[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                  SUBCOMMITTEE HEARING ON THE ROLE OF 
               AUTOMOBILE DEALERSHIPS IN RURAL ECONOMIES 

=======================================================================

                                HEARING

                               before the


                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                           SEPTEMBER 16, 2009

                               __________

                   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 111-045
Available via the GPO Website: http://www.access.gpo.gov/congress/house

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman

                          DENNIS MOORE, Kansas

                      HEATH SHULER, North Carolina

                     KATHY DAHLKEMPER, Pennsylvania

                         KURT SCHRADER, Oregon

                        ANN KIRKPATRICK, Arizona

                          GLENN NYE, Virginia

                         MICHAEL MICHAUD, Maine

                         MELISSA BEAN, Illinois

                         DAN LIPINSKI, Illinois

                      JASON ALTMIRE, Pennsylvania

                        YVETTE CLARKE, New York

                        BRAD ELLSWORTH, Indiana

                        JOE SESTAK, Pennsylvania

                         BOBBY BRIGHT, Alabama

                        PARKER GRIFFITH, Alabama

                      DEBORAH HALVORSON, Illinois

                  SAM GRAVES, Missouri, Ranking Member

                      ROSCOE G. BARTLETT, Maryland

                         W. TODD AKIN, Missouri

                            STEVE KING, Iowa

                     LYNN A. WESTMORELAND, Georgia

                          LOUIE GOHMERT, Texas

                         MARY FALLIN, Oklahoma

                         VERN BUCHANAN, Florida

                      BLAINE LUETKEMEYER, Missouri

                         AARON SCHOCK, Illinois

                      GLENN THOMPSON, Pennsylvania

                         MIKE COFFMAN, Colorado

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

                  Karen Haas, Minority Staff Director

        .........................................................

                                  (ii)

  


                         STANDING SUBCOMMITTEE

                                 ______

     Subcommittee on Rural Development, Entrepreneurship and Trade

                 HEATH SHULER, North Carolina, Chairman


MICHAEL MICHAUD, Maine               BLAINE LUETKEMEYER, Missouri, 
BOBBY BRIGHT, Alabama                Ranking
KATHY DAHLKEMPER, Pennsylvania       STEVE KING, Iowa
ANN KIRKPATRICK, Arizona             AARON SCHOCK, Illinois
YVETTE CLARKE, New York              GLENN THOMPSON, Pennsylvania

                                 (iii)

  












                            C O N T E N T S

                               __________

                           OPENING STATEMENTS

                                                                   Page

Shuler, Hon. Heath...............................................     1
Luetkemeyer, Hon. Blaine.........................................     2

                               WITNESSES

Allison, Mr. Daniel, Allison's Chevrolet, Sylva, North Carolina..     3
Thomas, Mr. Donald, Thomas Motors, Moberly, Missouri.............     5
Ernie Goss, Ph.D., McAllister Chair and Professor of Economics, 
  Creighton University, Omaha, Nebraska..........................     8

                                APPENDIX


Prepared Statements:
Shuler, Hon. Heath...............................................    24
Allison, Mr. Daniel, Allison's Chevrolet, Sylva, North Carolina..    26
Thomas, Mr. Donald, Thomas Motors, Moberly, Missouri.............    29
Ernie Goss, Ph.D., McAllister Chair and Professor of Economics, 
  Creighton University, Omaha, Nebraska..........................    39

                                  (v)

  


                   SUBCOMMITTEE ON RURAL DEVELOPMENT
                  ENTREPRENEUSHIP AND TRADE HEARING ON
                   THE ROLE OF AUTOMOBILE DEALERSHIPS
                           IN RURAL ECONOMIES

                              ----------                              


                     Wednesday, September 16, 2009

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                     Washington, DC
    The Subcommittee met, pursuant to call, at 10:09 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Heath Shuler 
[chairman of the Subcommittee] presiding.
    Present: Representatives Shuler, Dahlkemper, Bright, 
Luetkemeyer, Thompson.
    Chairman Shuler. I will now call this hearing to order.
    Earlier this year, the House Small Business Committee held 
a hearing examining how small parts manufacturers are faring 
during the reconstruction of the automotive industry.
    During today's hearing, the subcommittee will look at 
another vital link in the automotive supply chain, automotive 
dealers. Traditionally, our domestic automotive makers will 
rely on a network of 20,000 local dealers throughout the Nation 
to sell vehicles to the American public. These entrepreneurs 
are the nexus between manufacturers and car buyers, making them 
a critical component in the overall automotive sector.
    These small businesses are also an important source of 
employment. Nationally, dealerships employ more than 1 million 
workers and support a payroll of $54 billion. On average, each 
new car dealership employs 54 people and supports a payroll of 
$2.6 million. These employees, in turn, spend their wages 
buying goods and services from local businesses.
    In rural areas, like western North Carolina, the economic 
role of auto dealers is magnified. Beyond providing a source of 
livelihood for their workers, these dealers also offer rural 
America an important service. Often, the closest dealership can 
be as far as 50 miles away. This means that dealers that choose 
to service rural areas are an important option for Americans 
looking to purchase new vehicles.
    These dealers also service vehicle warranties. In rural 
America, public transportation is often not readily available. 
In short, if you live in rural America, you are more likely to 
drive to work, to bring your kids to school, or to pick up 
groceries than if you live in a big city. And on average, the 
distance you drive is likely to be greater than it is for 
Americans who live in congested areas or urban areas.
    Unfortunately, in recent years, automotive dealers have 
encountered unprecedented economic pressures. Plunging sales 
have hit all parts of the automotive industry hard. The number 
of cars and light trucks sold in the U.S. declined by almost 3 
million between 2007 and 2008.
    In 2008, things went from bad to worse, as a combination of 
rising gas prices, the credit crisis, and a recession put a 
serious pinch in automotive sales. The U.S. auto sales fell to 
a 26-year low that year, and the industry estimates sales could 
drop by 3 million more this year.
    Of course, automotive dealers are not alone in facing these 
challenges. All of the American automotive industry is 
undergoing significant reconstruction, and the entire sector is 
responding to this climate. GM is eliminating several brands. 
Both Chrysler and GM are closing plants and will employ fewer 
workers. During the first six months of this year, at least 15 
auto parts suppliers have sought Chapter 11 protection, 
including the two largest suppliers.
    As the committee heard earlier this year, an increased 
number of small auto parts suppliers are going out of business. 
These changes are causing hardships in communities across this 
Nation.
    It is my hope that today's discussion can highlight the 
importance of auto dealers in rural communities. While they are 
just one link in the chain of the automotive industry, the 
small businesses play a critical role in small town America. I 
think today's hearing is timely, and I want to thank our 
witnesses for being here today. With that, I will defer to the 
ranking member, Mr. Luetkemeyer, for his opening statement.
    [The statement of Chairman Shuler is included in the 
appendix.]
    Mr. Luetkemeyer. Good morning.
    And thank you, Mr. Chairman, for holding this hearing to 
examine the impact of the auto dealer closings on rural 
communities. I would like to extend a special thanks to each of 
our witnesses who have taken the time to provide this committee 
with their testimony. This is undoubtedly a difficult issue to 
examine. The health of the American auto industry is directly 
tied to the economic health of our nation.
    On a smaller scale, but no less important, the financial 
well-being of local auto dealerships, especially in rural 
areas, is very closely tied to the economic health of our own 
small towns and farm communities. Automobile manufacturers rely 
on an extensive network of approximately 20,000 independently-
owned dealers for sales and service to their vehicles. Dealers 
provide the local connection between manufacturers and car 
buyers, and the dealership system is one of the several key 
players in the complex web of relationships that make up the 
U.S. automobile industry.
    While there is a consensus about the overall role and value 
of the dealer network, manufacturers and dealers have 
demonstrated that there is a wide gulf between them on the 
appropriate size of that network, the flexibility of the 
dealerships in running their business, and the GM and Chrysler 
visions of how the dealer network should perform going forward.
    In June 2009, Chrysler eliminated 25 percent of its dealer 
network to 789 dealers. GM has announced it will reduce its 
dealer network from 6,000 to approximately 3,600 in October 
2010 when its contracts with dealers from around the country 
are up for renewal.
    According to the National Automobile Dealers Association, 
the GM and Chrysler dealerships slated for elimination have 
more than 100,000 employees. This is a very important issue, 
especially for members who represent rural areas where there 
may have been only one or two GM and/or Chrysler dealerships to 
serve one or more counties. This could lead to drive times or 
tow times of well over an hour to get some service done.
    Additionally, given the abysmal employment statistics we 
have been seeing for well over 1 year now, this restructuring, 
while hopefully benefiting the nation as a whole in the long-
term, will undoubtedly increase the numbers of unemployed 
workers. Clearly, closing dealerships will translate into job 
loss, an economic hit to many regions, particularly rural ones.
    The broader impact on the communities they serve must also 
be taken into consideration. For example, car dealerships are 
local businesses and pay billions annually in State and local 
taxes. They provide significant employment opportunities to the 
communities in which they operate.
    In addition, on average, each dealership makes $25,600 in 
charitable contributions to its community according to the 
NADA. From monetary donations to local charities to sponsoring 
the local Little League team, these activities, while harder to 
quantify, make dealers an integral part of their communities.
    I am looking forward to today's testimony. And again, I 
would like to thank Chairman Shuler for holding this hearing 
and everyone for being here. I yield back.
    Chairman Shuler. Thank you, sir.
    Does any other member wish to be recognized for opening 
statements?
    We will now move to our panel. We will now move to 
testimony from our witnesses. Witnesses will have 5 minutes to 
deliver their prepared statements. The timer begins when the 
green light illuminates. When there is 1 minute remaining, the 
yellow light will come on. And when time is up, the red light 
comes on, but obviously, we have got a rather small hearing 
today, so we will be a little bit lenient on that. So hopefully 
you can fully explain your testimonies.
    Chairman Shuler. I would now like to introduce our first 
witness, Mr. Daniel Allison.
    He is the owner of Allison Chevrolet in Sylva, North 
Carolina. It was founded by Dan Allison, Senior, in 1935. From 
that time, three generations of Allison families have been 
involved in running the company.
    Mr. Allison, you will have 5 minutes to deliver your 
testimony.

