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


 
         GM AND CHRYSLER DEALERSHIP CLOSURES AND RESTRUCTURING

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 12, 2009

                               __________

                           Serial No. 111-49


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

   HENRY A. WAXMAN, California,      JOE BARTON, Texas
             Chairman                  Ranking Member
JOHN D. DINGELL, Michigan            RALPH M. HALL, Texas
  Chairman Emeritus                  FRED UPTON, Michigan
EDWARD J. MARKEY, Massachusetts      CLIFF STEARNS, Florida
RICK BOUCHER, Virginia               NATHAN DEAL, Georgia
FRANK PALLONE, Jr., New Jersey       ED WHITFIELD, Kentucky
BART GORDON, Tennessee               JOHN SHIMKUS, Illinois
BOBBY L. RUSH, Illinois              JOHN B. SHADEGG, Arizona
ANNA G. ESHOO, California            ROY BLUNT, Missouri
BART STUPAK, Michigan                STEVE BUYER, Indiana
ELIOT L. ENGEL, New York             GEORGE RADANOVICH, California
GENE GREEN, Texas                    JOSEPH R. PITTS, Pennsylvania
DIANA DeGETTE, Colorado              MARY BONO MACK, California
  Vice Chairman                      GREG WALDEN, Oregon
LOIS CAPPS, California               LEE TERRY, Nebraska
MICHAEL F. DOYLE, Pennsylvania       MIKE ROGERS, Michigan
JANE HARMAN, California              SUE WILKINS MYRICK, North Carolina
TOM ALLEN, Maine                     JOHN SULLIVAN, Oklahoma
JANICE D. SCHAKOWSKY, Illinois       TIM MURPHY, Pennsylvania
CHARLES A. GONZALEZ, Texas           MICHAEL C. BURGESS, Texas
JAY INSLEE, Washington               MARSHA BLACKBURN, Tennessee
TAMMY BALDWIN, Wisconsin             PHIL GINGREY, Georgia
MIKE ROSS, Arkansas                  STEVE SCALISE, Louisiana            
ANTHONY D. WEINER, New York          
JIM MATHESON, Utah                   
G.K. BUTTERFIELD, North Carolina     
CHARLIE MELANCON, Louisiana          
JOHN BARROW, Georgia                 
BARON P. HILL, Indiana               
DORIS O. MATSUI, California          
DONNA M. CHRISTENSEN, Virgin         
    Islands                          
KATHY CASTOR, Florida                
JOHN P. SARBANES, Maryland           
CHRISTOPHER S. MURPHY, Connecticut   
ZACHARY T. SPACE, Ohio               
JERRY McNERNEY, California           
BETTY SUTTON, Ohio                   
BRUCE L. BRALEY, Iowa                
PETER WELCH, Vermont                 
                                     

                                  (ii)
              Subcommittee on Oversight and Investigations

                    BART STUPAK, Michigan, Chairman
BRUCE L. BRALEY, Iowa                GREG WALDEN, Oregon
  Vice Chairman                        Ranking Member
EDWARD J. MARKEY, Massachusetts      ED WHITFIELD, Kentucky
DIANA DeGETTE, Colorado              MIKE FERGUSON, New Jersey
MICHAEL F. DOYLE, Pennsylvania       TIM MURPHY, Pennsylvania
JANICE D. SCHAKOWSKY, Illinois       MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas
DONNA M. CHRISTENSEN, Virgin 
    Islands
PETER WELCH, Vermont
GENE GREEN, Texas
BETTY SUTTON, Ohio
JOHN D. DINGELL, Michigan (ex 
    officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Bart Stupak, a Representative in Congress from the State of 
  Michigan, opening statement....................................     1
    Prepared statement...........................................     4
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     6
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................     8
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     9
Hon. Bruce L. Braley, a Representative in Congress from the State 
  of Iowa, opening statement.....................................    11
Hon. Diana Degette, a Representative in Congress from the State 
  of Colorado, opening statement.................................    12
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................    13
Hon. Michael F. Doyle, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................    14
Hon. Betty Sutton, a Representative in Congress from the State of 
  Ohio, opening statement........................................    16
Hon. Peter Welch, a Representative in Congress from the State of 
  Vermont, opening statement.....................................    17
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................    18
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, prepared statement.............................   211

                               Witnesses

James Press, President, Chrysler, LLC............................    21
    Prepared statement...........................................    24
    Answers to submitted questions...............................   214
Fritz Henderson, Chief Executive Officer, General Motors 
  Corporation....................................................    36
    Prepared statement...........................................    38
John McEleney, Chairman, National Automobile Dealers Association.    44
    Prepared statement...........................................    46
    Answers to submitted questions...............................   219
Robert Thomas, Bob Thomas Chevrolet-Cadillac, Bend, Oregon.......    70
    Prepared statement...........................................    72
Frank A. Blankenbeckler, III, Carlisle Chevrolet Company, Inc., 
  Waxahachie, Texas..............................................    82
    Prepared statement...........................................    84
Duane Paddock, Paddock Chevrolet, Kenmore, New York..............    87
    Prepared statement...........................................    89
Daniel J. Kiekenapp, Tacoma Dodge, Inc., Tacoma, Washington......    95
    Prepared statement...........................................    97
Alan Spitzer, Spitzer Automotive Group, Elyria, Ohio.............   101
    Prepared statement...........................................   104
    Answers to submitted questions...............................   224
James Golick, Golick Motor Company, Pitcairn, Pennsylvania.......   158
    Prepared statement...........................................   161


         GM AND CHRYSLER DEALERSHIP CLOSURES AND RESTRUCTURING

                              ----------                              


                        THURSDAY, JUNE 12, 2009

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2322, Rayburn House Office Building, Hon. Bart Stupak 
[chairman of the subcommittee] presiding.
    Present: Representatives Stupak, Braley, DeGette, Doyle, 
Schakowsky, Ross, Welch, Green, Sutton, Dingell, Walden, 
Radanovich, Burgess, and Barton (ex officio).
    Staff Present: Theodore Chuang, Chief Oversight Counsel; 
Scott Schloegel, Investigator, Oversight and Investigations; 
Jennifer Owens, Special Assistant; Jennifer Berenholz, Deputy 
Clerk; Lindsay Vidal, Special Assistant; and Kenneth Marty, 
Detailee, HHS-OIG.

  OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Stupak. This committee will come to order.
    As you can see, there is a lot of interest in this hearing 
today. I expect Members who are not on the committee will be 
coming in and out. And we are going to try to hold a tight rein 
on time and statements and questions in this hearing today 
because, as I said, there is a lot of interest in this 
oversight hearing.
    This hearing today is entitled, ``GM and Chrysler 
Dealership Closures and Restructuring.'' The chairman, ranking 
member, and the chair emeritus will be recognized for 5-minute 
opening statements. Other members of the subcommittee will be 
recognized for 3-minute opening statements. I will begin.
    For much of the past 100 years, General Motors has been the 
largest automobile company in the world. The Detroit three--GM, 
Ford, and Chrysler--have fueled the engine of Michigan's 
economy, as well as the economy of the United States, for 
generations. Through their vehicle manufacturing, countless 
suppliers, and a vast dealer network, the automotive industry 
has created and supported millions of jobs.
    With the recent global financial collapse, much of the 
domestic auto industry has been brought to its knees. In 2008, 
General Motors and Chrysler lost $30.9 billion and $17 billion 
respectively, and, in order to survive, they both filed for 
bankruptcy. In the bankruptcy process, General Motors has 
announced plans to close roughly 1,200 dealerships and Chrysler 
announced plans to close 789 dealerships nationwide.
    The Federal Government has loaned billions of dollars to GM 
and Chrysler in an effort to help stabilize them. Billions of 
more have been committed to assist them while emerging from 
bankruptcy.
    Today's hearing will focus on several issues associated 
with General Motors and Chrysler's decisions to close more than 
2,000 dealerships across the country. Among the questions to be 
answered are: Why do the manufacturers believe they need to 
close so many dealerships? What criteria were used to determine 
which dealerships to close? How do GM and Chrysler save money 
by closing these dealerships, which are independently owned?
    Why were Chrysler dealers given a mere 26 days' notice that 
their franchise would be pulled? Why were dealerships that had 
been meeting or exceeding their expected sales requirements 
still ordered to close? Why did Chrysler effectively order 
dealers to buy more cars in January but now refuses to buy 
those cars back from dealers who are being forced to close?
    Who made the decisions of which dealerships to close? What 
are GM and Chrysler doing to assist dealerships with selling 
their parts, cars, and specialty tools before they are put out 
of business? How will the dealership closures and restructuring 
make GM and Chrysler more competitive and profitable?
    Being from Michigan, I absolutely want General Motors and 
Chrysler to survive. I think we all do. But we have an old 
saying in Michigan that, ``when the auto industry sneezes, 
Michigan catches a cold.''
    Now, due to the global financial collapse, the entire 
Nation is feeling the impact of a crippled domestic auto 
industry. Other than high gas prices or a serious food 
outbreak, I can't think of few subjects that have brought the 
ire of so many Members as these auto dealership closures.
    I understand the fact that General Motors and Chrysler need 
to improve their bottom line. I also understand that the import 
brands have far fewer dealerships, with higher sales volume per 
dealership. What many of my colleagues and I do not fully 
understand is why there is a need to close so many dealerships 
and why dealerships that appear to be performing well are now 
being told to close their doors.
    We will hear from Chrysler today that the average Chrysler 
dealer sold 405 vehicles and lost $3,431 in 2008.
    We will also hear from Dan Kiekenapp of Tacoma Dodge in 
Tacoma, Washington. Tacoma Dodge had net sales exceeding $1.7 
million last year and was one of the top 100 dealers for sales 
of parts in 2008 and was the number-one ranked Dodge dealer in 
western Washington during the month of April this year but 
still received a closure notice from Chrysler. I look forward 
to asking Mr. Press how he reconciles this decision to close 
Tacoma Dodge.
    As I mentioned earlier, I want to see GM and Chrysler 
return to strong and vibrant companies. I am, however, 
concerned that the accelerated timeframe for dealership 
closures and the way in which dealers have been treated may 
actually damage the brands more than help them.
    I am also deeply concerned that the closures will hurt 
rural communities disproportionately. In my vast rural northern 
Michigan district, if a dealer closes down, it can mean a 2-
hour drive for us to reach the next closest dealer. This will 
cause added expense and hardship for my constituents who need 
to have warranty work or special service done at a certified 
dealership.
    In addition, when it comes time to purchase a new vehicle, 
many of my constituents will abandon GM or Chrysler and go to 
whichever brand is locally sold by people they trust within our 
communities rather than traveling a long distance to huge, 
impersonal, big-box dealerships, where they don't know the 
sales or the service staff.
    In closing, I want to thank General Motors and Chrysler 
executives for coming here today. This committee understands 
how busy you are and greatly appreciates you taking time to 
work with our staff and attend today's hearing.
    In addition, I want to thank the dealers who have come from 
every region of the country to testify today. I know that, in 
many instances, many of you are facing the loss of your 
livelihood, and to take the time and expense to travel to 
Washington to be part of this hearing is appreciated by myself, 
the staff, and everyone here.
    Next, I would turn to the ranking member, Mr. Walden, for 
an opening statement.
    [The prepared statement of Mr. Stupak follows:]

