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tv   [untitled]  CSPAN  June 14, 2009 4:00pm-4:30pm EDT

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that that kind of the deal? was there any subject is part to this? >> we have more than two hundred people in the field better part of the process of collecting the appropriate information. . information and the identification of future trends. we have the process of understanding what franchisees we have, the criteria from the dealers own score cards. it's a number of pieces of information. it wasn't just a computer. it was vetted through a number of levels. >> -- why would a dealer who had maybe one of your to prance and was a performing dealer and profitable dealer, why wouldn't they be given the opportunity to just pick up, the you stores selling the third brand to them? selling the third brand to them? what stops >> there's a couple reasons. one of them of course is you don't want to dealers that maybe
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next door to each other selling the same products. i don't think the dealers want that either. in fact there are laws that require 10-mile separation. we have to be careful to craft a right network going forward that has the distance and appropriate market so the dealers can survive. and normally many of these locations where we have the single brand dealerships they are in such close proximity that they have to be brought up into one that means one dealer may be chosen and one may not. we have that process for the dealers in front of you. >> thank you. mr. golick, you sold two of the three brands, right? this minimum sale steel, have you met that? >> yes. i've always been -- by the way, there are two main criteria a manufacturer can use to terminate a dealership under the state franchise laws and they are the minimum sales
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responsibility and your minimum working capital requirements. we've always been, hundred 50% of those and there's one other criteria and that is taking care of the customer, customer satisfaction, and we've always been just about highest in the state. >> mr. chairman, i want to cite there's a website call the dealerthe rate of, where you can look up dealerships. i have golick jeep and consistently has five out of possible five customer satisfaction, 24 month rating by the way is 5. ciro, the highest you can get. i have another dealer here i won't name them out of respect for the same market area that was kept up their dealers rating is one on a scale of one through five. this is a surviving dealer. mr. golick is a dealer i would like to submit these ratings for the record. >> without objection. >> i want you to grab that a book on the table and turned t tab 14 on that book.
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now, if you are looking at tab 14, this is an article that appeared in automotive news on february 5th, 2009. and it describes a conference call which mr. press, president of chrysler, urged dealers to buy 15,000 cars from the company in order to save it. now let me read what mr. press reportedly said to the dealers. quote, you have two choices: you can either helpless or per noss down. mr. golick, are you familiar with this? >> very familiar. >> the article also quotes mr. press saying and i quote, if you decide not to do that, we've got a good memory of who helped us and who didn't. do you recall that, mr. golick? >> i very much do. >> how did you feel about that? did you take that as a threat? >> i never heard that from an auto executive in my life. i've never heard anything like
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that. >> mr. golick, as the result did you buy additional cars? >> you know what, i honestly can't remember. i think if i had to look it up and probably did not on that particular month but i did all the other months. i think chrysler could provide you with that, but i have a feeling i did not that particular month he made that comment as i sloughed off and told my family i can't believe this guy said this. >> mr. keikenapp, were you on that call? >> yes, i was. >> are these quotes attributed to mr. press in the article, do you recall hearing that? >> yes i did. >> did you buy cars as a result? >> i did not. >> how about you, mr. spitzer? >> in some cases we bought them and some of the stores couldn't take them. >> after you and other dealers put up your own money to buy these cars in order to help out the company, you were shut down a few months later. now, let me ask you, mr. press,
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is this an accurate quote in the paper or do you deny saying this? >> it's accurate. >> it's accurate? so you get on the phone and ask your dealers to help you survive, you ask them to buy more cars and basically said you've got a good memory and you will remember the guys that helped you out and the guys that didn't. can you tell this committee that you didn't use that as one of your criteria to decide what dealers got -- if dealers said we take that as a threat and present and we are not going to buy additional cars would that be used to retaliate against the dealers? >> absolutely not tall in any way, shape, or form. >> how do you take a statement like we have a good memory who helps us and who doesn't -- if i made that call to you and asking that, how would you take that call? >> may i put that in context? a understanding your question and i realize the way that could be used in a manner that may not
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be accurate. but the situation was we had a shutdown in december before christmas. we made no production. we had asked for and received a very small part of our t.a.r.p. fonts'. we asked for t.a.r.p. funds for a first quarter. we got one month and had to extend through february 14 or timing to submit to get additional t.a.r.p. funds. in the month of february, we had insufficient production to meet cash flow targets that would have cost the company to liquidate. we had continued and were committed for everyone's sake to avoid bankruptcy and not liidate the company. and we did make an appeal to the dealers to please understand we need to buy the february production. i realize that you were not out of cars, but if the company is going to make it through february and we have a chance at getting the t.a.r.p. funding, which we finally did and we are still here today, we would need the help. 70% of the dealers purchased