                  STATEMENT OF DANIEL ALLISON

    Mr. Allison. Thank you.
    Chairman Shuler, Ranking Member Luetkemeyer and committee 
members, thank you for your willingness to address these 
economic impacts of the closings of automobile dealerships in 
rural communities.
    Thank you also for allowing me to present my views and to 
tell my story. My name is Daniel Allison, and I am the 
president of Allison's Incorporated, a family-owned Chevrolet 
dealership located in Sylva, North Carolina, in the 
southwestern mountains of North Carolina.
    Our relationship with General Motors began in 1935, when my 
grandfather established Allison's as an Oldsmobile dealership. 
From that time until recently, three generations of the Allison 
family have proudly and loyally partnered with General Motors. 
This partnership has been profitable for both GM and Allison's.
    Small rural dealerships like mine offer automakers like 
General Motors an important competitive advantage. They are 
usually located in areas where there are very few, if any, new 
car dealerships, and most often no import car dealerships.
    Since 1935, Allison's has supported the local economy by 
providing stable employment in one of the more economically 
depressed regions of North Carolina. Even today, when the 
unemployment rates in our market area range from 8.3 percent in 
Jackson County, and 9.7 percent in Swain County, to a high of 
14 percent in Graham County, 16 people and their families 
depend on us to provide them with a good living wage and with 
much needed benefits, such as a health care plan and a simple 
IRA retirement plan.
    Our business generates significant Federal, State, and 
local tax revenues. In 2008, our annual payroll was over 
$670,000, and we paid over $233,000 in payroll taxes. We sold 
150 new Chevrolets and 163 used vehicles. These sales generated 
over $147,000 in North Carolina highway use tax. Our service 
and parts sales generated over $25,000 in sales tax, and the 
property taxes we made were over $9,000. A good portion of all 
these taxes, of course, returned to our community through the 
services provided by the Federal, State, and local governments 
through their services.
    Allison's, Incorporated, like all small rural dealerships, 
is of great economic importance to its local community. We do 
regular business with several local, regional, and national 
banks, with at least four local and State credit unions, with 
10 or more local insurance agencies, three area radio stations, 
three community newspapers, three local auto parts stores. And 
in addition to this, our business and its employees spend money 
with our local grocery stores, building supply stores, 
restaurants, and other local retailers.
    Small rural dealerships and their employees provide 
critical support to the communities they serve by volunteering 
their time and contributing their money. As a part of the 
fabric of our community, Allison's, Incorporated, and its 
employees have for 74 years supported our area schools, 
churches, hospitals, community assistance organizations, youth 
and high school athletic and music programs, as well as victims 
of disaster, disease, and economic loss.
    We are also regular supporters of Southwestern Community 
College and Western Carolina University. I was raised to 
believe that being a good neighbor and serving your community 
is the right thing to do. Doing so also makes good business 
sense, and it creates tremendous goodwill for General Motors in 
our local communities.
    The relationship between automakers and their rural 
dealerships is mutually beneficial. Therefore, I hope that my 
dealership and the thousands of successful rural dealerships 
across America can continue helping their communities grow and 
prosper. On behalf of our dealership, its employees and 
customers, and of all small rural dealerships, I sincerely 
appreciate your time, interest, and concern. Thank you.
    [The statement of Mr. Allison is included in the appendix.]
    Chairman Shuler. Thank you, Mr. Allison.
    At this time, I will recognize the ranking member for the 
purpose of introducing his witness.
    Mr. Luetkemeyer. Thank you, Chairman Shuler.
    Next up we have Mr. Don Thomas. He is the owner and 
president of Thomas Motors, Incorporated, in Moberly, Missouri. 
He has spent his entire life and raised his family in rural 
Missouri, has been a General Motors dealer for over 34 years, 
selling Chevrolets, Buicks, Pontiacs, Cadillacs, and GMC cars 
and trucks.
    Thomas Motors is a family-owned-and-operated business that 
recently renovated its entire operation, from the exterior of 
the building to the service department and the showroom.
    Welcome, Mr. Thomas. I look forward to your testimony.

