this has led to tremendous redundancies in product development and brand strategy. for example, we spent $1.4 billion in the last product cycle in engineering and development costs for sister vehicles that did not return one cent of incremental profit or sales.
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for example, chrysler currently supplies dealers with two similar minivans, two similar full-size sport utilities, two similar midsize suvs and two similar sudans. we cannot afford to produce unique products any longer and that's one of the real reasons that the company had to declare bankruptcy. other cost inefficiencies include $150 million annual in marketing and advertising. $33 million annually in just administrative cost to work with the dealer body. third question, my discontinued dealer said he's profitable why not keep him? profitability is not an adequate measure to determine a dealer's viability or value to chrysler's future. chrysler's discontinued dealers were for the least profitable dealers in the network. on average the discontinued lost $73,000 last year, of course, some of them are profitable, yes, some of them are profitable.
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but their new chrysler business may not be. .. many dealers are in the wrong location. some did not have all three brands. they are not viable. we can no longer produce products to keep those dealers alive. 84% sell more used and new period 44% sell competing brands from the same show room. here's a typical example. a dodge dealer in the mid atlantic area. he is profitable, but he also sells buick, pontiac, and dodge only represents 3% of his sales for his dealership last year. that is a good example of the situation that we face.

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