tv [untitled] CSPAN June 12, 2009 11:30pm-12:00am EDT
down? and how much is he going to lose per car? and how much is a chrysler dealer going to lose per car? >> sir, it would be very hard to project. i would guess in the case of gm, there would be some cars when you get to the tail end of the process -- you have some of the less popular models left. they could lose several thousand dollars in those cases. it depends on their own situation. in the case of chrysler, those dealers that have vehicles left do not have a franchise or a licence. they cannot sell them. they cannot get chrysler incentives. the cost would be many thousands. 56 or $10,000. -- a 5000, 6000, or 10,000. >> how could that aspect of it be approved?
that aspect be improved? >> i do not understand the question is. >> i am not sure i do. [laughter] what is there in the two plans that is particularly hurtful in terms of costs to the dealers? and how could those matters be improved? >> and the case of gm and chrysler when the dealer loses a franchise like these gentlemen here and around the country they lose the value that goes at the o. >> i want to know the specific charges per car, in other words chrysler has a $350 item that they have to pay. are there other charges like that and either one of these
plans that impact upon the dealer? >> not that i am aware but in general motors they do not buy the cars back but give them the opportunity to sell them down over the next 15 months. >> i will submit to you and ladder and other letters submitted i ask unanimous consent mr. chairman, those letters and responses be inserted in the record. >> without objection. >> mr. mceleney to your assertion two ships do not cost of money to maintain than wide to foreign debt transplants have significantly fewer dealerships in the united states than the domestic competitors. >> i am an emcor dealer as well so i have some perspective. the business model for the transplant manufacturer is quite a bit different than domestics. domestics have a strong market
share in the world market like where i live in this be eight to they have a 10. market share advantage. is a competitive a vintage port gm and chrysler to have representative if they have some 5,000 on average or a toyota or honda have no interest they will not backfill these locations that are being closed with a franchise. >> why would they choose not to back those kinds of franchises? that is the root of the question. >> based on my experience i would say they don't see the market opportunity for their brand as they do in more metropolitan areas. >> mr. press, but mr. henderson, mr. mceleney has indicated the franchisees do not cost manufacturers money to maintain. do agree with this question
and agree with his position or do not? >> i do not. >> i do not. >> why? >> and our situation, one of the main reason is that caused our bankruptcy and a week product engineering is a requirement that we provide individual models for each standalone franchise, the sister models that cost substantial amount of money and took resources which in negative sales that is a huge cost. the sec and of course, is lost sales, lost volume in a market underperforming, those sales don't provide revenue for us. they lose that and it was 1.5 billion dollars, the development of individual models is 1.4 billion. that is a very real situation.
third, because we have so many dealers and the average dealer of loses money, we don't have a competitive dealer network that can compete with other manufacturers with customer satisfaction, location, of facilities, advertising, a substantial cost to the company. >> mr. henderson and? >> in my testimony i talked about the cost of the company over time has incurred to provide support for a dealer body total which is financially weekend -- weekend. there is that cost in the testimony. second, general motors market share is a 10 full market share points higher than it is on average it is a source of strength even when done with restructuring will also have the most extensive dealer body in rural america up. what cost us is insufficient
distribution in metropolitan markets where we have many locations and a few strong one's. that is a significant problem today. >> it has been estimated the average for foreign transplant dealer is twice that of a comparable domestic dealer. is this true? yes or no? >> i don't know exactly double blood is a substantially higher, perhaps. >> toyota reverses a chevrolet approximately would be double. >> if this is true, but apparently it is, why is that the case? mr. press first. >> the reason and toyota's case they sell 2 million cars at a 1200 doo there's and if we did not have the restructuring we would sell
about 700,000 retail out of 30100 dealers. average sales per dealer is substantially different. as and toyota case the product line is less truck oriented and more mature market or sunshine states in a bus presents in the rural areas are secondary markets and also don't have the 80 year legacy of having a substantially higher dealer body to see the volume disappear. >> mr. henderson? >> i don't have anything to add. >> gentlemen do believe your respective numbers of dealerships has been reduced for your restructuring plans and sfo has parity been achieved through these plants and a way which will be adequate with regard to our foreign transplant competitors? >> we tried to achieve a