                   STATEMENT OF DONALD THOMAS

    Mr. Thomas. Chairman Shuler, Ranking Member Luetkemeyer, 
and members of the subcommittee, thanks for having me.
    My name is Don Thomas. I am owner of Thomas Motors in 
Moberly, Missouri. I have spent my entire life in rural 
Missouri, 15 miles from my dealership. I have been a GM 
dealership since 2005. We represent Chevrolet, Buick, Pontiac, 
Cadillac, and GMC. We have no non-GM brands.
    We are a family-operated business. We treat our customers 
and our employees fairly. I think that is reflected in our 
customer satisfaction scores of the dealership and the tenure 
of our employees.
    We comply with all the GM operational policies and 
procedures, and we compete fairly with GM and non-GM dealers. 
Sales have fallen since 1975 due to the overall decline in the 
domestic auto sales. But even in a down economy, our unit sales 
and profits are good. This year, to date we have sold 117 new 
vehicles, including our GM program cars in addition to our used 
cars.
    We have a modern, updated facility. Our location is 
excellent. We are on a new divided highway just a mile from the 
shopping center, just a mile south of the junction. We have got 
a new modern facility, updated facilities, 21,000 square foot. 
We have 12 service bays. Our showroom will accommodate five 
vehicles. We have 4 acres of paved parking.
    In 2000, GM came out with a project they called Image 2000 
Upgrade, Project 2000. We have complied with that. We spent a 
little over $300,000 on our facility. In 2004, we finished the 
renovations; spent another a little over 200,000. We paid for 
that all out of the dealership profits. Our dealership is debt-
free.
    Thomas Motors is the only dealership in a seven-county 
area. Those seven counties consist of approximately 200,000 
people. The local fire departments, schools, farmers, everybody 
around, they depend on us for service. Since July of this year, 
January to July, we have completed 2,600 repair orders for GM 
vehicles. Now I have calculated the distance if we weren't here 
that those customers would have had to have driven to get the 
their respective car worked on, make and model, and they would 
have had to have driven in excess of 55 miles one way. I have 
talked to many of my loyal customers from Moberly and 
surrounding areas, and they said they simply would not drive, 
could not drive the 45 or 50 miles one way at minimum to get 
their car worked on.
    Randolph County is a population of 30,000 people. The 
income is approximately $40,000. It is a rural area, but it is 
a thriving area. Just across the street from us they just 
opened up a new Lowe's home store, brought 120-some new jobs. 
They just opened up a new biodiesel plant in our town, the 
first one in our State, brought over a hundred-plus jobs. The 
hospital, which is right next door to us, just completed a big 
renovation. The airport, they added on; now it is a regional 
airport. Moberly has got a Ford Lincoln Mercury dealership. It 
has a Chrysler Dodge and Jeep dealership. The courthouse is 
here. It has two colleges, training center; prison is here. It 
has got eight major banks. It has got three radio stations. You 
know, it has got Norfolk & Southern has got a terminal here.
    There are seven or eight factories. There are approximately 
7,000 people working in Moberly. The elimination of Thomas 
Motors I think would have a very negative impact on the entire 
area. We have 25 employees. We hire some school help when 
school is out just to give them a job. Our payroll is in excess 
of a million dollars a year.
    In June of this year, I received a letter from GM saying 
that our franchise was going to be wound down by 2010. We can 
stay in business until then selling the cars we have. We can 
buy or dealer trade for 2010 units, but we can't order from the 
factory.
    The thing that really concerns me when I get this letter, 
there is no objective criteria whatsoever how they made that 
decision. When GM filed bankruptcy, they filed in the U.S. 
Bankruptcy Court in New York. They told the Court they were 
going to use a dealership evaluation process. They would 
objectively consider the dealership sales, the customer 
satisfaction, the capitalization, the profitability, the dealer 
return on investment, the customer convenience, the drive-time 
metrics, shifting market demographics. If you look at that, 
look at those facts, we excel on every one of them but one. If 
we had known we had a deficiency in vehicle registrations, we 
could have corrected that.
    If they had only used the objective criteria that they said 
they were going to use, if they would look at us and use those 
criteria, there would be no question we would be there. Our 
profit the last 10 years has been in excess of $275,000 a year 
when you add back our LIFO deduction and the excess allowable 
IRS deductions. Our capitalization is in excess of $1.5 
million. That is a million dollars more than GM guidelines. 
Year-to-date this year, even in a down economy, our profit is 
in excess of $190,000.
    We live in a rural community. I don't know how many ball 
teams, school uniforms, scholarships, all the things we 
contribute to. There is no telling how many dollars. You know, 
the school I graduated from needed a van just here a while 
back. They didn't have any money, so I just gave them one. I am 
sorry. We donate to everything. If we weren't there, I don't 
know what the Moberly community would really do.
    Those people can't drive 50 or 75 miles to get their car 
worked on. You know, we provide the city with lost of their 
vehicles. Just the other day, they came out and asked me to bid 
four vehicles for the city. I couldn't do it. I couldn't bid 
them because we can't get them. They said they don't know what 
they are going to do. If we are gone, they won't have 
competitive bidding. They have expressed great concern what 
they are going to do. They will just have to buy them because 
they can't buy what they can't get serviced, and the Ford 
dealer will get them all.
    You know, GM just came up with a deal here just the other 
day. I can't understand it; they had a deal they are going to 
pay the General Motors dealers, that is the going-forward 
dealers, to upgrade their facility. They are going to work with 
GMAC to get them more floor planning.
    I have been running the business for 35 years. My place is 
paid for. I have done all the upgrades. I don't need GM to help 
me with my floor planning. I got it. I mean, I don't need their 
help.
    You know, I have done everything that GM has asked me to 
do. Our CSI score and our SSI score is above the zone; it is 
above the region. That is a questionnaire or survey that GM 
sends out to all the GM customers and gets feedback. We are 
ahead of them always.
    GMAC tiers their customers; that is the wholesale group 
that does floor planning for dealers. They have three tiers. We 
have got the highest rating GM offers. Since January of this 
year, General Motors has lost six dealerships within a 100-mile 
radius of me. And I can tell you, some of them have cost GMAC a 
lot of money. But still they want to pour more money into some 
of these dealers that can't make it. I just don't understand.
    I have tried to figure the reasoning, what GM could be 
possibly thinking about to get rid of a dealers that are making 
money, that are doing what they are supposed to do. I just 
dealer traded just in the last 3 or 4 weeks with some so-called 
going-forward dealers. Got a letter they are going to stay. 
They are going to stay in business. One of them, GMAC was 
holding their MSOs. I don't know how in the world they are 
going to stay. Another one, GMAC had them cut off; they 
couldn't take any cars back. Another one, GMAC, they were full. 
I could get their car, but they couldn't take something back 
either.
    Now how in the world is General Motors going to take our 
tax money and put it in those dealers and help prop them up 
when they got dealers like me and I don't need any of their 
help? I have done everything they have asked me to do. And I am 
selling their cars and making money. I got over a million 
dollars a year payroll. I just had a conversation just a few 
days ago with a branch manager of GMAC. He told me he had 200 
dealers that he had sent demand letters to. He said a lot of 
those, some of those he said were going-forward dealers. He 
said they had to pay off within 30 to 60 to 90 days. He said 
they can't stay; they are going out of business, but part of 
them got going-forward letters. He said I have got 200 more on 
a watch list that are going to be cut off after that. I just 
don't understand it.
    If I am gone, if I am out of Moberly, there will never be 
another GM dealer there. You know, it cost $2 million to build 
a dealership like mine. And where are they going to get the 
money? If they had the money, they wouldn't put it in there, 
seeing what GM has already done to them. They are losing money. 
And if they had to go borrow the money, they wouldn't do it. 
And GMAC--GM is working a deal with GMAC. Now they are going to 
help those dealers get more money. It is just going to take 
more tax money and throw good money after bad.
    If the dealers can't make money, if they can't stay, they 
can't stay. You can't keep propping them up. But if a dealer 
that is making money and doing business, why do they want to 
kick him out for? You know, we have got people that--I just did 
a deal just Thursday, I knew I was coming down here, to see how 
long it would take for a customer to go for his service. I had 
him start at the Post Office in Moberly and drive to Columbia. 
He left at 7:30. I told him drive down and turn around and 
drive back. See how long it took. It took him 2 hours and 10 
minutes. If you ever went to Columbia, where there are 200,000-
plus students, and tried to get there at work time and see how 
much traffic you got and how long it takes, how is a farmer 
going to go and do that?
    I mean, this is not just getting rid of me or Thomas 
Motors, it is the whole community. You know, I have got 25 
people, that my payroll is over a million dollars a year. I 
don't understand it. We have got a good business. I have 
excelled in everything GM has ever asked me to do. I need no 
help from them financially. My business needs no help 
financially. I got a new, modern place. Moberly is growing. 
They have got so much to offer. But still they want to get rid 
of us. And there will never be another GM dealer in Moberly if 
I am gone. Where are those people going? Ford is going to get 
them all.
    [The statement of Mr. Thomas is included in the appendix.]
    Chairman Shuler. Thank you, sir, for your testimony.
    Mr. Thomas. Thank you for allowing me to speak.
    Chairman Shuler. Yes, sir.
    Our next witness is Ernie Goss. He is the MacAllister Chair 
and professor of economics at Creighton University in Omaha, 
Nebraska. Dr. Goss has published over 80 research studies 
focusing primarily on economic forecasting. Dr. Goss's research 
spans local, regional, and national perspectives. He has done 
an extensive review of the American automotive industry.
    Dr. Goss, thank you for being here today, and I look 
forward to hearing your testimony.