    [GRAPHIC] [TIFF OMITTED] TR73744A.001
    
    [GRAPHIC] [TIFF OMITTED] TR73744A.002
    
  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Thank you very much, Chairman. I want to thank 
you and Chairman Waxman for concurring with me in the need for 
our subcommittee to conduct an oversight hearing and 
investigation to get answers regarding the termination of auto 
dealer franchises all across our country.
    I want to recognize the dealers, including a constituent of 
Oregon's Second District, which I represent, Bob Thomas of 
Thomas Chevrolet-Cadillac in Bend, Oregon. Bob and the rest of 
the dealers have taken time and expense to travel to Washington 
to provide us with their perspective on this issue.
    I also welcome Mr. Press of Chrysler and Mr. Henderson from 
General Motors. We are honored to have you here today, as well. 
We have some hard questions for you, and I appreciate your 
willingness to come here today and explain your situation, your 
perspective, with clear and straight answers.
    Since American taxpayers now own 60 percent of General 
Motors, we have a right to know just how the decisions 
affecting our constituents are made. We also have a duty to 
make this process more accountable and transparent for all 
concerned.
    So let's start with a look at customer service. And, Mr. 
Henderson, you have spent a pretty large some of money on 
newspaper ads recently--I am sure you are familiar with your 
own ads--proclaiming your concern for greater transparency and 
customer service.
    Yet, you have dictated the closure of GM dealerships all 
across Oregon and the country. And I will cite one in specific 
out in Burns, Oregon. Now, if you are a GM customer and the 
dealership in Burns, Oregon, Ruel Teague Motor Company, is 
closed, your nearest GM dealer is Payette, Idaho, 136 miles 
away. Now, that is the equivalent of driving from Philadelphia 
to Washington, D.C., to get service for your General Motors 
vehicle.
    Since we don't have the 3-plus hours it would take to drive 
there even in one of the new Camaros, we are using the fastest 
plane our Air Force has, the F-15 Eagle, and Google Earth to 
demonstrate the route, while I talk, to that new brand of 
customer service. This will be in 3D for your enjoyment. It 
will take a while.
    Just about a month ago, General Motors and Chrysler sent 
what were effectively termination notices to about 2,000 auto 
dealerships nationwide. We are told their notices serve to 
accelerate restructuring plans that are a must-do step for 
these troubled automakers. This is so Chrysler and GM can 
emerge successfully from bankruptcy with stable financial 
support.
    Many dealers and the communities they serve, frankly, feel 
blind-sided. The mid-May notices came in the form of complex, 
take-it-or-leave-it wind-down contracts, with just weeks to 
make important and expensive life-changing decisions about 
their own livelihoods, few explanations, no real opportunity to 
negotiate corrections or even sell to another more favored 
dealer, and no clear rationale for why they were chosen for 
closure.
    Thousands more received continuation contracts, equally 
complex, which forced them into 18 months of limbo, giving up 
protections against abusive practices they would normally have 
been able to be protected against under State franchise law. 
But they had no choice; it was take it or leave it.
    Oh, and the agreements, by the way, required the dealers to 
say they weren't signing under duress. Really?
    So let's talk about transparency. We have yet to get a 
clear answer on how the so-called rationalization of dealer 
networks will save the automakers or taxpayers money. 
Rationalization seems like the 21st-century version of ``we had 
to burn the village to save it.'' I want to hear this morning 
from GM about how cutting dealers really will save $2 billion.
    The National Auto Dealers Association argues the dealers 
cost the automakers little on the margin and provide necessary 
and convenient outlets for consumer sales and even the local 
connection the automakers so sorely need. Dealers, even small 
dealers, make sales and make the automakers money.
    By what we can gather today, many dealers affected are not 
bad-apple operations. Maybe they weren't meeting your mandated 
sales quotas, but it is hard to see them as cost drains on 
automaker operations. They often are the mainstays of the local 
communities they serve. They contribute substantial taxes, 
support local sports and community events, and they have good 
reputations. They are established, they are hardworking, and 
they are struggling in a horrible economic environment.
    And soon, their employees will be out of work. By one 
estimate, the termination notices may cost upwards of 190,000 
well-paying jobs.
    The validity of the cost issue is of particular interest 
since the press reported yesterday that the House Majority 
Leader said he had spoken to the White House's Auto Task Force 
and it acknowledged that the automakers will see no immediate 
cost savings from closing the dealerships.
    So, Mr. Henderson, you say GM is going to be more 
accountable. Let's talk about accountability. Who made the 
closure decisions? How were they made? When were they made? Who 
made the recent decisions to reverse closures of 41 
dealerships?
    Mr. Henderson, you say GM will be more focused on 
customers. Let's talk about customers. How it ispro-customer to 
reduce competition by eliminating dealerships which compete 
with each other for price, quality, and service?
    It has been said that our domestic automakers own rural 
America. You know how it is to serve rural America. To 
eliminate the lone dealership in a place like Burns, Oregon--we 
are still not to Idaho, by the way. We did just pass Stinking 
Water Pass.
    In this ``Alice in Wonderland'' world of rationalization, 
where up is down and less is more, how are customers served by 
less competition and higher prices while, on the taxpayers' 
dime, better served?
    In Bend, Oregon, for example, General Motors terminated the 
only GM dealership with substantial service repair facilities, 
servicing tens of thousands of people in the 16,000-square-mile 
radius. Do the planners behind this restructuring understand 
the rural America from whence I come? Do they really understand 
rural customers, the rural market, the loyalty?
    Let's talk plainly. If you just want to turn GM and 
Chrysler into a network of urban dealerships, then tell me. But 
don't ask me and my constituents to provide the bailout.
    Or is your plan to use the crisis of bankruptcy as a cheap 
and quick way to get rid of dealers you don't want, only to 
eventually sell or put in place, since you don't sell them, a 
new franchise in a market you have left?
    If you plan to reduce dealers, can you give me a guarantee 
that you won't simply get rid of a Bob Thomas only to turn 
around and offer a GM franchise in Bend to someone else in the 
coming months?
    So the goal for me in today's hearing, Mr. Chairman, is to 
get straight talk and facts. We need to know the real reasons 
for the closure decisions and whether they are really 
justified. We need to know how this is really a good deal for 
the taxpayer and the consumer. We need to know whether auto 
dealers targeted for closure in their local communities are 
getting that fair shake.
    We all recognize the very tough and painful times for the 
auto industry, especially its workers and suppliers. The 
reverberations of Detroit's troubles have already reached into 
every one of our districts.
    I look forward to the testimony, and I look forward to 
working with you, Chairman, on further investigating this 
matter, and hope future hearings will focus on the role of the 
President's Auto Task Force, as well.
    Mr. Stupak. Thank you, Mr. Walden.
    Mr. Dingell for an opening statement, please.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Dingell. Mr. Chairman, thank you.
    And I commend you for holding this hearing. This is a time 
of unprecedented hardship for the domestic auto industry, but I 
feel it is prudent that we objectively examine all aspects of 
General Motors' and Chrysler's restructuring plans, including 
how they affect dealers.
    Although, restructuring of these companies is inevitable 
and necessary, it means that we are going to have to achieve 
their long-term viability, but at the same time we are going to 
have to look to see how it is being done and how it is going to 
impact on other parts of our economy. Measures must being taken 
to mitigate excessive hardship on working Americans, especially 
in a time of grave national recession.
    In view of this, I will be asking frank questions of our 
witnesses today. In particular, I seek to determine for the 
record how GM and Chrysler arrived at the decisions they did 
related to dealer closures. Public furor over these closures 
demands truthful answers from these companies regarding these 
matters. And it is my hope that they will provide much needed 
insight into the decision-making process whose results will 
affect the livelihood of many thousands of Americans in all 
parts of the country.
    Moreover, I understand that GM and Chrysler have approached 
dealer closures in a markedly dissimilar fashion. And this, 
again, should be subject to candid discussion.
    Finally, I wish to ascertain what steps, if any at all, GM 
and Chrysler have taken or will take to mitigate the impact of 
these closures on dealership owners and their employees and 
also on the communities. Their fair treatment is paramount to 
the success of any rationalization of the companies' respective 
value streams.
    I conclude by encouraging our witnesses to engage in open 
dialogue with members of the committee about the matters that I 
have just mentioned. The honest disclosure at today's hearings 
is necessary to restoring the semblance of public trust in the 
plans for restructure.
    So, thank you, Mr. Chairman, thank you to our panel, and I 
yield back the balance of my time.
    Mr. Stupak. Thank you, Mr. Dingell.
    Mr. Barton for an opening statement, please.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman.
    I want to thank you and Chairman Waxman for holding this 
hearing. I want to thank you personally for agreeing to let Mr. 
Frank Blankenbeckler, who is dealer in my district, testify.
    And, also, thank you for being willing to put a segment in 
the record of Congressman LaTourette, who is not a member of 
the committee but has asked to sit on the dais, And you 
indicated that you would accept unanimous consent to allow his 
statement into the record.
    So I appreciate all those courtesies.
    Mr. Chairman, I have a prepared statement, and I will 
submit it for the record, but I want to just kind of speak 
extemporaneously.
    I see both sides of this issue. I have a GM assembly plant 
in my district in Arlington, Texas, that has been in business 
since 1954. There are 2,400 people that work there; management, 
about 250; and UAW workers, around 2,200. They have been making 
cars and trucks in Arlington, Texas, for over 50 years. And I 
have dealers all over my district, about a dozen of which have 
received closure or termination or failure-to-renew notices.
    I met yesterday with the president of GM North America and 
also the president of Chrysler. And I see the management side 
of this, the manufacturing and the business side of it. It is a 
different era, and we have to make tough decisions to keep U.S. 
nameplate manufacturing cars and trucks in America. I 
understand that.
    But there is another side. There is a human side, a dealer 
side. And we are going to hear from Mr. Frank Blankenbeckler of 
Waxahachie, Texas. He is a fourth-generation GM dealer and, I 
think, a second-generation Jeep dealer.
    His grandfather started selling Chevrolets in Waxahachie, 
Texas, in 1926. He made it through the Great Depression. His 
family made it through World War II, when you had quotas. They 
made it through the boom years of the 1950s. They made it 
through the gas rationing of the 1970s.
    Bomb or bust, there has been a Blankenbeckler selling cars 
in Waxahachie, Texas, for over 80 years. And, in May, he got 
letters, I think, back to back, Jeep terminating his contract 
immediately, or within 3 weeks, and GM saying they weren't 
going to renew it.
    Now, when the GM and the Chrysler people, the managers were 
in my office yesterday, they were very sincere. They had their 
flip charts and they had their notebooks and they could look up 
and show me if I wanted to see the performance or 
nonperformance of all the dealers in my district.
    But that doesn't touch on the human story. Again, Carlisle 
Chevrolet in Waxahachie, Texas, has 40 employees. They are not 
at the bottom of these flow charts. Now, they are not at the 
top either, but they are not at the bottom.
    Mr. Blankenbeckler told me that last year he paid $1.3 
million in taxes in Ellis County, employed 40 people, sells an 
average of 50 cars and trucks a month. In good years, he can 
double that. So he could do better; he says that.
    But his business that has been in his family for four 
generations, if we can't get Chrysler and GM to take a second 
look, is gone. And his son, Austin, who is sitting right out 
here, his opportunity at the American way of life, as we know 
it, is gone.
    Now, what I am asking, Mr. Chairman, is I am not asking the 
management of Chrysler and GM to do things that don't make 
sound business, economic sense. But what I am asking is the 
show a little mercy, if that is the right term. Every decision 
does not have to be the toughest decision you can make. You 
know, you can err on the side of leniency. And if somebody is 
selling 50.5 cars a month and the goal is for them to sell 51, 
you don't have to cut them off at the knees.
    So, Mr. Chairman, I want to hear from both sides. But I 
really, hopefully by the end of the day, want to hear from the 
presidents of the manufacturing companies that they will go 
back and take a second look at some of these decisions and, if 
there is an opportunity that makes reasonable business sense, 
that they will give the Frank Blankenbecklers and the people 
that he represents today an opportunity to continue in 
business.
    Because if they go out of business, it is gone. And, you 
know, ultimately, if nobody is selling cars and trucks, it 
doesn't matter what your manufacturing capability is, nobody is 
going to buy them.
    So, with that, Mr. Chairman, I yield back.
    As you know, there is another hearing going on downstairs. 
Mr. Markey's subcommittee is having a transmission hearing. I 
have to run and make a statement down there, too, but I will be 
back up here for the question period.
    And thank you again for your many courtesies.
    Mr. Stupak. Thank you, Mr. Barton.
    And members will be moving in and out.
    And while I am at it here, I should mention that we have 
other Members who are not part of the Energy and Commerce 
Committee, who are not part of this subcommittee, but are here. 
Dan Maffei over here, from New York, I know he has some 
legislation pending on dealerships. That is why he is here. He 
will probably be in and out. Patrick Murphy is over here from 
Pennsylvania. He is not on the committee, but very interested. 
You mentioned Mr. LaTourette, Mr. Barton. I saw him earlier. I 
am sure he will be popping in and out. I know he has 
legislation.
    And, in all honesty, I think we have 435 Members of 
Congress, I think 430 contacted me and all wanted their dealer 
to testify today. That wasn't possible. But we are going to try 
to get you in this hearing. We welcome Members who would like 
to sit and watch these proceedings.
    But we are going to have to keep a tight timeframe on all 
Members who have an opportunity to ask questions. For the 
Members who are here who are not part of the committee, if you 
an have opening statement you would like to submit for the 
record, without objection, that would be accepted.
    And let me do one more thing. As we were preparing for this 
hearing, there were some concerns that Members may get into the 
confidentiality agreement or, I should say, the dealer 
agreement that GM has. And since Chrysler has already emerged 
out of bankruptcy, GM is still there, there is a 
confidentiality agreement with the dealers.
    And I talked with Mr. Walden here. It is our understanding 
that GM, Mr. Henderson, has no objection whatsoever to a dealer 
testifying before the subcommittee about its business, 
circumstances, or other matters involving the dealership. 
Further, it is our understanding that General Motors has no 
objection to the dealer testifying about the terms of the wind-
down agreement itself.
    And GM is proud of these agreements and the assistance and 
support they will provide to dealers compared to what they 
would have received under an ordinary bankruptcy proceeding.
    GM does have concerns, though, on the confidentiality part 
of these wind-down agreements in two areas: the amount of the 
wind-down payments set forth in paragraph 3(a) and any 
discussions with GM representatives about the wind-down amount 
found in that agreement.
    So I am cautioning Members that if you want to talk about 
the wind-down agreement, you have a right to, but we are not 
going to expect the witnesses, for proprietary and business 
reasons, to get into financial amounts and things like this 
with the agreement.
    Other than that, we are in agreement with that, Mr. 
Henderson?
    Mr. Henderson. That is correct.
    Mr. Stupak. And, Mr. Press, as I stated, you have no 
problems as long as we don't get into money exchanges with 
dealerships?
    Mr. Press. That is correct.
    Mr. Stupak. OK.
    OK, with that, let's continue to opening statements, 3-
minute opening statements. I am going to hold you guys to it 
pretty firm.
    Next on the list would be Mr. Braley.