dealer network going forward to have a minimal impact on removing dealers there have been critics that say we did not go far enough, we did not want to go all the way to ve parity but we are in a good position to go forward and have the dealer network emerge over time. but through the bankruptcy and emergence of a new company we have the optimum amount of dealers going forward 2391. >> and our case also as i mentioned we would expect 3600 dealers approximately even with a modest improvement next year and conservative assumptions we would almost double. >> very quickly, it is said the dealer should be permitted to remain open while you terminate to provide service and maintenance. what is wrong with that
arrangement? >> and our situation with there are surrounding dealers that may take the franchise for example, the dodge and jeep dealer may take a chrysler franchise. they are spending money and adding overhead that is part of customers that would travel with it. >> you are saying this is having an adverse affect? recon adverse impact on adjacent dealers. and there are some cases there are a single point* that may have a real planes then we have always had the opportunity to take a look at very minimal number of companion points, but in this particular case, it was substantially reduce the ability of the dealers to go forward to derive the full
have this dominant brand loyalty. yet, i look at page four, mr. henderson, of your proposal and what do i see? wind down dealers by state, pennsylvania, 90, ohio, 79, ellen malae, 66, wisconsin, 50, michigan, 58, indiana, 48, iowa, 46. and after your description of why these foreign auto makers are not playing in this part of the country i find it very difficult to believe that you will perpetuate your brand loyalty in light of these deals are pleasures in my state and representative stupak and congressman dingell and congressman sutton. i see the evaporation because of this practice and i wonder whether it is part of your you have given consideration to
that. mr. henderson? >> first of all, i'm able for the unborn in the state of michigan. second of all, when we are done general motors will still have what we believe will be the largest distribution system for the small towns in the u.s.. approximately 1500 of the 3600 will be located, sir. >> actually, through the new dealer network with increased the share of dealers in the rural markets and reduced the share of dealers in the metro markets. we do realize the importance. the difficulty is from the volume guinn from 2 million to 50,000 we don't produce enough vehicles for every business to stay in business. it's unfortunate but it's a fact and we are trying to make sure the dealers have highly enough volume they can stay in business and have a good operation going forward to compete with the transplants.
>> into the two of you that have accomplished so much in your career the people sitting on this side of the table have a much deeper sense for the attitude of our constituents, and i would be shocked to see your brand loyalty maintained in light of these shutdowns. one of the things we know, mr. walden referenced this in his opening statement, both companies have been doing advertising to talk about their business strategy going forward and mr. henderson, we have seen the gm ads that talked about how your company is going to stand behind the products it sells going forward but in reality you are not standing behind your product speak cause one of the things we know is part of these bankruptcy proceedings every existing and future product liability claim that your company could be responsible for for selling a defective product is going to be distinguished, isn't that true? >> and our case, warranty recall will be assumed by the new
company by product liability purchasers and normal 360 process do not assume the obligation. >> so they will be extinguished in the bankruptcy. >> they will be claimants of general motors. >> because we know what happens to those unsecured claimants. >> likely. >> you are going to be passing on monte league, as if cost shipping because of that. >> know we are not peery islamic yes you are because i can tell you in the state of iowa and he is immune from liability as a distributor of your product if the manufacturer is in existence and not in bankruptcy. that's the fact in almost every state understand product liability law. so if you disappear as a potential claimant in that process, every one of these dealers is going to be on the hook. not just your remaining dealer network the existing dealers that no longer have a franchise. >> both the wind on agreements
as well as continuation agreements will be assumed by the new general motors and indemnification agreements gm has today will@@@@@@@@ár as part of our obligation we would continue to identify the dealers that signed the agreement with general motors. >> they're going to have to rely upon you to step up after they have been sued and they pass that on to you, and they're going to have to have counsel involved because of that. >> sir, i think that by virtue of the indemnification continuing to the new company, we did that purposefully to try to avoid the situation or a dealer could be badly hurt. >> i want to give you the last opportunity to talk about the impact on every one of the dealers that you represent as chairman of nada that have not had a seat at the table. haven't had a seat