                 STATEMENT OF ERNIE GOSS, PH.D.

    Mr. Goss. Thank you, Chairman Shuler, and distinguished 
members of the subcommittee. I want to thank you for inviting 
me to appear before you today to discuss the economic issues 
related to the closure of GM and Chrysler dealerships across 
the Nation. My testimony will identify some of the community 
benefits and costs associated with the closures.
    Up to this time, the media has focused on the private cost 
and private benefits related to shuttering more than 1,900 
dealerships across the U.S. For example, GM's CEO Fritz 
Henderson recently claimed a savings of $928,000 per closed 
dealership. There was no mention of the cost or benefits to the 
public.
    To date, taxpayers have invested more than $64 billion in 
Chrysler and GM. And that doesn't include GMAC and the 
suppliers as well. Currently, less than 1 percent of GM and 
Chrysler stock shares are held by investors other than the U.S. 
Federal Government. Thus both GM and Chrysler are essentially 
100 percent, plus or minus 1 or 2 percent, taxpayer-owned.
    As public corporations, public costs and public benefits of 
corporate decisions must be an input into the decision-making, 
including the decision to shutter dealerships. These closures 
will result in a loss of thousands of jobs, both direct and 
indirect, and produce severe economic hardships in many 
communities across the country in the form of plummeting tax 
collections, tumbling charitable contributions, and sinking 
local real estate values.
    Losses will be particularly acute and difficult for small 
towns and rural communities of the Nation, where automobile 
dealerships are an integral part of the area economy. At this 
time, neither GM nor Chrysler is offering assistance to the 
affected communities or to closed dealerships, at least to my 
knowledge. This departs from GM's 2004 dispensation of 
Oldsmobile, costing GM approximately $1 billion, with a 
significant portion of that $1 billion going back in the form 
of vehicle repurchases.
    With public ownership comes public responsibility. As such, 
the analysis of the closures must include the public costs and 
benefits of the dealership termination. Across the country, 
these dealerships employ hundreds of people in good-paying 
jobs. They support the infrastructure of many communities by 
sponsoring sports teams, raising funds for needy projects, and 
contributing to local charities.
    In many cases, the targeted dealerships have been a huge 
part of the community for generations. What I am contending is 
that both private and public costs be part of the decision-
making process. Thus far, to my knowledge, there has been no 
cost-benefit analysis conducted as part of the dealer 
termination process. That is, while the private benefits may or 
may not exceed the private costs, there has been no explicit 
examination of the public costs, especially for rural 
communities where these dealerships are very important.
    I will provide a brief examination of one announced 
closure, one termination of Meyer-Earp Auto in Auburn, 
Nebraska, a community of 3,400 residents in southeast Nebraska. 
Each month since 2005 I have conducted a survey of bank CEOs in 
rural parts of 10 States with an average community size of 
1,300. States included are Colorado, Iowa, Kansas, Illinois, 
Minnesota, Missouri, Nebraska, North Dakota, South Dakota, and 
Wyoming.
    In May of 2009, I asked the bank CEOs whether dealership 
closures would have a significant impact on their area 
communities. In those communities slated for dealership 
closure, the impacts were judged as negative and very 
significant. In total, and this is total, one-third of the bank 
CEOs expect the closures to have a negative impact on their 
local communities.
    In an effort to gauge the impact of just this one closure, 
I simulated the closure of Meyer-Earp using input-output 
analysis. According to my estimates, Auburn will lose, now this 
is a very small community, $680,000 per year in yearly sales, 
more than $260,000 in wages and salaries, and in excess of 
$54,000 each year for self-employment income. Additionally, the 
area will lose 6.8 jobs and tax collections of $77,000. And I 
am just including only new car operations there.
    In summary, the lack of analysis and transparency, the lack 
of analysis and transparency in the decision-making process is 
troubling and could produce costs to the public greatly 
exceeding the benefits. As stated by one Nebraska bank CEO in 
our May 2009 Rural Mainstreet survey, this is his quote, "I 
have yet to see the real cost to Chrysler and GM in keeping 
rural dealerships open."
    Mr. Chairman and members of the committee, thank you for 
having me here today, and I look forward to any questions that 
you may have. Thank you.
    [The statement of Mr. Goss is included in the appendix.]
    Chairman Shuler. Mr. Goss, thank you so much for your 
testimony.
    Really good testimony by a great panel here.
    And Mr. Thomas, our heart goes out for you. I know how much 
you have done for your community, and I can relate to growing 
up in a small town like that, as Mr. Allison has always 
performed just incredibly well when it comes to the youth 
programs and the arts and sciences and the athletics of our 
communities. When people need help, it is supplying those vans 
and sometimes just, you know, letting them use it for a day or 
so. I know how sometimes getting people to where they need to 
go means a tremendous amount. And when you have that type of 
payroll and you have that type of impact to a community, 
especially a growing community, wow.
    We actually had a Lowe's going to go up in my hometown 
where I live now, but they said, no, it is just not going to--
and we feel like we are a growing community. They said, well, 
just not now, so even though the property was already graded 
and ready to go. So that just goes to show to me that you are 
in a growing community.
    I guess, Dr. Goss, one of the first questions I have is, 
when you look at the overall impact in the communities, 
especially the rural areas, what is the impact to these 
communities when one dealership goes? And then to the people? I 
mean the things that we don't hear about. You know, it is the 
buying the goods and services. What overall impact? How big a 
shadow does it cast when you lose a company such as this?
    Mr. Goss. Well, Chairman Shuler, obviously, as Mr. Allison 
and Mr. Thomas have testified to, very significant. So the 
decisions of travel time, for example, that is not in the 
matrix of decision-making. And I think the biggest problem, one 
of the largest problems from my standpoint is lack of 
transparency. The banks that we survey are complaining loudly 
about, where is the analysis? Where did GM--it seemed to be 
arbitrary and capricious. But to your question, you have got 
retail sales, and the retail sales spills over into 
wholesalers, which spills over into restaurants, and so on and 
so forth. You have got very significant impacts.
    And again, it is particularly large relative to the economy 
in these small communities where there may be no other 
dealership. In, for example, Auburn, Nebraska, there is no 
other dealership there. This is their dealership. And by losing 
their license, by losing the dealership franchise, it is going 
to be quite significant, and it will ripple across the 
community.
    But also you have got in this part--that part of the 
country, I should say, the part I live in, you have got farmers 
who use the dealerships as well for buying parts for repairs 
that doesn't really show up, in my analysis, and I would argue 
doesn't show up in GM or Chrysler's analysis. But I have to 
say, I have yet to see Chrysler and GM's analysis. This, again, 
we have gone from--we went from $11 a barrel oil in 1998 to 
$147 a barrel last year. In other words, we have got this very 
large volatility in lots of factors, yet we are making 
decisions, or GM and Chrysler is making decisions that will 
last forever for these communities.
    These are communities in the middle section of the country, 
perhaps not on the East Coast and North Carolina, but in 
Missouri and Nebraska, where population losses are quite 
significant and something we need to pay attention to, and 
depopulation. So this is another nail in the coffin, in some 
cases, for some of these communities. And again, without 
transparency, without analysis, we are talking about two 
corporations that got $64 billion, yet we, at least I haven't 
and the bank CEOs that I survey have not seen, what is the 
analysis? Where is the cost? You are taking taxpayer money, yet 
you have yet to show to the public where you are giving back. 
In other words, this looks like a taking.
    Now I am talking about the bank CEOs that I survey. I am 