OPENING STATEMENT OF HON. BRUCE L. BRALEY, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF IOWA

    Mr. Braley. Well, thank you, Mr. Chairman and Ranking 
Member Walden.
    I think you can tell from the interest in this hearing that 
it is something that affects all 435 congressional districts. 
And that is why I am going to submit my written statement and 
focus instead on the human cost of what we are here to talk 
about, as Mr. Barton was just talking about.
    I am very fortunate one of my constituents, who is the 
chairman of the National Auto Dealers Association, John 
McEleney from Clinton, Iowa, is here, because he works and 
sells cars in the heartland. And I think a lot of what we are 
talking about here today is an explanation of how the decisions 
that are being made are affecting dealers all over the country.
    My wife's grandfather, Burt Kalb, was the first Ford dealer 
in Dubuque, Iowa. And my uncle, Lyle Nusserhoe, came home from 
World War II and, at the request of one of his Navy buddies, 
moved to my hometown of Brooklyn, Iowa, and started work being 
as a parts manager in a Chevy dealership that he later 
purchased and worked in for 60 years.
    And I want to talk a little bit about where we have been to 
get to where we are right now. Because I remember those fall 
rollouts of new models and the excitement that they brought to 
my hometown. And I remember those ads that my uncle ran in my 
hometown newspaper showing all of the employees of his 
dealership and how many years they had worked there, to show 
the impact that his business was having object our community. 
Because those same employees were the ones volunteering in the 
Boy Scouts and the Little League and in school activities, and 
they were making our community a better place to live.
    And when you talk about these dealer closures, you are not 
just talking about the application of economic principles and 
mathematical formulations; you are talking about the impact on 
people's lives in every congressional district in this country.
    And that is why the issues we are going to be discussing 
today matter. That is why they matter to me, they matter to my 
colleagues on both sides of the aisle, and they matter to the 
constituents we represent. Because when these dealerships 
close, they don't just take away the opportunity to buy and get 
service for your cars and trucks, they take away the lifeblood 
of these communities. And it is much broader than simply the 
loss of sales and service. It is part of the fabric of this 
country.
    And, Mr. Henderson and Mr. Press, your corporations were 
built on the backs of people like the dealers you see in this 
room, who went out there, invested in their communities, and 
made you profitable during your boon times. And now I think 
each of you and your companies owe them and the taxpayers of 
this country a detailed explanation for your business 
decisions, because we have to live with the aftermath.
    And I welcome everyone's testimony on the committee and 
look forward to further opportunities to question the 
witnesses.
    Ms. DeGette for an opening statement, please.