at a table or an opportunity to tell their story because i am guessing that you been getting a lot of phone calls. what has it been like for you and what type of concerns are you hearing? >> well, we are hearing many concerns expressed earlier today by some of the dealers on the panel. they run the gamut of the dealers sometimes third, fourth generation. my family as you know has been in business 95 years and going forward but there's a lot of dealers like me that are not. most dealers the net worth of their enterprise is represented in the value of the real-estate of the fact of when it and the value of their franchise and in the case of dealers being terminated by gm or chrysler the franchise value is a zero and immediately realize the value is single purpose real-estate particularly in this commercial real estate market that is pretty stressed any way would be severely devalued even to the point many cases dealers will owe more money on the property
that is worth or they are obligated to for a number of years and have no way to generate revenue to pay for that. so those are some of the issues the dealers have made significant and tell me the expectation they would have a franchise going forward as long as they met the requirements of the franchise agreement are being left with those obligations. so there is a variant of stories that are tough personal bankruptcies in many cases and there are employees are having to take personal responsibilities. they are on average about twice what is paid in the retail so these are good jobs. most of these people will not be able to go to other dealerships and find employment. particularly in this market. i don't know of any the worse hiring people. i suspect there may be some as this rationalization takes place in the dealership market areas but for the most part the some
hundred 20, 130,000 employees with terminated dealerships will have to find work outside the auto sector and it is a tough market as you know to find employment right now, so there is pretty devastating stories out there. >> thank you, mr. berlin. ms. sutton. >> thank you, mr. chairman. press about the appeal process and i talked up the state law and under the state laws about the country it is my & and that you can terminate for just cause you can terminate dealerships. is that your understanding, mr. henderson? mr. press wasn't certain. >> i have the same recollection. there are provisions but they depend bistate but yes in general for cost. >> when you say they depend or maybe differences but they all have some sort of just cause standard; is that correct? >> i can't answer the question. >> i can tell you in ohio there
is a law that allows termination based on just cause so we can go with that understanding. let me ask you how many dealerships did gm closed last year based on a just cause under the state laws? >> i will have to get back to you i don't have an answer. >> do you have any idea? >> no >> and how many are easily did to close during the bankruptcy? >> as we talked about, we will move from approximately 6,000 to approximately 3600 overtime. >> okay. 2600, is that right? 3600. >> 2400. >> okay i had 26. thank you. i want to follow-up -- >> the reason by the way the number isn't perfect. it can go anywhere from 3400 to 3800. >> okay, good enough. i want to follow on some of the discussions going on awhile back
about information being transferred from the dealerships that are being closed and the discussion you said gm has a record of securing and it was mentioned it was going to go to third parties so who are those third parties? are they identifiable at this point? >> we can identify them for you. these would be party is we would use to sell vehicles to customers to make sure the surface is taken care of to provide surveys. there are many reasons we want to contact customers. >> i would appreciate you submitting hall of the third parties, but they might receive that information to the committee. mr. spencer i want to thank a again for coming today and i want to just ask you able to more. in a poke earlier about the investment that you have put in
to this work of course representing chrysler and other products, how much have you invested in project justice so far? >> working closely with the people from the management of the business which includes michigan, illinois and so forth, that they have responsibility for most of our dealers six upset one working very much in concert with them and sometimes almost at their direction i won't say insistence but let's say strongly urging we have consolidated to genesis stores. one of them is in florida with a different business center it was the first one in the state i think or very close. 45 -- it was called project alpha at that time. we have spent in concert wh again, chrysler corporation i think about $6 million in acquisitions at their urging