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cars, 30% hadn't and mike quote was something like if you don't buy the cars today, we liquidate, we are gone. if we buy the cars and stay in business at least we have a shot at getting to the end of this and getting money. it's like a bucket brigade and everybody's got a bucket. 70 of you -- >> destin present is fine. >> those of us in the brigade will know which ones are in and which ones aren't, using the peer pressure of all loveless recognizing who is there. absolutely i am a dealer body amount would never threaten a dealer. you can ask anybody in the united states i would never use that pressure, and i promise you under any oath that there was never an aspect, and if you ask the people that did not get approved to go forward, they both equally either bought cars or didn't and that is why we were so insistent on the redistribution program to make sure any dealer that cars would be reimbursed. we added incentives. we had the best sales in
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february after that, we had a retail month for the first time in history we outso ford. we sold those cars we didn't want the dealers to score them. we wanted to save the company and get to the point we could emerge from the currency. >> three months after you cut those guys loose. i see my time is up. >> ms. sutphen of ohio. >> thank you, mr. chairman. there are so many things i would like to pursue but i would like to start, mr. henderson, you said gm has an appeal process referred about that and i just want to ask why do you have an appeal process? >> at process was initially certainly intended to be dated driven up the data isn't always right which is why i think we felt certainly compelled to have the review process which would reconsider facts that may not have been clear in the data and that process is born out with the right thing to do because there were cases we were wrong.
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>> would you say it was a matter of fairness? >> yes. we thought it was the fair thing to do. >> and in those decisions where your decisions were overturned on the appeals, can you tell us, you know, the examples -- we heard the one about the devastation of the bridge that stopped the business from going forward. can you tell other examples of what was overturned? >> recently i don't have the full knowledge of the 45 but another recent example is we ha a small town that had it she buick gm store and the conclusion initial plan would be to consolidate the two and a conclusion after the reconsideration was no, let's leave that to for example the would be another one. >> mr. press, in light of what we have heard mr. henderson say about the need to have an appeal process because fairness requires it, equity requires it, how do you feel about that in light of the fact chrysler has
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no such thing for those who have been shut out? >> interesting question, i understand contrast. the fact is the situations are different. >> but the employees are affected the same way and the dealerships are affected the same way. >> they are both dealerships and auto companies but the factors that led to the appeal process don't exist for chrysler and that's a completely different situation because we don't have a term agreement that comes up that has -- >> with all due respect the fact that was a determining factor whether or not they were going to have a peace process was fairness and that a applies to chrysler as well as edna? >> we have a situation where the company went bankrupt -- >> i understand. >> a new company was formed to go forward and selected specific dealers based on criteria beyond the dealer performance from the standpoint of a strategic network, the number of dealers, locations, number of brands -- >> i understand the criteria,
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but again, i think we are leaving out the point and the point is both companies have an obligation i would suggest to make sure those who have given a lot in working with your company for many years, decades upon decades in some cases, an appeals process as a matter of fairness. i understand all the underlying issues and i understand the business perspectives but what mr. henderson just referred to is something that applies to both companies and that is a matter of fairness and i will move on the line a little bit perplexed because i would suggest, mr. press, regardless of your criteria if it were okay at the inception and it was all perfectly subscribe to in terms
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of the inappropriate, you might still make mistakes. so with that we will move on. i want to clarify a little bit more this whole idea because we hear from the dealers about how the dealerships don't feel they cost the companies a lot of money so if i could get from mr. press and henderson a yes or no answer to these questions is a true the dealers pay for the cars before they receive them? >> yes. >> yes. >> and is it true that dealers pay to have the cars shipped to them? >> yes. >> and to the dealers pay for the parts as they receive them? >> yes, ma'am. >> and to the p dealers pay for their science? >> yes. >> and do they pay for their buildings including taxes? >> yes, ma'am. >> do they pay obviously their employees and related taxes?
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>> yes, ma'am. >> do they pay for the brochures they hand out in the show rooms? >> yes. >> okay. so mr. press last week you testified the dealer's cost you in the neighborhood of $3 billion. have you provided substantiation of that number somewhere? >> yes, in the testimony. >> that is what you are submitting as the substantiation? >> we have submitted written testimony. >> yes, i have your testimony. there's nothing supplemental to provide for any additional substantiation, just your testimony? >> yes. >> okay. mr. press, told all the states allow you to terminate dealer agreements provided there is just cause? >> it depends on the state. >> i understand. but they all allow the opportunity to terminate for just cause?