coming at it as an economist, pretty sterile, as you can 
probably imagine but nonetheless trying to get at it. And even 
I have yet to see the analysis. I mean, maybe GM and Chrysler 
can show that, but it is yet to be--those out there, those of 
us in the hinterland have yet to see it.
    Chairman Shuler. Well, and unfortunately, in small 
communities I think these two gentlemen have stated obviously 
their financial strength and not having debt. But if there are 
some of these communities, I guess the TARP funding is there 
for some of the people from the banks that are going to be 
having to lose obviously the revenue and when they are not 
having the businesses, not having--no one--the dealerships not 
able to pay the loan back. So, obviously, we have certainly 
created a mess, no doubt about it.
    Mr. Goss. And speaking of the TARP revenues, sorry for 
interrupting there--
    Chairman Shuler. That is all right.
    Mr. Goss. --but a lot of the feeling out there, at least I 
do three surveys of purchasing managers and bank CEOs, a lot of 
the feeling is that we have done business, yet we have gotten 
no TARP funds, and now we are being, in the case of auto 
dealerships, being punished even though we are a viable, going 
concern. Show us, where is the analysis? Show us why this is 
happening, because again, as Mr. Allison and Mr. Thomas have 
demonstrated, or at least discussed, playing by the rules, not 
getting TARP funds, yet being shuttered anyway. That message is 
getting--is loud and clear in our surveys each month. So I am 
very concerned about, without transparency, without any 
analysis, at least from what I have seen.
    Chairman Shuler. Mr. Allison, can you talk briefly about 
the process that you are having to go through now and some of 
the obstacles with your employees and the benefits that they 
have and health insurance? And can you just briefly touch on 
that? I know you told me the story about how you kind of read 
the FedEx with your employees and kind of the openness that you 
had with all your folks.
    Mr. Allison. Yes, sir.
    Thank you for the question. The first thing is I guess we 
pride ourselves on offering not just a good wage but a 
complete, or as complete as possible, benefit package. We try 
to stay at least with the competition both in the industry and, 
you know, the other similar industries in our community and 
most of the time try to have a better package so that we can 
attract the best people.
    With that being said, Mr. Thomas's experience I am sure has 
been multiplied, you know, countless times with a lot of us 
dealers. And we are no exception. The way that we were notified 
that we wouldn't go forward with GM like the other dealerships 
is that they literally delivered the letter via FedEx. And in 
Sylva, North Carolina, that FedEx comes right to the door of 
Allison Chevrolet, and right up to the cashier's window. So 
everyone that is in the dealership, employees and customers, 
immediately knew about it. When it came in, I was actually with 
my son at the doctor's office in Asheville, which is about 50 
miles away. And the office manager called me and said, we got a 
letter, got a FedEx. And I said, well, I am just about 
finished. If you would have people just patiently wait, and I 
will be there in about an hour.
    So when I got there, I said, give me just a few minutes and 
let me read through this letter, and then we will talk about 
it. So we kind of chose to do something differently than maybe 
GM had suggested, which was to hold that information kind of 
close to your chest. I felt like the most honest and fair thing 
I could do with the employees and the community was just tell 
the truth. And so, with that, we have kind of embarked on the 
process, which has been somewhat lengthy and definitely 
harrowing, of trying to appeal. And these appeals are made 
really just through e-mail and to we don't know who.
    Chairman Shuler. What is the actual cost? I mean, how much 
do you give back to the auto manufacturer, the automaker versus 
how much you actually cost them? I am only assuming there has 
to be some costs relative to what every dealership actually 
costs the maker, automaker.
    Mr. Allison. That is the thing that I fail to see. On a 
monthly basis, we pay for all kinds of things that relate us to 
GM. We actually pay for delivery of our parts to repair cars 
from General Motors. We pay for our service training, for our 
sales training. We even pay to go to a dealer meeting. If we 
don't send someone that we have signed up for service training, 
then we are charged a fee, a no-show fee. We pay for every 
poster, every piece of literature, sales literature. We pay for 
the books that we train ourselves out of and use as a 
comparative analysis for, you know, to talk to the customers 
with. We pay for using the ability to communicate via the 
computer with General Motors, to record our sales and to order 
our parts and that kind of thing. So I don't know, it probably 
runs on an average month a little over $3,000.
    Chairman Shuler. That you pay them?
    Mr. Allison. Yes, sir.
    Chairman Shuler. And how much do you think you are costing 
them a month?
    Mr. Allison. I fail to see that I am really costing them 
anything. Our relationship, as far as their calling on us, is 
through the telephone.
    Chairman Shuler. So when they deliver a vehicle, you have 
basically paid for it then?
    Mr. Allison. Yes, sir.
    Chairman Shuler. So whether you sell it or it sits on the 
lot for 10 years, it really is no impact to them.
    Mr. Allison. That is exactly right, other than the fact 
that, to be fair, that if we didn't sell it and had an 
accumulation of those vehicles, ultimately we wouldn't order 
any more.
    Chairman Shuler. Right. Got it. Have you ever failed to 
have someone--vehicles on your lot for an extended time far 
exceeding what you expected to order? I mean, obviously during 
this last couple years, it has been very difficult.
    Mr. Allison. Yes, sir. And occasionally you will get a 
vehicle for whatever reason that just seems to stay. But for 
the most part, they move rather quickly.
    Chairman Shuler. At this time, I will yield to the ranking 
member, Mr. Luetkemeyer, for his questions.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Follow-up with Mr. Allison. Do you sell any other brands of 
vehicles?
    Mr. Allison. No, sir. Just GM presently.
    Mr. Luetkemeyer. Just GM products. What is the size of your 
market area that you have? You said six counties, I think you 
said? Is that right?
    Mr. Allison. It is actually three counties. It is the 
majority of Jackson County, all of Swain County, and the 
greater portion of Graham County.
    Mr. Luetkemeyer. Do you have a population figure on what 
all--how much--how many people it would be?
    Mr. Allison. Jackson County is about 39,000 people. About 
60,000 or 64,000.
    Mr. Luetkemeyer. What is the average length of employment 
for someone who has been with you?
    Mr. Allison. I have employees that have been well over 20 
years. I think the youngest as far as service is probably 2 
years, year-and-a-half.
    Mr. Luetkemeyer. Okay. So, in other words, you have been 
there a long time?
    Mr. Allison. Yes, sir.
    Mr. Luetkemeyer. People who work with you have been there a 
long time.
    Mr. Allison. Yes, sir.
    Mr. Luetkemeyer. They are well trained. You pay for the 
training.
    Mr. Allison. Yes, sir.
    Mr. Luetkemeyer. At this point, you don't really cost the 
company any money per se.
    Mr. Allison. No, sir.
    Mr. Luetkemeyer. Let me follow up with a question, Mr. 
Chairman, here. At what point do you actually purchase the 
vehicle? When it comes off--if you have ordered one, at the 
point that it comes off the assembly line, do you own it or 
when it comes on your lot?
    Mr. Allison. It is actually shortly thereafter being 
assembled. So shortly after it has come off the assembly line, 
then we have purchased the vehicle.
    Mr. Luetkemeyer. Okay. So the company charges your account, 
I assume?
    Mr. Allison. Well, generally if you pay for it in cash, 
they charge your account. If you are paying for it, like I do, 
through General Motors Acceptance Corporation, or GMAC's floor 
plan, then they charge your floor plan.
    Mr. Luetkemeyer. Okay. Okay. Very good.
    Mr. Allison. Yes, sir.
    Mr. Luetkemeyer. Mr. Thomas, I know that you have been also 
been profitable. What is the average length of your employee 
employment?
    Mr. Thomas. I have three people that have over 30 years. I 
have seven people that have got over 13 years. I got three with 
over 10.
    Mr. Luetkemeyer. What do you think the average wage is of 
your employee? You said you had a million dollar payroll?
    Mr. Thomas. Oh, $40,000, they will average $40,000. My 