 OPENING STATEMENT OF HON. DIANA DeGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you very much, Mr. Chairman.
    Following up on what Mr. Braley and Mr. Barton said, these 
bankruptcies and these closing of the local car dealerships are 
not just affecting the dealers themselves, but millions of 
people who live in all of our districts, who are going to be 
inconvenienced, at the very least.
    And the thing I am struggling with is, if bankruptcy 
reorganization is designed to help GM and Chrysler become 
leaner and meaner, become more efficient, then how does it help 
to close profitable dealerships? Because, in my home State of 
Colorado, for example, 14 profitable Chrysler dealerships are 
going to be closed, and a number of other GM dealerships and 
some others.
    So I guess the reason why we are concerned is because, on 
the one hand, we see these profitable dealerships in our 
districts; on the other hand, we see the need for consolidation 
and for saving money. But we don't quite understand how closing 
those profitable dealerships works, especially given the human 
implications. And that is why we are concerned, and that is why 
we are having this hearing. I think that our constituents 
deserve an explanation.
    I want to mention one other thing really briefly that is 
not the subject of this hearing, Mr. Chairman, but might be 
worth some further investigation. As part of the 
administration's bankruptcy plans, they are putting all of the 
product liability court claims into the bankruptcy court, which 
is going to wipe out the claims of victims who have had 
defective products.
    And talk about leaner and meaner. This is something that is 
going to hurt millions of Americans who have been injured by 
these cars and who don't have some kind of a fund set up 
through the bankruptcy.
    Now, in the past, when the government has helped companies 
like GM and Chrysler through their bankruptcy plans, like with 
the asbestos, we set up a fund to compensate victims. But here 
there is no fund whatsoever that has been set up to compensate 
victims. And I think this committee needs to look at this, and 
I also think the administration needs to revisit their policy 
of not setting up this kind of fund.
    Thank you very much, Mr. Chairman, and I yield back.
    Mr. Stupak. Thank you, Ms. DeGette.
    Mr. Green from Texas, opening statement, please. Three 
minutes.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman. Like my colleagues, I 
would like my full statement placed into the record.
    Mr. Stupak. Without objection.
    Mr. Green. And I am glad you are holding this hearing 
because it is probably one of the biggest issues that I have 
heard from in our district in a long time.
    And I guess the problem I have is the lack of transparency 
on how the decisions were made. And I think, hopefully, the 
witnesses today will make some discussion or provide that to 
us.
    I didn't vote for the TARP bill last fall, either time. One 
of the reasons is that I thought it was more of a bailout of 
Wall Street, not Main Street. And now we are seeing what is 
happening on Main Street, because our dealerships are on Main 
Street in our area.
    And I will give you a great example. The Houston market, 
where I am from, already lost three large-volume Chevrolet 
dealerships, and yet Knapp Chevrolet, one of the oldest 
dealerships in Houston, actually close to the central business 
district, which opened on December 6, 1941, the day before 
Pearl Harbor Day, received their letter, and their appeal was 
denied.
    It is the only Chevy dealership in the downtown area. In 
fact, it is the only one inside what we call the 610 Loop, and 
there are only two inside Beltway 8, which is miles and miles 
away. So now people in my district who live in the inner city 
will have to definitely go to the suburbs to have their car 
serviced or to buy a vehicle.
    More than 4,000 people live in the core of downtown 
Houston, and 74,000 people live within a two-mile radius. And a 
rapidly growing population of about 4,000 live within that 
five-mile radius. And over 140,000 people work in downtown 
Houston, with 17,000 students at downtown colleges. It seems to 
me that market is pretty sizable.
    And Knapp Chevrolet was actually one of the highest 
profitability, in the top 20 percent, for many years. I guess 
that is what is frustrating, how this decision was made. People 
working in downtown Houston could drop their cars off and their 
trucks and get serviced, and then they would shuttle them back 
and forth.
    And, again, on Wednesday of this week, Knapp Chevrolet 
received the denial of their appeal, for no reasons at all, 
just, ``Your appeal was denied.'' We are losing a lot of high-
paying jobs. We have a lot of high-paying jobs in downtown 
Houston. I don't know why it is.
    And that comes from someone who buys Chevrolet and GM 
products. I drive Chevy trucks. I am kind of Texas that way, 
and I will continue to buy them. I am glad they are made in Mr. 
Barton's district.
    And I know the witnesses may not be able to answer 
individually why that happened, but when you lose--in the last 
year, we have lost three huge Chevy dealerships in the Houston 
market--why we would go in and pick one of the oldest and the 
only one within the inner city to close, it just kind of 
boggles my mind.
    So, with that, Mr. Chairman, I will yield back my time, and 
appreciate you calling this hearing.
    And, like other Members, I am getting ready to go down to 
the transmission hearing down in the room below us, but I will 
be back.
    Thank you.
    Mr. Stupak. Thanks, Mr. Green.
    Mr. Doyle for opening statement, please. Three minutes.

OPENING STATEMENT OF HON. MICHAEL F. DOYLE, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Doyle. Thanks, Mr. Chairman. Thanks for holding this 
hearing. And I want to thank you personally for allowing Jim 
Golick from Golick Jeep-Chrysler, a constituent of mine and 
someone in my district, for allowing him to testify today.
    I didn't have a prepared statement, Mr. Chairman. I just 
want to make a few comments.
    My friend Joe Barton says maybe we are in a new era, and I 
fear that maybe he is right.
    You know, growing up in Pittsburgh, I have had the 
privilege of representing Pittsburgh, Pennsylvania, and the 
Turtle Creek and Mon Valley in Congress. We are blue-collar 
kids. Our dads and grandfathers made the steel that go into a 
lot of your cars. We look after one another in Pittsburgh. We 
buy from our own. We were taught never to buy foreign cars, 
where I grew up. The thought never would occur to us. We buy 
American, and we buy from the people we know.
    I remember Mr. Gatti had the local pharmacy on the corner. 
He is long gone. There are no more family pharmacies left. It 
is all the big-box stories. Mr. Tamarello had the hardware 
store where I grew up. No more family hardware stores. Now it 
is Home Depot, Wal-Mart.
    But we always had our car dealerships. Jim's family has 
been in business at the same location since 1935, an 
institution in Mon Valley, in the Turtle Creek Valley.
    I wouldn't buy a Jeep from anyone else besides the Golicks. 
I don't care that their showroom isn't fancy. I don't care that 
it is not the newest, most modern-looking place, or they don't 
have a giant floor. What they have is service. They know you 
when you come in. They don't take that little piece of paper 
back to the manager and say, ``I will try to get you a better 
deal,'' and go through that whole dog-and-pony show they pull 
at these big places. They give you a good price right upfront. 
And they take care of you. That is why I buy Jeeps there. I 
wouldn't think of going anywhere else.
    I raised my family on Dodge Caravans. My wife Susan and I, 
we have four children. That car took care of our family for 
years. I owned a bunch of them. Got it from another local 
family dealership.
    We are losing that. We are losing that in this country, 
this idea that you can buy from people you know and trust, that 
you know are going to take care of you. You don't have to guess 
if they are going to take care of you; you know they are are 
going to take care of you. That is why I buy the cars I buy at 
the places I buy.
    Now, Jim tells me he has met his quota-plus every year 
since he has been in business. These guys started out in 1935, 
a Hudson dealer. Then it was Jeep, Jeep-Eagle. Then Jeep-
Chrysler, when Chrysler come through.
    You can't take people like this of the--you just can't 
replace people like this. I can't imagine myself--I have never 
bought a foreign car, but I can't imagine myself ever buying a 
Jeep again if the Golicks aren't in business in Pittsburgh.
    I don't understand how they are costing you money. I think 
they are a revenue stream for you guys. And if for some reason 
this has to happen, I want to know why you are not taking care 
of people who spent 70 years and generations selling your cars 
and, as you tell them that they don't have a business anymore, 
that you are not doing something to help these guys out in the 
transition.
    So I have lots of questions, Mr. Chairman. I am just glad 
that you are holding this hearing today, so that I can ask 
them.
    Mr. Stupak. Thank you, Mr. Doyle.
    Ms. Sutton from Ohio, please.

  OPENING STATEMENT OF HON. BETTY SUTTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Ms. Sutton. Thank you, Chairman Stupak, for holding the 
hearing and inviting one of my constituent dealers, Alan 
Spitzer, here to testify today. Mr. Spitzer is losing seven of 
his Chrysler dealerships. And, additionally, there are two 
other Chrysler dealerships in my district that are being 
eliminated.
    Across Ohio, 47 Chrysler dealerships are being eliminated, 
and the Ohio Auto Dealers Association estimates that 130 GM 
dealerships may be cut. The impacts of these decisions on 
families and local economies will be substantial. And we heard 
from the distinguished gentleman from Pennsylvania, and I 
associate myself with his remarks.
    On average, 43 people work at a dealership in Ohio, where 
the average pay is $44,000 a year. With these closings, 
millions of dollars of income will disappear with the jobs. And 
those jobs are lost on top of the 2,000 auto manufacturing jobs 
that will be eliminated by the closing of the Chrysler 
Twinsburg plant, the GM Mansfield Metal Center plant, and GM's 
powertrain unit in Parma.
    These dealers and their employees, they are not merely 
statistics. They have families, they have mortgages, and, dare 
I say, they have car payments. And in the time that I have been 
in Congress, we have been fighting. We have been fighting hard 
to try and keep those jobs in America. Because if people do not 
have good jobs in the United States, they are not going to have 
any money to buy things and they can't be consumers.
    And over the last few months, along with my colleagues, 
many of them in this room, we have been working on the Consumer 
Assistance to Recycle and Save Act, known as the CARS Act, 
which passed earlier this week. And through the CARS Act, it is 
going to help manufacturers and it is going to help auto-
related jobs throughout the country, while improving the 
environment and helping consumers.
    But, again, it is called the CARS Act, but it is really not 
about cars, it is about people. It is about the people who 
produce those cars. And our job here--the actions that we have 
been taking--and it is really hard to understand--have not been 
taken just to preserve the brands of GM and Chrysler. It has 
been to preserve the jobs, the jobs that our families and our 
friends and our neighbors and our communities depend upon for 
their tax base, to fund their police and their fire and their 
schools and their other city services. It is about people. And 
the impact of the decisions that have been made have been 
extreme, and they have been decimating to many.
    Now, we have been trying to get answers and trying to 
understand the rationale that has been undertaken to come to 
these decisions. And I think you heard it here today, that we 
don't get it. We don't understand it. And we want to know why, 
if you are trying to sell more cars, why having less sales 
people to do it, who have been committed to doing it for years 
and decades on end, will result in more sales.
    That just doesn't seem logical to many of us here or 
logical to many of the people who are out there in our 
communities about to become jobless or who have become jobless 
because of the decisions that have been taken. So I am 
interested in hearing about that.
    And I am also interested in making sure and hearing the 
commitment, hopefully from the companies, about how we are 
going to keep the market share of cars that are being sold in 
the United States from the companies at its present level or 
increase it so that we are not selling more cars from GM or 
Chrysler that are imported.
    Because, again, we haven't been taking these actions to 
save the brands. We have been taking these actions to save our 
manufacturing base, strengthen our Nation, and to preserve the 
jobs of so many that are in our districts and across the 
country.
    And I yield back.
    Mr. Stupak. Thank you, Ms. Sutton.
    And the CARS Act that she mentioned is really called ``Cash 
for Clunkers,'' as we call it. She was the lead author, along 
with myself, Mr. Dingell, a bunch of us on this committee. In 
fact, it went through this committee, went to the floor. We had 
votes on the floor this week. We got that passed. It is 
actually now in conference. So the Cash for Clunkers, hopefully 
next week we can have that done. This committee has always been 
supportive of the auto industry, no doubt about that.
    Last but not least, Mr. Welch from Vermont, opening 
statement, 3 minutes, please.