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>> i do not know. >> how many dealerships did chrysler terminate last year because of sub-standard performance? >> i do not know how many. >> please provide that to me. we now have 789 been terminated. that is a huge number. >> is not for the same reason. >> it would be interesting to see how many were terminated under the just cause standard in the last year. did i read correctly that you said it cost $41,000 per dealer? was it some other number? >> that was for providing training, to have computer systems, to have our internet program up, all of the records inside the dealership, all of the audit information we have, the computer data, the field organization. we have a full field office,
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transportation, logistics, parts, service. it is a fairly large enterprise of administrative costs. it is $41,000 per dealer. >> i will wait for the next round. thank you. >> thank you very much, mr. chairman. you have been hearing from republicans and democrats who represent dealers that there is enormous concern about how they have been treated and the impact on communities. one area where there seems to be a dispute is whether this was a decision made by chrysler and gm or orchestrated by the white house. i know that you were asked about that in the senate hearings. it is very important that it be clear who bears the responsibility here and accept
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the responsibility. ibility here and accept the responsibility. so mr. henderson, let me ask you, is it in fact the case the treasury was not involved in any way in this election are the ifill met in the guidance on the number of dealers the would be closed? >> could you repeat the question, i'm sorry. >> basically the question is who made the decision on how many dealers to close at which dealers to close? >> management. >> and that is you making the decision according to your best judgment about what was in the interest of general motors, correct? >> yes, sir. >> the treasury wasn't involved? >> treasury was involved as a purchaser but they were not involved in individual decisions or what the exact number should be. >> so you acknowledge that decision whether it was right or wrong is a decision you made, not the white house?
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>> yes, sir. >> how about you, mr. press? >> it wasn't made by the white house, it was made by our company, chrysler. >> so the basic question here is not just a matter of fairness although i agree with my colleagues on that, it is a matter of business judgment, and somebody is right and somebody is wrong. q2 gentlemen on behalf of your companies have come to the conclusion closing down of dealers including dealers in good standing who've done a good job long time in some cases generations it is in the interest of the company to close them down; is that right? >> in our case is this the only way we will survive, and forward. >> there's obviously evidence that has presented the pos dealers arnall costing money but actually can be a lifeline to reenergize sales in their local communities, so you are going to bear the responsibility if in
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fact it turns out that you are wrong and they are right; correct? >> yes. we will bear the responsibility. >> and on this appeal question -- here's the dilemma we have. the bankruptcy code is brutal. this man over here, his grandfather was in the business. his father was in the business. and had there not been the resort to bankruptcy, which was obviously made as the result of the business situations that developed over decades, had there not been the resort to bankruptcy, you would have had to have a sit-down, face-to-face interaction with people that had been loyal, effective and solid business partners for decades; correct? >> the bankruptcy was caused by a market that ended and no credit. >> once you go in the bankruptcy
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called the rules and that he is to apply, contracts, agreements, relationships, are thrown out the window. the law allows that to happen but it's the nuclear option; correct? >> it wasn't the desire or the plan. it was a failed enterprise that stopped operating, and it doesn't exist any longer. >> and what it did is allow the court to throw out the contract law and state statutes that provided some equity between the dealers and the company and here's the question. you're not responsible for what bankruptcy law is, this is the question you and mr. henderson. given the fact bankruptcy is a brutal tool and in some cases it may be necessary, do you believe that entity in general motors and chrysler which resort to bankruptcy for the best of intentions i will stipulate that for the moment, should bend over backwards on the side of giving
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the benefit of the doubt to dealers that have been loyal, effective and largely profitable partners to the manufacturers know what? >> i can't speak with the bankruptcy court should or shouldn't do -- >> i'm not asking what they should do, i'm asking what the company should or shouldn't do. >> the reason we approached winding down agreements is to handle this responsibly as we could. >> the bottom line is the law probably allows you to do what you're doing and i have no doubt that you've probably made the decision you think is consistent with exercise of your responsibilities. you have got tough jobs. but we have got a unique situation here where the brutal on fairness of the law is imposing enormous and frankly unspeakable hardship on some
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pretty good people, and you will acknowledge i am sure your fallible and you made your best judgment that doesn't guarantee that your right and the request that i have loved you is whether in the exercise of your judgment you will give the benefit of three free doubt that can be given to people who've been doing a good job for a long time. >> this was not using oh-la-la. with great respect understand how that could be construed but the fact of the matter is a new company was formed in our particular case and a certain number of dealers with certain locations and certain brand representation selected to go forward. but the cause of this is we became a field enterprise. >> i yield back. >> thank you. we are going to go another round. mr. henderson, let me ask you this. on the part of the interest of the new general motors, right? in canada is part interest?