salesmen in the high 50s. My service manager and parts manager 
in the high 40s. Our techs all in the 40s. Our lowest paid 
would be naturally the boys in the cleanup department, and they 
will make in the 20s.
    Mr. Luetkemeyer. So I think you said a while ago the 
average citizen's income in your area was $40,000?
    Mr. Thomas. $40,000.
    Mr. Luetkemeyer. So most of your employees are average to 
above average?
    Mr. Thomas. All of ours with the exception of the three 
folks in our used car cleanup department. But all of our people 
will--yeah, I have got, oh, five or six that make well over 50.
    Mr. Luetkemeyer. Okay. What kind of impact is there going 
to be on those lives?
    Mr. Thomas. I don't know. They don't have a place to go. 
They won't have a place to go. They will have to go to--I don't 
know where they would go. They would have to go to Columbia 
would be what I would assume would be the closest place, and 
that is, you know, an hour and something. I don't know where 
they would go.
    Mr. Luetkemeyer. You also don't sell any other brands, is 
that right?
    Mr. Thomas. GM is all I have.
    Mr. Luetkemeyer. Okay. Very good.
    Dr. Goss, where do you think this needs to go? I mean, you 
have studied this. You have seen that basically there is no 
cost to the car companies for the dealerships, yet they are 
canceling dealerships.
    You know, I have got a little bit of a financial 
background. And to me, when you have a manufacturer, you need 
to have a distribution system. I mean, it is a pretty important 
part of being able to sell your product to have a distribution 
system.
    You know, we were talking to Mr. Thomas this morning before 
the hearing, and he was telling us, you know, and in his 
testimony as well, how difficult it is going to be for people 
to buy his particular brand. There is going to be a void there. 
Other dealers may come in, but there is some, you know, brand 
loyalty there. Where do you see this going as far as, are these 
companies just going to fall back and retrench, or are they 
making some really bad business judgments here by cutting their 
distribution system off? What do you think?
    Mr. Goss. Yes, sir, I don't think it be would the first 
time GM and Chrysler have made some bad decisions, if I may say 
that. And of course, I believe at least--now, again, the 
problem I have, and I think most economists and most 
representatives have, is, where is the analysis? Where is the 
transparency? And the motivation, at least looking at it from 
GM's standpoint and Chrysler's standpoint, is economies of 
scale and the ability to reduce competition between dealers, 
and thus what we call in economics get the consumer surplus. In 
other words, the consumer surplus that goes now to the consumer 
would now go to GM and Chrysler, which of course we in 
economics don't think highly of that. We like competitive 
markets. So my concern is that this reduces competition. And 
certainly I think that is the intent, one of the goals is to 
reduce competition, what they see as economies of scale.
    I don't know if there is economies of scale in terms of 
dealerships. They have yet to show the analysis, the 
transparency. And from the non-economist, even for the 
economists and the dealers out there that are being closed, but 
especially the individual has yet to see, well, why? What is 
driving this? Where is the transparency? Why is my dealership 
going and another is staying?
    The travel times, as Mr. Thomas has indicated, are quite 
significant. The impact that is not even a part of it is the 
farmers who in fact do get repairs at many of these 
dealerships, at least in the mid-section of the country. So I 
think, again, that that is the motivation. And the impact, 
unfortunately, for the consumer is going to be certainly 
negative. There is no way you can reduce the number of 
dealerships and have the consumer better off.
    Mr. Luetkemeyer. One other follow-up question before I 
finish up here. You talked about the lack of competition. I 
realize there are other automobile options out there. However, 
in a lot of rural areas, they are limited. So therefore, does 
this, because of the lack of competition, do you see the 
opportunity for increased prices on other makes and models than 
in a certain area? Is that a possibility, or is that--because 
of the other competition that is available that would not 
occur?
    Mr. Goss. Yes, sir, not just a possibility; it is going to 
happen. That, again, I think is a lot of the motivation for 
what is going on here. And that is certainly a concern as an 
economist. And back to my point about the volatility that we 
have seen, and we are making decisions for generations. In 
other words, these dealerships have been in business for 
generations, yet GM and Chrysler are making decisions that will 
be with these communities forever. And the idea that somehow 
another dealer will come in, many of these communities will not 
see that. For example, in Auburn, Nebraska, the community I 
discussed, it is very unlikely, or I would say somewhere 
between a zero and 10 percent likelihood that there will be 
another dealership that will replace the one that is closed.
    Mr. Luetkemeyer. If Mr. Chairman would indulge me one more 
minute, just one follow-up question with regards to the appeals 
process that you gentlemen have to go through or are trying to 
attempt to work your way through, is there a process set up 
that you can present your case? Is there a board of review? Is 
there a group of people that you can talk to? Is there an 
individual that will make it? Or is it just a fiat from above 
that has been dictated to you and this is what it is going to 
be?
    Mr. Thomas. That is it.
    Mr. Luetkemeyer. That is it.
    Mr. Allison. Yes, sir, thus far, that has been the outcome.
    Mr. Luetkemeyer. So regardless that you are profitable, 
made sales quotas, all the other criteria that they look at and 
judge the quality and capability of your agency to survive and 
deliver quality service, those things are not able to be 
discussed with anybody at a higher level and appeal their 
decision?
    Mr. Thomas. No.
    Mr. Allison. In one of my e-mail communications that I sent 
to General Motors, I literally asked them, is there someone I 
can speak to, a person? And would you be willing to come down 
and talk to me? And really those questions weren't answered 
directly.
    Mr. Luetkemeyer. Well, Mr. Chairman, from the standpoint 
that we are looking at the impact on rural areas, and these 
gentlemen have got good numbers from the standpoint of customer 
service, it looks like we have certainly got some work to do.
    Thank you, gentlemen, for your testimony.
    Thank you, Mr. Chairman.
    Chairman Shuler. Thank you, sir.
    At this time, I would like to recognize Mr. Bright from the 
great State of Alabama.
    Mr. Bright. Thank you, Mr. Chairman, for this opportunity. 
Thanks for this hearing today and the testimony.
    Guys, thank you all greatly for the testimony that you have 
given us today. It is kind of awakening to hear your testimony. 
And I don't think there is a person in this room today that can 
testify or even say that it is a mystery to us as to why 
Chrysler and GM is in the shape today that they are in. Making 
decisions like they have made as it relates to each one of your 
dealerships is unconscionable.
    And Dr. Goss, thank you for your testimony, too. And I 
would like for you, if you would, to tell me if in the 
communities that you have seen and investigated out there you 
have seen any Federal stimulus moneys or anything invested by 
GM or Chrysler in these communities to offset the value and the 
benefits and the assets that these two dealerships will take 
with them when they quit selling the GM product out there or 
the Chrysler product out there? Is there anything that you have 
seen during your investigation to substitute for those 
benefits?
    Mr. Goss. Each month we do a survey of three--we do three 
different monthly surveys of about probably 15 States, and we 
ask that very question. And the answer is about 10 to 15 
percent respond yes, so that is meaning 85 percent say no. So 
that is one of the real issues that they see, the bank CEOs, 
purchasing managers. And these are all businesses that we are 
surveying, not consumers.
    Mr. Bright. Dr. Goss, thank you very much.
    Mr. Thomas, Mr. Allison, thank you for your time today. 
Thank you for your very valuable testimony. It is awakening. 
And people need to pay closer attention to what you have had to 
say here today.
    And I really tend to look closely at what, and Mr. 
Chairman, what we need to do is investigate closely the 
analysis used by GM and Chrysler in making these decisions. And 
if it is determined that they are creating areas of competition 