  OPENING STATEMENT OF HON. PETER WELCH, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF VERMONT

    Mr. Welch. Thank you, Mr. Chairman and Mr. Walden. I really 
appreciate you calling this hearing.
    I am going to be repetitive. The reason I am going to be 
repetitive is that this is a catastrophe for every community 
where we have car dealers that have been doing a good job. And 
you guys know it.
    I mean, Mike Doyle was talking about the family 
dealerships. I was taking to the Handys--52 years, father to 
son, supporting Little League teams, providing good service, 
good jobs in their community, and they get a letter telling 
them ``no.''
    Wade Walker is here from Vermont, one of our great car 
dealers who has been playing a lead role. And you have heard 
these stories one after another, and it doesn't seem to sink 
in.
    One of the things that is bewildering to us is that, as we 
understand it, the car dealers pay basically for everything. 
Every single thing that they get from the manufacturers they 
have to pay for, from brochures to signs.
    And I just asked Wade to put together a few facts for me. 
$22,000 he has to pay every year--$21,000, actually, for 
special tools. These are tools you could go down the street and 
get for next to nothing, and they have to pay $21,000 to the 
manufacturers because that is part of the deal. $2,000 for 
parts and service promotion; $3,200 to put up a sign. Your sign 
they have to put up every year. They have to sign a contract, 
and I guess it is a 10-year contract. They have to pay for 
that. $3,200 per employee to send to service training. $10,000 
to hook up to the computer. $5,000 for the brochures.
    So it is money out of their pocket that supports the 
manufacturer. So it is very hard for us to understand why it is 
these guys are, quote, ``a drain'' on the business model.
    Secondly, I think what you are hearing from all of us is 
that there is something wrong with a business model that 
basically says, in order to survive, we have to crush our local 
dealers; we have to take out of the community some of the folks 
in the community that have been doing the most to create a 
sense of community and to provide local jobs.
    I mean, the economy has to be about making a living in our 
local communities. And we are going dead-wrong if we can't have 
a business model that rewards local success and gives people in 
a community that are willing to take a risk to do a job, 
provide a service, be related to their customers, if they don't 
have a place in the economy and in the auto future of this 
country.
    You know, it is almost as though each one of the 
manufacturers wants to have one dealer on steroids that can 
sell to everybody in the country over the Internet. And it just 
ain't going to work.
    So, Mr. Chairman and Mr. Walden, I really appreciate you 
having this hearing. My hope is that we can find a way where 
there is a place that includes our local car dealers who have 
been doing so much for so many for so long.
    Thank you very much.
    Mr. Stupak. Thank you, Mr. Welch.
    Ms. Schakowsky, if you have an opening statement, a 3-
minute opening statement, now would be the time. Give yourself 
a second, get situated there.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you, Mr. Chairman. I appreciate this 
hearing.
    And the circumstances that bring us here today are really 
unfortunate. Despite signs that the economic downturn has 
slowed and may be even turning around, many Americans are still 
unemployed, are fearful of losing their jobs. And, for some, 
this fear is--for many, this fear is very real.
    Two iconic companies here today, Chrysler and GM, are 
closing more than 2,000 dealerships nationwide, with potential 
job losses numbering in the hundreds of thousands. This move 
will impact every State and city in the United States. On 
Tuesday, 789 Chrysler dealerships closed their doors, including 
some in Chicago, where I am from. About 2,500 GM dealers closed 
by the end the year.
    There are three GM dealers in my district and another four 
nearby that my constituents depend on. There has been no public 
announcement of whether any of those businesses will close, but 
the employees and their families go to sleep every night 
wondering what the news will bring in the morning.
    And I am glad that this committee will have the opportunity 
to review how the decisions are made to close certain 
dealerships. Closures of local businesses of this magnitude 
will severely harm communities and local economies that are 
already strained. And nationwide these closures have an 
exponentially larger effect.
    We have to determine whether the process used for deciding 
whether and which dealer to close was fair to all involved. We 
also have to begin to think about how to assist those who have 
lost or will lose their jobs.
    In addition, we must look to the future of our Nation's 
historic auto industry. I have no doubt that these brands will 
be able to make a comeback building and selling the cars and 
trucks of the future, ones that are energy-efficient, 
innovative, and uniquely American.
    Also, while this may not be the primary focus of this 
hearing, it has been brought to my attention that there are 
concerns about how GM and Chrysler's restructuring will affect 
injury and liability claims from current customers. I think 
this issue is important and is something that we may want to 
consider in the future.
    Thank you, Mr. Chairman, for your indulgence. I yield back.
    Mr. Stupak. Thank you.
    That concludes the opening statements of all members of the 
Oversight and Investigations Subcommittee.
    Let me introduce our first panel of witnesses. Some of the 
members have asked to introduce some of them. I will yield to 
them at the appropriate time. And keep your comments brief.
    First, we have Mr. James Press, who's President of 
Chrysler, LLC; Mr. Fritz Henderson, chief executive officer of 
General Motors Corporation.
    Mr. Braley, do you want to introduce Mr. John McEleney?
    Mr. Braley. Yes. I am very pleased to have John McEleney, 
who is the chairman of the National Auto Dealers Association 
and also president of McEleney Auto Center in Clinton, Iowa, in 
my district, and also has another franchise in Iowa City.
    Welcome, John.
    Mr. Stupak. Mr. Alan Spitzer of Spitzer Automotive Group of 
Elyria, Ohio. Betty, do you want to introduce him?
    Ms. Sutton. Mr. Spitzer, as I said in my opening statement, 
has been in the business a long time in Elyria and the 
surrounding area, 100 years, I believe, in the auto dealership.
    Mr. Spitzer. 105. We are 4 years older than General Motors 
and more than 20 years older than Chrysler.
    Ms. Sutton. Well, those are pretty deep roots.
    And I am honored and grateful, Mr. Chairman, that you 
brought Mr. Spitzer here to share his experience, not only in, 
obviously, providing our communities with the cars they need to 
drive, but helping to shore up so much within our community by 
sponsoring organizations and contributing to the quality of 
life there.
    Mr. Stupak. Next we have Mr. Bob Thomas. Mr. Walden, if 
you'd like to say a few words.
    Mr. Walden. Thank you very much, Mr. Chairman.
    Mr. Thomas is a constituent of mine from Bend, Oregon. His 
grandfather formed the dealership for General Motors in 1918. 
He served as a lieutenant in the U.S. Marine Corps from 1969 to 
1972. He's a graduate of Stanford University.
    Serves on the boards of the United Way of Deschutes County, 
Greater Bend Rotary, St. Charles Hospital Foundation, Boys and 
Girls Club, Bend Chamber of Commerce, Oregon State University-
Cascade's campus, and the Central Oregon Visitors Association--
the kind of person you'd want to represent your company in 
central Oregon.
    Mr. Stupak. Next is Mr. Daniel Kiekenapp of Tacoma Dodge in 
Tacoma, Washington. He was requested by Mr. Dicks.
    Thanks for being here. And Mr. Dicks asked that you be 
here.
    Mr. James Golick--Mr. Doyle, do you want to say a few words 
there?
    Mr. Doyle. Thanks, Mr. Chairman.
    It's a pleasure to welcome my friend Jim Golick at today's 
hearing. Jim and his family at Golick Chrysler-Jeep have been 
at the same location in Pittsburgh since 1935, a business that 
is still owned and operated by his family. They started with a 
Hudson franchise. Then Golick sold cars from AMC-Jeep and later 
Eagle. Several mergers later, Golick was a successful Jeep-
Eagle dealer until 1999.
    In 2000, they acquired the Chrysler franchise. Now they're 
a Chrysler-Jeep dealer and have sold over 10,000 new and used 
vehicles over the last few decades. They have consistently held 
the highest customer satisfaction rating for sales and service 
in the State of Pennsylvania.
    And I welcome you, Jim.
    Mr. Stupak. Next is Mr. Duane Paddock of Paddock Chevrolet 
in Kenmore, New York. Thanks for being here.
    And last but not least--Mr. Barton is not back--is Mr. 
Frank Blankenbeckler III, of Carlisle Chevrolet Company of 
Waxahachie, Texas. Frank is here with his son, Austin.
    And thank you for coming.
    Joe, did you want to say anything about your witness?
    Mr. Barton. Thank you, Mr. Chairman. I've been down in the 
electricity hearing.
    It is my honor to introduce Frank Blankenbeckler. He is a 
native of Waxahachie, Texas. Graduated from Waxahachie High 
School. Went to the University of Texas, where he lettered in 
basketball. Came back home to Waxahachie and entered the 
business that his grandfather started in 1926.
    He is one of the civic leaders in Waxahachie. He and his 
family have been major donors to every civic improvement in the 
last 50 years in that community. And, as I said in my opening 
statement, last year his business and the 40 employees 
generated revenues that resulted in over $1.3 million in taxes 
being paid to various State, local, and Federal entities.
    He is considered one of the leading entrepreneurs, 
businessman, philanthropists of his hometown. And I consider 
him to be a personal friend. So we are honored to have him 
here.
    And, as I said earlier, I think he represents hundreds, if 
not thousands, of family-owned dealerships that have been in 
business for decades. And most of those dealerships hopefully 
want to continue in a positive business relationship that is 
positive for themselves and General Motors and Chrysler--and 
Ford, who's not here.
    Thank you, Mr. Chairman.
    Mr. Stupak. Thank you.
    And it's also my understanding Mr. Blankenbeckler's son, 
Austin, is here, right? He is also in the car business?
    Mr. Barton. He is.
    Mr. Stupak. OK, that is our first panel of witnesses.
    It's the policy of this committee to take all testimony 
under oath.
    Please be advised that you have the right to be advised by 
counsel during your testimony. Do any of you wish to be 
represented by counsel?
    They are shaking their head ``no.''
    If, at any time, you wish to be advised by counsel, let me 
know before you answer a question, and we will accommodate 
that.
    Therefore, since we take our testimony under oath, I am 
going to ask you all rise, please raise your right hand to take 
the oath.
    [Witnesses sworn.]
    Mr. Stupak. Let the record reflect that the witnesses 
applied in the affirmative.
    You are all now under oath.
    We are going to start with your opening statement, which 
would also be under oath. I am going to ask you to please limit 
it to 5 minutes. We have an unusually large panel. That's 
because of all the interest in this hearing.
    Mr. Press, if you don't mind, we'll start with you, and 
then we'll do Mr. Henderson, Mr. McEleney, and then we'll go to 
Mr. Thomas and Mr. Blankenbeckler, Mr. Paddock, Mr. Kiekenapp, 
Mr. Spitzer, and Mr. Golick. That will be the order.
    Mr. Press, would you like to start, please? Five minutes.