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>> yes, sir. >> are we closing and dealerships in canada? >> we went through a similar process. >> did you hold hearings in canada? >> we did not. >> mr. press, we got the new chrysler and old chrysler, will the new chrysler dealers required to sell fia? >> with a required to sell fiats? we haven't established a brand position and product plan afford from now or alliance we will be branding fiats or some other brand. >> was it one of fiats considerations for helping out here with the new chrysler to get their product line in the united states? >> part of the new company is definitely going to benefit for the $10 billion worth of resources and product of a limit and hardware from fiats that gives tremendous car in trees and technology that would bring in our product line.
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>> are you required to sell fiats is line asking. >> we are going to have cars that have fiats technology or engines. >> but a car that says fiat? >> we haven't yet determined what brands and names will be on the vehicle. a vehicle could have a fiat name and it may have a chrysler name. >> mr. barton said, just for laughs, he said i help chrysler and general motors review some of these dealerships and maybe some of these things can be reversed. in all honesty because you went through bankruptcy there's no way for these chrysler dealerships being closed to get their cars dealerships back is their? >> that is correct and my answer is we would be transparent and share the information -- >> but we have got to be honest. none of these gentlemen are going to get their dealerships -- >> that is correct. >> and there was no process to get the dealerships back. >> that's correct.
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>> that's the bankruptcy, those contracts were broke therefore you don't have to offer them anything else; correct? the dealerships, the contractors were broken, they were done, bankruptcy discharged them. >> but we took responsibility for the redistribution of the inventory is. >> said that is all bothers me. that is old chrysler. those are old chrysler parts. how can the new chrysler if it isn't a link to give these gentlemen appeal process how can the new chrysler take stuff that was old chrysler? it seems like you are being selective in what you were going to take. >> that is a great question. the redistribution is to the dealers, not our company. so what we did is provided for distribution of the vehicles that were old chrysler dealers inventory and they are being moved into new chrysler dealers inventory. >> the $350 is going to get my 09 moved off the lot who gets that money?
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>> that goes for the inspection, cleaning of the vehicle and transportation logistics. that's an outside third party company. >> okay, so the new chrysler doesn't receive that money or distribute that money? >> no, sir. >> okay. the wellhead, mr. keikenapp. you can't ask a question but if you have got a statement, the head. >> no. >> you can ask questions, sorry. mr. henderson, let me ask this. did you have a conference call on june 10 with gm executive retirees? >> yes. >> two days ago. >> yes. >> was a statement made along these lines, i don't have it exactly, that no executive level gm retiree will receive retirement benefit package more than $100,000 at the direction of the treasury department or
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the auto task force? >> the discussion had to do with pensions that applied to executives nonqualified plans as part of the total number of liabilities one of which was that there were six liabilities that were on funded and unsecured, and part of our bankruptcy filing the purchased sale agreement suggested we would have to reduce the total amount of the liabilities by two-thirds. the management had the responsibility to allocate the two-thirds reduction so as part of doing that we identified a plan with respect to the salary, excuse me, executive retirees come any executive retiree whose combined qualified and benefit was less than $100,000 they would be unaffected and to the extent their benefits in total were more than $100,000, the extent of the unqualified plan would be reduced by two-thirds. ..
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>> they identified the amount of liabilities they would be willing to accept. this particular recommendation runs from management. -- was from management. >> to place the blame on the white house or the treasury department would be accurate? >> in the case of unqualified pensions like this, we indicated to our retirees that in most bankruptcies, that that is zero. in this particular case, it was considered to be a fair approach. >> to date is june 12. it is the day that the agreements have to be returned. of the dealers going forward or those who will be closed, what happens if they don't sign it? >> first of all, 96% as of this
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morning had either sign it or verbally said that it was coming in. we anticipate a high percentage of the dealers will sign the wind down agreements. in the event that they do not, those contracts would not be assumed by the old company. it would not be assumed by the new company and would be rejected. >> they would be out of business? >> their contract would be terminated. >> all right. go ahead. correct. >> >> as long as they do not sign that under duress. [laughter] but there are 1,000 more dealers going to be closed so if i don't get my contract in right away or protest too loudly i could be one of the other thousand dealers? >> in terms of participation agreement 99% are in and we
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expect to have all of them. mr. spencer? >> a couple of comments mr. press i would submit the cost producer will go up after the dealers are terminated because first of all, may be 40% or so get no representation at all part of it is electronically. there is no personnel. i will also submit they will cut very few field of people with you were dealers those fixed cost will go up. the oth >> i want to quickly educate the committee. they take the state average penetration for their brands. they expect every dealer to hit the


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