out there, or eliminating and shaping competitive districts out 
there by way of taking away the livelihood of dealerships like 
Mr. Thomas and Mr. Allison, I think that breaches on criminal 
activity as far as I am concerned. And that is all I have to 
say.
    And Mr. Chairman, thank you very much again for this 
hearing. And I will yield back the remainder of my time.
    Chairman Shuler. Thank you, sir.
    At this time, I would like to recognize Mr. Thompson from 
Pennsylvania.
    Mr. Thompson. Thank you, Chairman, and thank you ranking 
member, for putting this hearing of this subcommittee together.
    And you know, Mr. Thomas, Mr. Allison, having grown up in a 
small family-owned business, it wasn't a car dealership, but 
knowing what a central role I am sure you have in your 
communities, my heart goes out to you with this being imposed 
upon you pretty arbitrarily by the looks of things.
    You know, I scratch my head, and I wonder about an economic 
model that abandons successful, proven businesses with a track 
record. I just don't understand. And we have had this impact in 
the Fifth District of Pennsylvania as well, so I appreciate the 
opportunity to begin to try to understand.
    I will start with Dr. Goss. Is there any transparency at 
all of what criterion has been used? And you know, given the 
fact in your statement we are--you know, GM and Chrysler are 
100 percent, plus or minus a couple percentage points, 
government-owned, is there any transparency in terms of what 
criterion was used, and who is making these decisions?
    Mr. Goss. I have yet to see it. Now, that doesn't mean it 
doesn't exist. But I have yet to see that analysis. And the 
problem, as I see it, is the reduction in competition that is 
going to result, that will result in higher prices to the 
consumer, and the idea that there are economies of scale. But 
with the speed that this came down, I am really concerned that 
there was not any analysis, that it was done by some sort of 
math. I have no idea if that is what it was. And saying there 
is no--let's eliminate this dealership, that will provide more 
business for this dealership that is 35 miles over, and that is 
probably the way it was done without any serious look, 
examination of what it does to the communities that are 
affected, what it does to the profitability of the dealerships, 
but more I think--and again, I am not--I am a little suspect of 
any analysis that may have been done because of the speed that 
we would have had to have seen. This came in May. I think 
Chrysler's decision was in May. So this was very quick. [11:08 
a.m.]
    Mr. Thompson. You made a statement that really there was no 
cost-benefit analysis. And the question in terms of even the 
capturing market share, Thomas Motors sounds like you are going 
to drive at least 2 hours for somebody who wants to buy a 
vehicle that is readily available in that radius that you 
service today.
    I just throw this out there. I represent a very rural 
district, as a lot of my colleagues do. Is there any bias 
towards closing rural dealerships? Any evidence of that?
    Mr. Goss. I don't know that for certain, but I would 
suspect that there is that bias. And, of course, what it 
results in is a cost that is borne by the consumer by traveling 
greater distances which will be, I think--according to GM and 
Chrysler, they would get to put that into their price, the new 
dealership, the ones that the individual, the businesses will 
have to make use of. And so I think that is the intent.
    But I would question even that. I am just not certain that 
there has been any really analysis, even from the private 
benefit and private costs, let alone putting in the public 
benefit and the public cost.
    So, again, the swiftness with which this took place makes 
many of us question the decisions.
    Mr. Thompson. Mr. Allison, you had talked about, within the 
appeal process was rather anonymous. You send an e-mail you 
don't know where it went to, and that is an anonymous way to 
communicate. We all probably get those kinds of e-mails and 
people don't give their names when they give us feedback. But 
it is said that now that you are dealing with a company that 
is, say, 98 percent government owned and you get that--here is 
my question.
    Was that--and you all, you both have had decades, 
generations, of experience, of dealing with communications with 
GM in particular.
    Was that type--is that the standard that you experienced 
pre-government involvement with GM?
    Mr. Allison. No, sir. And I was not quite technically 
correct.
    There was a telephone contact set up that literally 
explained to you step by step, but there really wasn't any full 
explanation. They were very limited in what they could tell 
you.
    Mr. Thompson. Okay.
    With the chairman's indulgence, I wanted to take a little 
different direction, Dr. Goss, for those who have not been 
voted off the island--maybe they have been watching too many 
reality shows--those who are going to be participating. I have 
talked with some of those dealers, as well, and two specific 
things I wanted to get your reaction to if you are familiar 
with them.
    One is participation agreement--actually, that rolls into 
one question--I wanted to see what you are hearing about that. 
I am hearing--you know, dealers--that the new GM, to 
participate, you are going to have to build new facilities, you 
may have to invest capital in the showroom. If you happen to 
have a foreign line of cars that you have always carried also, 
that that is being shoved out and you are being dictated that 
you no longer continue, at least within your showroom, that 
line of business.
    And that kind of rolls into pushing because of government 
involvement, now that the State laws are circumvented with the 
State franchise requirement; and I wanted to get your reaction 
to those.
    Mr. Goss. That is certainly the case, Mr. Thompson. And I 
am not a lawyer, but nonetheless, it looks like, at least at 
certain levels, there may be violations of the antitrust laws 
whereby GM or Chrysler is eliminating competition. And that 
does work against the consumer, and at least work for those two 
companies.
    But you are talking about eliminating the profitable 
dealerships. I know I am repeating myself, but in an effort to 
capture that--the consumer surplus, as we would call it; in 
other words, consumers having now to travel greater distances--
the goal would be for GM and Chrysler to, in fact, capture 
that. I argue against that.
    But, secondly, I am not certain they calculate those things 
very accurately, given the speed with which it was done.
    So there are many problems there, but chief among them is 
the fact is these are public corporations now, $64 billion, yet 
decisions have been made that seem to be contrary to the public 
interest, at least on the surface.
    Mr. Thompson. Thank you.
    Thank you, Chairman.
    Chairman Shuler. Thank you.
    At this time would like to recognize the gentlewoman from 
Pennsylvania, Mrs. Dahlkemper.
    Mrs. Dahlkemper. Thank you, Chairman Shuler, and thank you 
for convening this critical hearing on the role of automobile 
dealerships in rural communities and, really, throughout this 
country.
    And I want to certainly thank the panel of witnesses for 
your testimony today. It has been very valuable for us to hear 
your personal stories, as well as you, Dr. Goss, to look at 
things on a larger scale.
    Since I had my first phone call from one of my dealers, I 
have been trying to understand this issue, and trying to 
understand exactly how this occurred. And as we seem come today 
with no conclusion as to exactly what kind of business model 
was looked at to make these determinations. And personally, my 
brother-in-law was an executive at Chrysler for many years, and 
he and I argued many times about the business model that they 
were using. I argued for about a dozen years, before he finally 
left the company, about the business model they were using and 
where they were going.
    I have a couple of questions for you, and I just want to 
try to understand. Would you, Mr. Thomas and Mr. Allison--first 
of all, when are you looking at time frame for closure of your 
dealerships?
    Mr. Thomas. 2010. GM says 2010 is when they expect our 
wind-down. We can't order any new 2010 model vehicles. We can 
stay in business, and they say we can buy them from another 
dealer.
    Mrs. Dahlkemper. You have 2009s, but you cannot get any 
2010s, which are probably coming out or have come out already?
    Mr. Thomas. That is right. The only way we can get 2010 
vehicles is to get them through another dealer.
    Mrs. Dahlkemper. So they are not selling any new product?
    Mr. Thomas. None.