   TESTIMONY OF JAMES PRESS, PRESIDENT, CHRYSLER, LLC; FRITZ 
HENDERSON, CHIEF EXECUTIVE OFFICER, GENERAL MOTORS CORPORATION; 
     JOHN McELENEY, CHAIRMAN, NATIONAL AUTOMOBILE DEALERS 
  ASSOCIATION; ROBERT THOMAS, BOB THOMAS CHEVROLET-CADILLAC, 
 BEND, OREGON; FRANK A. BLANKENBECKLER III, CARLISLE CHEVROLET 
   COMPANY, INC., WAXAHACHIE, TEXAS; DUANE PADDOCK, PADDOCK 
   CHEVROLET, KENMORE, NEW YORK; DANIEL J. KIEKENAPP, TACOMA 
    DODGE, INC., TACOMA, WASHINGTON; ALAN SPITZER, SPITZER 
  AUTOMOTIVE GROUP, ELYRIA, OHIO; JAMES GOLICK, GOLICK MOTOR 
                COMPANY, PITCAIRN, PENNSYLVANIA

                    TESTIMONY OF JAMES PRESS

    Mr. Press. Thank you.
    Chairman Stupak, Ranking Member Walden, and members of the 
committee, I appreciate this opportunity to discuss why a 
realigned dealer network is important to the new Chrysler 
Group.
    Despite completing a painful restructuring, the new 
Chrysler Group will retain 86 percent of its dealers by volume 
and 75 percent by location. I empathize with the dealers who 
were not brought forward into the new company, and I surely 
understand their disappointment. This has been the most 
difficult business action I have ever personally taken.
    I'd like to begin first by answering the four questions 
that I have been asked most often while I've been here in 
Washington.
    First, was discontinuing these dealers really necessary for 
Chrysler's survival? The answer is: absolutely, yes.
    Today's automative industry cannot support the number of 
dealers currently in the marketplace. We have gone from 17 
million new vehicle sales in 2006 to less than 10 million 
today. As a whole, the Chrysler dealer network is not 
profitable and not viable. In 2008, the average U.S. auto 
dealer sold 525 vehicles and made a profit of $279,000. The 
Chrysler dealer average was 405 vehicles and lost $3,431.
    Without profits, dealers can't invest in people or 
training, facilities. As a result, sales and customer 
satisfaction suffers. The old Chrysler's multiple dealer 
channel was too costly to support. I'll give some examples of 
that in a moment. And to complete our bankruptcy process and 
our alliance with Fiat, we needed a realigned, new dealer 
network for the new company to emerge on day one.
    On June 9th, the bankruptcy court authorized the 
discontinuation of our dealer agreements as part of our 
optimization plan. In his order, Judge Gonzalez said the dealer 
restructuring plan was, ``an exercise of sound business 
judgment made in good faith and for legitimate commercial 
reasons.'' The judge also said in his ruling that the dealer 
reorganization was, ``appropriate and necessary.'' On June 
10th, the Fiat-Chrysler alliance was launched, with a right-
sized new dealer network.
    Second question: Dealers don't cost the company anything, 
do they? Well, in fact, they do. The cost to Chrysler of an 
oversized dealer network includes both lost sales and excessive 
spending.
    First of all, dealers have a minimum sales responsibility 
every year. It's realistic and conservative and based on their 
average sales of Chrysler sales. Underperforming dealers cost 
unit sales as well as revenue. In 2008, of the 789 discontinued 
dealers, 80 percent of them were below their minimum sales 
responsibility, which translated into 55,000 lost sales, $1.5 
billion in lost revenue.
    Second, the old Chrysler dealer network included many 
dealers that sell only one or two of the three brands. This has 
led to tremendous redundancies and inefficiencies in product 
development and brand strategy.
    For example, we spent $1.4 billion in the last product 
cycle in engineering and development cost for sister vehicles 
that did not return 1 cent of incremental profit or sales. For 
example, Chrysler currently supplies dealers with two similar 
minivans, two similar full-size sport utilities, two similar 
mid-size SUVs, and two similar sedans.
    We cannot afford to produce unique products any longer, and 
that is one of the real reasons that the company had to declare 
bankruptcy.
    Other cost inefficiencies include $150 million annually in 
marketing and advertising, $33 million annually in just 
administrative costs to work with the dealer body.
    Third question. My discontinued dealer says he is 
profitable, so why not keep him? Profitability alone is not an 
adequate measure to determine a dealer's viability or value to 
Chrysler's future. Chrysler's discontinued dealers were, for 
the most part, the least profitable dealers in the network. On 
average, the discontinued dealers lost $73,000 last year.
    But, of course, some of them are profitable, yes. Some of 
them are profitable, but their new Chrysler business may not 
be. In fact, most of the profitability of these dealers in 
question is driven from used car business or the sales of other 
makes in this same business.
    Several problems beyond profitability contributed to 
certain dealers being discontinued. Many dealers are in the 
wrong location. Five hundred and fifty-five of the 789 are 
standalone. They do not have all three brands. They aren't 
viable. We can no longer produce products to keep those dealers 
alive. Fifty percent sell a hundred or fewer vehicles per year. 
Eighty-four percent sell more used than new. Forty-four percent 
sell competing brands in the same showroom.
    Here is a typical example, a Dodge dealer in the mid-
Atlantic area. This dealer is profitable, but he also sells 
Buick, Pontiac, Subaru, Isuzu, and of his new car sales Dodge 
only represents 3 percent of his sales, total sales for his 
dealership last year. That is a good example of the situation 
that we face.
    So while some of the 789 dealers may be profitable, chances 
are they are making money selling used cars, competitive 
vehicles; and, by our assessment, they are a drag on the 
network in total.
    The last page of my presentation isn't here, but I will 
paraphrase it very quickly. And that is that this is a very 
painful process. Going through bankruptcy was not our choice. 
The company is no longer a functioning organization. We have 
had to make some very difficult decisions in business that 
would assure, by making these tough calls for 789 dealers, we 
have got 2,391 dealers not represented here, in small towns, 
with Little Leagues, with a lot of employees whose jobs and 
business is saved, along with the full enterprise of our 
company, the suppliers, and the rest of the Nation.
    This was a very difficult decision that we have made. It is 
one that we want to share with you in terms of transparency. We 
have taken every step to make this a soft landing for the 
dealers involved. And you will find out soon that all of the 
vehicles in the discontinued dealers have been redistributed, 
along with most of the parts and most of the equipment.
    We stand ready to answer your questions and respond to any 
suggestions that you may have. Thank you very much.
    [The prepared statement of Mr. Press follows:]

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    Mr. Stupak. Thank you. Thank you, Mr. Press.
    Mr. Henderson, your opening statement, please.

                  TESTIMONY OF FRITZ HENDERSON

    Mr. Henderson. Good morning and thank you, Chairman Stupak 
and Ranking Member Walden.
    Mr. Stupak. You may want to pull that just a bit closer.
    Mr. Henderson. Behind each action we are taking to reinvent 
GM, there is a human story. Our dealers are part of the larger 
GM family. They are valued business partners and, for many 
consumers, the face of General Motors. However, the sacrifices, 
all painful, that we are all making are necessary to put GM on 
a brighter path to long-term viability and success.
    We owe this to the U.S. taxpayer. In essence, this is our 
last chance to deliver and reduce debt, to operate under 
competitive labor agreements, to have the manufacturing 
capacity that matches today's market realities, and, most 
importantly, to continue to design and build winning cars and 
trucks with leading technology.
    We simply cannot undergo this sweeping transformation 
without a comparable effort to reshape our retail network, one 
which was largely created in the '50s and the '60s. We have 
been called upon to make tough commercial decisions, and we 
will do so responsibly and compassionately and, in the case of 
our dealers, to act as carefully, responsibly, and objectively 
as we can to help them wind down their businesses in an orderly 
fashion, with a structured assistance package that benefits 
them relative to their alternatives.
    This approach is in stark contrast to what happens in most 
contracts in bankruptcy, where contracts are typically simply 
rejected with no assistance. And, unfortunately, we are a 
company today in bankruptcy.
    Let me first discuss costs and then sales opportunities 
that are relevant to these dealer decisions. A concentrated and 
highly profitable dealer network will reduce costs for GM at a 
time when every dollar is precious. These cost savings come in 
two categories. A right-sized network of strong dealers will 
allow GM to systematically--and this is over time--reduce 
direct dealer support programs, which today involve for General 
Motors about $2 billion here in the U.S., or approximately a 
thousand dollars per retail sale. This is a gross savings of a 
little less than a million dollars per discontinued dealer.
    This, however, does not take place immediately, because 
these support programs, or in fact subsidies, have been 
incorporated over many years to help dealer profitability as 
our dealer network has, unfortunately, weakened financially. To 
the best of our knowledge, our best-in-class competitors today 
bear few, if any, of these costs.
    Our consolidation will also provide an estimated $415 
million in gross fixed-cost savings potential, items like 
guaranteed local advertising--excuse me--assistance, service 
and training, and information technology systems, for a 
potential of approximately $180,000 per dealer.
    Second, our dealer consolidation is not just about saving 
money but about creating opportunity and revenue growth. It is 
about our dealers augmenting our efforts to greatly enhance 
consumer perception in our products, brands, and General Motors 
directly and on a daily basis.
    That is why in every other aspect of the retail business, 
from Harley-Davidson to Apple stores and, yes, Toyota and 
Honda, you see that a premium is placed upon creating a 
distinct, consistent, and top-notch retail experience. That is 
why we are building a profitable business plan for between 
3,500 and 3,800 U.S. dealers by the end of 2010, which, with a 
retail sales market of over 10 million units and a conservative 
share assumption, would allow our dealers to approximately 
double their throughput. For dealers, this translates into a 
greater return on investment, better profits, and the ability 
to attract and retain new customers and the best people to 
service our vehicles.
    Finally, even with these cutbacks, GM will still have the 
largest dealer network in the country, more than any of our 
competitors. In our case, around 3,600 versus, for example, 
Toyota's at 1,200. This would include an extensive rural 
network of 1,500 dealers nationally in markets where we hold 
today on average more than a 10 point advantage in market 
share.
    While we are operating with a high sense of urgency, it is 
equally important we get this process right, considering the 
personal and financial stakes at hand. We recognize we won't 
get every call right. That is why we are listening and working 
with the dealers and with the NADA to give us all a better 
understanding of their concerns. As a result, we sent our 
dealers a letter this week clarifying various subjects in the 
participation agreement, most notably dualing with competitive 
makes and performance standards.
    So what is the current status of our work on this important 
front? We have in place an appeals process and have considered 
856 appeals requests as of yesterday and have granted 45. We 
will continue to evaluate all GM dealers against a common set 
of performance standards to ensure that our selection process 
is fair and robust.
    As of today's deadline, we are encouraged by the progress 
we are making, and the overall dealer response has been strong. 
Approximately 99 percent of GM dealers have signed or verbally 
agreed to our participation agreements, while almost 96 percent 
have done so with the wind-down agreements.
    In closing, we are deeply grateful for the support of these 
dealers. They are helping to create a viable GM that will 
preserve over 200,000 jobs at GM's remaining dealers, along 
with hundreds of thousands of jobs with GM's direct 
manufacturing and supply network.
    We are also grateful for your support during this critical 
time. We take our responsibility to the American taxpayers very 
seriously, and we promise to be open and transparent in all we 
do every step of the way.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Henderson follows:]

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    Mr. Stupak. Thank you, Mr. Henderson.
    Mr. McEleney, please, National Auto Dealers Association.