insistence in fact in two or three cases i was called by chrysler and said this is and here is what you do call him by and that way we will consolidate. that is just in good will blue sky that has gone away. over and above that have invested the project genesis and. they changed the name somewhere along the way, and they didn't change anything but the name i don't think. i think in bricks and mortar just about $10 million. that doesn't count the land, that is just buildings done in concert with chrysler to consolidate and accomplish project genesis. with all due respect to mr. press why have healthy respect for over the years going back to his days eckert we've known mr. press for probably 30 years, and the arbitrary way which the steelers were selected has no connection to project
genesis or all three brands or stand alone from our own experience i can assure you and it also anecdotal observations from other dealers and i know that we are stand alone spent for work on the genesis got canceled, and all the petitions and accommodations that are out there. >> have you received the written criteria explaining why you're dealerships have been cancelled? >> we've received nothing. we didn't even receive termination. it was on the web. i was told by other people. we didn't even get notification and was going forward directly. mr. keikenapp that chance if you could ask a question here today, what would that question be? and [laughter] if you don't recall --
>> i think what is frustrating is that we are a very good dealership and we have done a good job and there's other dealerships that surround us and that have lost financing but don't have the ability to buy cars. we all all of our cars all right. we didn't have a financing problem. and now there's dealerships within gm and chrysler that don't have the ability to finance their vehicle so. they are now having to get bailed out by the small business administration and it's frustrating. i think there's probably some things i might have said that created frustration with the factory and i think it cost us these jobs. but i think that we have done a
great job and i know that within tacoma we are applying for that point, and i just hope they take a look at us because i feel we are the dealer and if we were to have conversations with them in regards to mabey moving the point to someone else we will do what ever it takes. i believe in the product. i believe in what they are doing is right. i don't believe in eliminating the dealer body did any good. i believe the bankruptcy was something that was inevitable but products they make are far superior. the dodge charger, the challenger, the 1500 are phenomenal. and i believe in the product. and it's just unfortunate when we have such a well-run business
and there's other dealers out there that are substandard you can't really look at any metrics from any dealership and shoot holes and everyone of them, and i don't believe it was -- copps pumas i appreciate your testimony. thank you khan -- >> general motors even mr. press, i guess i'm concerned as i see the opening areas about the rural areas where i live have any of you talked about 100,000, 80,000, i don't have a county in my district that house
70,000. i am a vast rural leary and i think we have got six chrysler dealerships being closed, maybe four or five, maybe more than that in my district of general motors. heil or people going to get service? if i bought a car this year at general motors or chrysler and my dealer is closed how do i get surface on my car? am i going to have to drive two hours somewhere else when might service light comes on? i mean, how do you do it and especially when you talk about the loyalty and of rural areas you've got him% greater loyalty base but we are getting hard hit. >> mr. chairman i appreciate the concern especially with the customers and that is a very fair question, customer size is important. after the case of the reorganization we actually increased the share of the dealer body in the rural markets. a higher portion of metro market
dealers were actually removed. >> i guess i am saying if you improve the world market by which to close my district? you can't get much more rural than me. and we lost six of them. >> the largest impact was on natural markets where the dealers were too close to each other -- >> we don't have natural markets. very few people in between. >> i'm very familiar with your area. i go there on weekends often so i appreciate that. actually in terms of customer convenience from the old dealer group to the new dealer group the customer dealer increased 9.4 miles, so we were careful to make sure that we were able to retain the convenience to customers. there may be -- >> that's going to be nationwide. >> there may be -- >> .9, like one for world markets? >> there will be a few rural
markets that will no longer be represented. >> the only way to do that is to take these dealerships you shutdown and of other dealers into their places. >> there's other dealers that have access to these markets or or adjacent especially in the case where there is a dodge dealership that goes out may not increase or it would be very minimal in terms of the number of locations and second, from the standpoint of those markets if there is a market there may be some markets we are abandoning the market if there is no longer potential for long-term growth and we don't have the 700,000 units of production we just don't have enough vehicles. >> but i trusted you >> abandoned those markets, you abandoned me.