    Mrs. Dahlkemper. So you will wind down next year?
    Mr. Thomas. 2010. October 2010.
    Mrs. Dahlkemper. But you may not be able to keep your doors 
open that long because you won't be able to get new product, 
basically?
    Mr. Thomas. Unless we buy them from other dealers.
    Mrs. Dahlkemper. Mr. Allison?
    Mr. Allison. Yes, ma'am, that would be the same for us.
    Mrs. Dahlkemper. Could you and would you consider selling a 
different brand?
    Mr. Thomas. I have been offered an import, but I don't want 
to do that.
    Mrs. Dahlkemper. Why?
    Mr. Thomas. Well, I have been with GM 35 years. Our 
customers, our community, depend on GM vehicles. I don't want 
to start switching them and try to go to--I just don't want to 
do it.
    I don't want to retrain our employees. I don't want to 
change our customers, GM loyal people. I think they are going 
to change, but--
    Mrs. Dahlkemper. You mentioned the Ford dealership, and you 
think they will go to Ford because there is--obviously, 
convenience being probably the biggest factor there.
    Mr. Thomas. Exactly. Exactly.
    Mrs. Dahlkemper. Do you think there will be another 
individual in your town who would say, Well, Mr. Thomas is not 
here any longer and there is only Ford, so I am going to come 
in and I am going to sell--you know, whoever, Honda, Toyota, 
whoever?
    Mr. Thomas. I don't think that there will be another 
dealer--never is a long time, but I think in this environment, 
in this economy, I think it is going to be a long time before 
this economy straightens out. And the cost now to start a new 
dealership would be prohibitive.
    Mrs. Dahlkemper. Mr. Allison, can you comment on that?
    Mr. Allison. Yes, ma'am. I, like Mr. Thomas, if we don't go 
forward with General Motors, there would only be Ford in our 
town. And I agree, the costs would be astronomical to establish 
a brand-new dealership from scratch.
    Mrs. Dahlkemper. Can you use your same facility if you 
wanted to? You own that building, right?
    Mr. Allison. Yes, ma'am, we do.
    Mrs. Dahlkemper. So you certainly could, but you would have 
to retool.
    Mr. Allison. That would be an option. But like Mr. Thomas, 
probably the most loyal General Motors dealers are the small 
dealers. We literally eat, breathe and live GM.
    Mrs. Dahlkemper. I guess my question is, then, as you 
were--as we were looking at the automobile industry in this 
country failing really in their business model, did you have 
any concerns about that, long term? Were you concerned about 
where the business model was going as we see our foreign 
competitors were take a bigger and bigger share of the market?
    Mr. Thomas. Yes, I do.
    Mrs. Dahlkemper. I guess I am just trying to understand the 
loyalty. If you can explain that to me a little bit, why you 
would not go with some other dealer.
    Mr. Allison. I certainly would not close out that 
alternative at all. But it is just that my first wish would be 
to continue forward with General Motors, as would the people in 
our community and, certainly, our employees.
    Mrs. Dahlkemper. Dr. Goss, do you have any comment on this, 
because you seem to know a lot of what is going on in many 
different areas.
    Mr. Goss. Well, at this juncture, as everyone in the room 
knows, this is a tough time for the economy.
    These decisions are being made at a critical time for many 
of these communities, and many of the communities that we 
survey--I survey 15 States, a lot of rural areas--they are 
under tremendous stress, and this is just another nail in some 
cases in the coffin. And I am not certain you can move that 
quickly and not suffer some significant long-term generational 
impacts.
    Mrs. Dahlkemper. There is a piece of legislation--there are 
271 sponsors on it--that I have signed on to called the 
Automobile Dealer Rights Restoration Act of 2009. Are you 
familiar with that piece of legislation?
    Mr. Thomas. Yes, I am.
    Mrs. Dahlkemper. Obviously, there are many in this Congress 
that are concerned. I have many dealerships in my district that 
have closed, and I am continuing to try to understand. Staying 
on it--my time is expired, but what would the costs be if you 
wanted to start up a new dealership with a different brand? 
Just--can you give me kind of a ballpark?
    Mr. Thomas. I talked to one that--out-of-pocket, about 
$700,000 for the one I talked to for their initial package. 
That does not include inventory. That includes training, 
signage, some of the equipment they require you to buy. The 
initial package, about $700,000.
    Your facility has to meet their specifications, so you have 
to change, redesign and make your facility meet theirs. Like 
GM, GM wants theirs to all look the same. You would have to do 
the same. I would have to do, not the same thing I did to my 
building in 2000. But I would have to redo it, reshape it, 
recolor it. And my building is all stucco. I would have to redo 
all the signage, all the fascia.
    Mrs. Dahlkemper. So basically the investment that you put 
there, there is no value to that?
    Mr. Thomas. No.
    Mrs. Dahlkemper. And you would have to outlay a very, very 
large sum of money?
    Mr. Thomas. Well, based on the one that I have looked at is 
$700,000.
    Mrs. Dahlkemper. Have you looked at anything Mr. Allison?
    Mr. Allison. Yes, ma'am, and my experience is similar to 
Mr. Thomas'. Obviously, the outlay would be--we already have 
facilities, so it would be to retrofit or change the facilities 
to meet their requirements.
    Mrs. Dahlkemper. Thank you very much for your testimony.
    Thank you, Mr. Chairman. I yield back.
    Chairman Shuler. Thank you.
    I think one thing that really struck me in the testimony 
was loyalty. You guys have one store, one location. Most of the 
big dealers have, what, multiple? I mean, some of them are very 
close friends of mine. They have multiple dealerships, multiple 
brands, foreign and domestic.
    So you decided to stay with that American-made vehicle. 
Hopefully, these dealerships that are in front of us--and maybe 
there are some automakers' representatives here today. That 
goes a long way with me, people that are going to be loyal to a 
particular brand, to service them with the integrity and 
character that I know that Mr. Allison has had. I am sure Mr. 
Thomas has, as well.
    That goes a long way with me, and hopefully that can--that 
will go a long way with the automakers. So we have a lot of 
work to do, I think.
    As you can tell, there is minority on one side and majority 
on the other, and you probably couldn't tell with the question 
which side anyone was on from the standpoint--this is not 
political, this is about creating jobs.
    I mean, the bailout happened. I guess it is all the more 
reason that I think my vote was right when I didn't vote for 
the bailout, because it is about families, creating jobs. And 
maybe I don't fully understand it, and hopefully I will get 
educated, as well, from the understanding--from the automakers' 
standpoint. Maybe that is where I need to educate myself for 
the reasons of why they are being shut down. It is hard when we 
have great testimony from you to understand that analogy.
    So when it comes down to making sure that we have 
representatives in our communities, three generations and a 
fourth that is here today, I hope. I know your son is here 
today. Hopefully. That would be a fourth generation to be able 
to sell that GM product.
    Mr. Allison. Yes, sir.
    Chairman Shuler. We need to make sure.
    And one of the things we need to do is make sure--we have 
to ensure--I don't want us to lose GM, Chrysler, Ford; that 
would be devastating to our country. We need to continue to 
produce things in this country. We far import way too much. And 
so I respect your loyalty more than anything and what you have 
given back to our communities.
    And so, does any other member have any other follow-up 
questions or comments?
    But I do want to thank you all for your participation. And 
I hope I get educated so--on some of the things, and maybe I 
can relay some of the messages to you. That will be part of--we 
will all try to gather as much information to educate 
ourselves. There are always two sides to the story, and I want 
to be able to see both sides and understand the issues that we 
have in front of us.
    But loyalty goes a long way for me. So, hopefully, you guys 
will get an appeal process that will be beneficial to you, long 
term for the families and the people of the community.
    I ask unanimous consent that the members will have 5 days 
to submit statements and supporting materials for the record.
    Without objection, so ordered. This hearing is now 
adjourned.
    [Whereupon, at 11:28 a.m., the subcommittee was adjourned.]

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