                   TESTIMONY OF JOHN McELENEY

    Mr. McEleney. Thank you, Chairman Stupak, Representative 
Walden.
    My name is John McEleney, Chairman of NADA, the National 
Automobile Dealers Association. I am also President of McEleney 
Autocenter of Clinton, Iowa, which is in the district of 
Representative Bruce Braley. We operate General Motors, Toyota, 
and Hyundai franchises and have been in business for 95 years; 
and we provide jobs for 140 people. Additionally, my family 
held a Chrysler franchise from 1984 to 2007.
    NADA welcomes engagement of this subcommittee. This panel 
has a long history of aggressive congressional oversight, and 
that is exactly what we need to enhance your understanding of 
the Chrysler and GM bankruptcy proceedings. The lack of 
transparency during this government-structured process has 
compounded our concerns about the treatment of dealers 
throughout this ordeal.
    In the initial viability submissions, Chrysler mentioned 
nothing other than continuing their current program to 
facilitate dealer consolidation. Yet bankruptcy has left 789 
Chrysler dealerships without franchises on 26 days notice 
without even buying back their vehicles, parts, and factory 
specific tools. No manufacturer has ever done this.
    GM's original viability submissions reflected the desire to 
eliminate some brands, and its call for additional dealer 
consolidation was over an extended period of time. Now, besides 
the brand eliminations, 1,350 additional GM dealers face 
terminations on a much more aggressive timeline.
    Why this dramatic shift? In response to a question before 
the Senate Banking Committee on June 10th, Ron Bloom of the 
Auto Task Force said, and I quote, we did not give the 
companies a numerical target, but we certainly did say, 
regarding plants, regarding dealers, regarding white and blue 
collar head count, regarding all these matters that you need to 
be more aggressive, close quote.
    Everyone agrees that these companies need to decrease costs 
and increase revenue, but dealer cuts do not achieve these 
goals. The other key elements of the restructurings provide 
direct and timely cost savings to GM and to Chrysler. In sharp 
contrast, terminating a dealership does not provide any 
material cost savings. The retail network, the land, the 
buildings, the employees, training, the dealers pay for all of 
this.
    As detailed in my written testimony, we dispute the notion 
that the dealer network imposes any significant per vehicle 
cost or any significant administrative costs on the 
manufacturers. Indeed, company officials have been widely 
quoted as saying that the manufacturers' costs do not vary, 
whether there are 6,000 dealers or 3,000 dealers. Moreover, the 
faster, deeper approach of the Auto Task Force will actually 
reduce manufacturer revenue at this critical juncture.
    Over 90 percent of Chrysler and GM's revenues come from the 
dealers. Because the dealers buy the cars, the parts, even the 
dealership signs from the manufacturers. Automakers will tell 
you that it takes at least 18 months to regain the sales of a 
closed dealership. And that is the best-case scenario. In 
short, the dealer terminations will cause revenue losses for 
the manufacturers without any corresponding cost savings. As 
such, we do not see how these cuts make economic sense, not for 
the companies, not for the dealers, not for local communities, 
and certainly not for the struggling U.S. economy.
    Now I will turn to the status of the GM agreements, both 
the participation agreements for those dealers going forward 
and the wind-down agreements for those dealers who lose their 
franchises.
    Last week, during my testimony to the Senate Commerce 
Committee, I voiced NADA's concerns about the extremely one-
sided participation agreements delivered to 4,000 dealers of 
the new GM. During that hearing, Mr. Henderson committed to 
meet with NADA to discuss our concerns. GM followed through on 
that commitment. Our leadership met with senior GM officials 
last Friday, and we had a very frank discussion. As a result, 
GM has agreed to make significant improvements in the 
participation agreement. Additionally, GM is committed to 
clarify some of the terms of the wind-down agreements, and NADA 
will continue to work with GM to improve these agreements. We 
appreciate GM's efforts to interact with NADA on these crucial 
matters.
    In conclusion, Mr. Chairman, I want to thank you again for 
convening this hearing, because we still have fundamental 
concerns. These government-negotiated bankruptcies continue to 
threaten dealer rights under State motor vehicle franchise 
laws. These laws inject balance in the inherently unbalanced 
economic relationship between a dealer and the manufacturer; 
and they also provide consumers a reliable, convenient, and 
competitive auto retail network. Therefore, Congress should 
ensure that the franchise laws of 50 States apply with full 
force and effect, especially when the new Chrysler and the new 
GM are operating outside of bankruptcy.
    We urge Members of Congress to support H.R. 2743, which 
would restore fundamental rights to dealers. We stand ready to 
work with you to achieve this goal.
    Thank you for holding this important hearing, and thank you 
for the opportunity to testify.
    [The prepared statement of Mr. McEleney follows:]

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    Mr. Stupak. Thank you.
    We are now going to go from my left to right with the 
dealers.
    Mr. Thomas, would you like to begin? Pull that mike over, 
turn it on until you get a green light, and speak into it so we 
can hear you and they can also pick it up.


                   TESTIMONY OF ROBERT THOMAS

    Mr. Thomas. Thank you Mr. Chairman, Ranking Member Walden.
    May 15, 11 a.m., the FedEx truck arrives. Employees watch 
as the driver hands me the thin cardboard envelope that 
contains our destiny. I received an unsigned letter from 
General Motors. The tone of letter was vague and referred to 
criteria but not the specific methodology, neither stating the 
relative importance of each, nor how great a period of time was 
being referenced.
    The letter stated, quote, we don't think we will be able to 
renew your contract in October 2010. This is not final. Submit 
what you like by the end of the month to this e-mail address.
    The significance of this letter became clear on June 2, 
when the content of the vague letter had been construed into 
the offer of a wind-down agreement. The agreement offered on 
the 2nd had to be returned in time to arrive in Detroit by the 
12th, a scant 10 days to decide one's options, to confer with 
professionals regarding unprecedented legal matters and loved 
ones about our financial and professional future.
    My grandfather immigrated to the U.S. in 1900 and by 1918 
had established himself as a Chevrolet dealer in Bend, Oregon. 
His daughter married my father, and he was a dealer until 1982, 
when I succeeded him. Our company has woven itself into the 
social fabric of the community since the time it was a village. 
Our family has provided automobile sales and service, civic 
leadership, and community involvement every year continuously 
since 1916.
    These are hard times for Bend, but not as difficult as 
those we survived in the Great Depression and the world wars. 
General Motors has been with us the whole time, from 1918 
forward.
    We have been GM to our community. Now it is a dark time 
when GM must abandon our town, our region, and us. Just as GM 
is an icon, we enjoy iconic status in our region: Always there, 
always helpful and compassionate, always acting responsibly.
    The letters we garnered in support to our appeal to GM were 
humbling in their appreciation of our caliber and quality of 
service and community support. Moreover, there was confusion as 
to why Bend, now 80,000 strong, will be abandoned, as will we, 
their dealer of choice, the largest GM dealership in central 
and eastern Oregon.
    Their world is crumbling. Things they thought they could 
count on are being taken away: Long-standing reliability, 
integrity, a safe harbor. In a very real sense, our customers 
are afraid.
    Who benefits from this taking, this cancellation that is so 
unnecessary, so wrong, so wrongly executed? Not GM. Having no 
dealer in Bend will not increase GM's sales. Not the 216,000 
people in our region who are left solely with a small GM dealer 
in the tiny town at its perimeter, with limited inventory and 
repair capacity. Not our community, who has relied on us always 
to generously support its activities. Not our employees, who 
are highly trained to work on sophisticated GM products like 
Cadillac and Chevrolet and service clientele with courtesy and 
compassion. Not our customers, who bought our products 
thinking, like we did, that we would be here forever.
    That is our business model, the longest term you can 
imagine. Always do it right. Be here for the long haul. Earn 
the loyalty of your clientele, and they will reward you with 
long-term patronage.
    Over the years, that has been GM's business model, too; and 
we were a good fit for 91 years until we got cut from the team.
    Why are these cuts necessary? I recently attended a meeting 
of letter recipients in Oregon. Who was there? A roomful of 
respectable business people with whom I have attended GM 
business meetings for 30 years. Obviously, they are able 
business people to have survived, as have we.
    The marketplace should be the sole arbiter of who should 
fall by the wayside, not the arbitrary acts of well-meaning 
administrators. If the plan is to replace us with another GM 
dealer, why have we been deprived of the opportunity to make 
such a transaction with their approval? Will our market be 
awarded to a GM favorite or insider? This would seem to be an 
unreasonable and wrongful taking of a valuable asset nurtured 
through the years, only to be snatched by an overreaching at a 
moment of opportunity inside the bankruptcy.
    And what of the inventory that remains? In our case, some 
$4 million, the value of which could shrink by a million or 
more from what we paid. Over a year's supply of GM cars await 
our sale. A half-a-million dollars of parts cannot be returned.
    What I would hope for in such dire straits would be a 
request of reason. Allow us to provide support for those GM 
customers in our region and relieve us of the inventory 
obligations we incurred in good faith by repurchasing at what 
we paid. This is a small price to pay for potentially depriving 
a long and faithful associate of its livelihood.
    [The prepared statement of Mr. Thomas follows:]

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    Mr. Stupak. Thank you, Mr. Thomas.
    Mr. Blankenbeckler, your opening statement, please, sir.

           TESTIMONY OF FRANK A. BLANKENBECKLER, III

    Mr. Blankenbeckler. My name is Frank A. Blankenbeckler, 
III. I am the dealer-principal of Carlisle Chevrolet-Cadillac-
Jeep in Waxahachie, Texas, to my knowledge the oldest Chevrolet 
dealership in the State of Texas. The Cadillac line was added 
in 1990, and the Jeep line was added around 1978.
    This dealership was operated continuously in the same 
community, with the same family ownership since 1926. The 
dealership was found in 1926 by my maternal grandfather, Y.C. 
Carlisle. My father, Frank A. Blankenbeckler, Junior, who was 
awarded a bronze star for his service to his country at 
Bastogne during World War II and who received a masters in tax 
law from Harvard, married my mother in 1947 and moved to 
Waxahachie to be the dealer at Carlisle Chevrolet for the next 
55 years.
    I graduated from the University of Texas in 1974 with an 
MBA. Since that time I have had one job. I have been a GM and 
Jeep dealer for nearly 35 years.
    Approximately 3 years ago, my son graduated from Ole Miss 
and joined me at the dealership to fulfill his childhood dream 
of being an automobile dealer like his father, his grandfather, 
and his great grandfather before him.
    During these 84 years of dealership ownership and 
operation, my family has been one of the most generous and 
civic minded in Waxahachie. My family was very instrumental in 
the founding of Baylor Hospital there, the YMCA, served on the 
school board, and made many other numerous contributions, too 
numerous to mention.
    The point of this type of introduction is to state that my 
family has been an integral and generous part of Waxahachie for 
a long time.
    On May 13th, I received a letter from Chrysler. It stated I 
will no longer be a Jeep dealer after June 9. On May 14th, I 
received a letter from GM stating that my Chevrolet and 
Cadillac dealer agreements would not be extended beyond 2010. 
In 24 hours, I was told that everything my family and I had 
worked for for 84 years would be taken away, with no 
compensation.
    I have introduced a folder which conveys some facts about 
Carlisle Chevrolet. I would like to request this folder and the 
balance of my testimony be entered into the record.
    Mr. Stupak. Without objection. Mr. Walden had supplied it 
to the committee. Without objection, it will be part of your 
testimony.
    [The information was unavailable at the time of printing.]
    Mr. Blankenbeckler. The pages of this folder show the 
location of the dealership, including an article by the local 
paper and a page of facts about the dealership.
    I would particularly encourage you to look at the total 
amount of taxes paid by Carlisle in 2008, about $1.3 million. 
It contains sales history, CSI scores, and a couple of articles 
about the dealership that is located next door. I can assure 
you Carlisle is not the bottom of the heap in regards to its 
peers per this folder.
    I want to make mention of my employees. Over the years, 
Carlisle has had numerous employees that had worked for my 
family for 35 to 50 years. Time doesn't permit me to do them 
justice. My point is Carlisle has had and currently has the 
best people in the industry.
    I would like to mention to the committee the human element 
of these actions by GM and Chrysler. Nearly 90 souls depend on 
Carlisle for their existence. With our closing, these people 
will be subjected to serious economic hardship.
    I have had numerous offers to sell my business. I have had 
that right taken away. My family will be left with a single-
purpose dealership facility with no tenant. This is senseless.
    My grandfather paid for Carlisle Chevrolet from his labors. 
My father paid my grandmother for Carlisle Chevrolet through 
his efforts. It took me nearly 20 years to pay my parents for 
Carlisle Chevrolet. It took GM and Chrysler a mere 24 hours to 
take Carlisle Chevrolet from me.
    This makes no sense. Why is this happening? GM and Chrysler 
have stated publicly they have not used the Bankruptcy Code to 
usurp State and local motor vehicles codes and statutes. This 
is patently not true. I don't care how it is spun.
    GM dealers have offered either a wind-down agreement or 
participation agreement. The content of the agreements is 
horrible. Dealers are told to either sign the agreements or GM 
will petition the bankruptcy court to have them immediately 
terminated. There is no alternative to signing these new 
agreements. This is wrong.
    Now I would like to address what I think is the most 
important part of my testimony. In a period of 24 hours, my 
business was essentially taken from me with no real explanation 
other than that these are difficult times. How in this country 
can a man's property be taken without due process and without 
compensation and apparently given to another dealer with better 
political connections who has been in my community for less 
than a year for nothing?
    I adamantly think my constitutional rights have been 
violated. I think I am a victim of an illegal taking. This is 
the most important point of this hearing in my mind, and I 
think it is the feeling of all the dealers that are in the same 
position. I feel like it should be the concern of all 
Americans. When your property rights are destroyed, how long 
will it be until it happens to you?
    I am hurt. I feel violated, and I am extremely upset. I 
wear my father's Bronze Star lapel pin on my coat. He was truly 
a member of the greatest generation. I am glad that he is not 
alive to witness this terrible injustice. To have risked his 
life for a country that does what they are doing would have 
destroyed him.
    I love my country, and I love my State. I feel great pain 
from what is happening. It is my hope and my prayer that I will 
be able to continue my life and not be consumed by bitterness 
should this situation not be reversed and this country not 
return to the tenets of the Founding Fathers who created it.
    Thank you for hearing my testimony.
    [The prepared statement of Mr. Blankenbeckler follows:]

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    Mr. Stupak. Thank you.
    Mr. Paddock, your opening statement, please, sir. You may 
want to pull that mike a little bit closer. They don't pick up 
as well as we think they do. Thanks.

                   TESTIMONY OF DUANE PADDOCK

    Mr. Paddock. Good morning. I am a ``go forward'' dealer. My 
name is Duane Paddock, dealer-owner of Paddock Chevrolet in 
Kenmore, New York, where we employ 135 of the finest, most 
hard-working Americans in the Buffalo area. I am proud to say 
that Paddock Chevrolet is currently the largest GM dealership 
in the Nation, and we have been proudly serving western New 
York for almost 75 years.
    I am really pleased to be here today. It seems especially 
appropriate for me at least, since my father passed away 
exactly 15 years ago to this day. It was on that day the 
livelihoods of my employees were passed on to my hands, and our 
company's responsibility to our community had to be preserved.
    In addition to my responsibilities at the dealership, I 
serve as Chairman of GM's National Dealer Council, known as the 
NDC, for the past 2\1/2\ years, a position I was elected to by 
my fellow GM dealers.
    The state of our industry is this. The U.S. marketplace for 
automobiles is the most open and competitive in the world, with 
that competition taking place across a wide variety of brands 
and competing dealers and now the Internet. But it is a 
recognized fact that, since 2006, a rapid decline of our retail 
business across all automakers, domestic and foreign, has 
occurred.
    Our industry has gone from an annual selling pace of over 
17 million units to just more than 9 million. My fellow dealers 
of every brand, both GM and non-GM, have suffered huge 
financial losses in a very short period of time. The amount of 
working capital necessary to fund their day-to-day operations 
has been severely diminished. In addition, bank loans to 
dealers for working capital are essentially nonexistent.
    As I sit before you today, I am a franchisee of a company 
going through a painful restructuring, a restructuring that is 
not only necessary, but it is critical to the future of our 
customers, suppliers, dealers, employees, and other 
stakeholders. Some of my fellow dealers, many of whom I 
consider friends, received notices this past few weeks that 
they will not be part of the new GM.
    While I cannot advocate the termination of any individual 
dealership, I will tell you that the Dealer Council will work 
vigorously with senior GM management over the past 2\1/2\ years 
to address circumstances that we dealers face today. During my 
tenure as chairman, all meetings between the NDC and GM 
management have and will continue to be led with dealer 
profitability as the primary goal of our dealer network. That 
is because dealer profitability and the reinvestment it makes 
possible are the keys to improving our customer experience at 
our dealership and improving that experience is essential to 
our ability to compete against our best competitors.
    I also can tell you that, regarding the restructuring of 
the GM dealer network to improve its competitiveness, GM has 
elected to wind down affected dealers over a 17-month period, 
allowing them to make an orderly business planning decision 
about their futures. In addition, GM has recognized the need--
--
    Mr. Stupak. It is just going to buzz. Go ahead. Keep going.
    Mr. Paddock [continuing]. GM has recognized the need to 
offer certain compensation to dealers winding down their 
operations, something Chrysler clearly chose not to do.
    Before I conclude, I should tell you that the vast majority 
of GM dealers I know are also overwhelmingly optimistic about 
GM's future. They believe in the uncompromising quality, 
reliability, and dependability of our current portfolio of 
vehicles. I can tell you that in my 26 years at Paddock 
Chevrolet, I have never had a better portfolio of vehicles to 
sell. The stunning designs and compelling fuel economy 
improvements of these vehicles gives us hope for the future.
    In closing, let me say I appreciate your time and, more 
importantly, your understanding of the significant impact a 
successful General Motors will have on this great Nation. My 
family has been a part of GM for decades, my father as a GM 
dealer, my two uncles, who were UAW members working at the 
Tonawanda engine plant. Since the day I was born, everything my 
family had came from their association with GM, from the food 
on my table to the 1982 Camaro I proudly drove to my high 
school graduation.
    Paddock Chevrolet and all GM dealers are and will continue 
to be a vital part of the future success of the new GM. I, like 
my father before me, will continue to work tirelessly to ensure 
that a vibrant GM dealership can be proudly passed onto my 
children and will continue to be a fixture in the Buffalo 
community.
    Thank you for this opportunity, and I look forward to 
answering your questions.
    [The prepared statement of Mr. Paddock follows:]

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    Mr. Stupak. Thank you.
    Mr. Kiekenapp, can we get your testimony in?
    We have one vote, and I will let Members know I plan on 
getting through this testimony of this witness, and then we 
will take a 15-minute break and get right back and finish up 
this hearing. This is the only vote we will have today, so we 
will get it done.
    Mr. Kiekenapp, if you can, please.

                TESTIMONY OF DANIEL J. KIEKENAPP

    Mr. Kiekenapp. Mr. Chairman and Members of the 
subcommittee, my name is Daniel J. Kiekenapp; and I am the 
general manager and a shareholder of Tacoma Dodge, an 
automobile dealership in Tacoma, Washington. Thank you for 
giving me the opportunity to tell you the Tacoma Dodge story 
and how the TARP funds you authorized are being used.
    Tacoma Dodge has been in business continuously since 1972. 
Until this week, the dealership was valued at several million 
dollars and employed 71 people. In the month of April 2009, the 
last month for which we have a complete report, reports 
prepared by Chrysler showed that Tacoma Dodge was ranked number 
one in western Washington and number two in the entire State of 
Washington for the sale of new Dodge vehicles.
    These reports, prepared by Chrysler, also show that out of 
eight western States covered by the reports Tacoma Dodge ranked 
32 out of 313 dealers for the sale of Dodge vehicles. Other 
reports prepared by Chrysler for the area Chrysler termed Team 
Washington, which covers more than the State of Washington, 
shows that in 2006 Tacoma Dodge was ranked 7th out of 60 
dealerships; in 2007, it was ranked 8th out of 41 dealerships; 
and, in 2008, our worst year ever because of the economy and 
the public's lack of enthusiasm for Dodge vehicles, we still 
ranked 8th out of 35 dealerships. These stellar sales rankings 
were accomplished in competition with other dealers selling 
multiple lines of Chrysler vehicles, whereas Tacoma Dodge only 
had the opportunity to sell Dodge brand vehicles.
    The Dealer Performance Report prepared by Chrysler for year 
end 2008, comparing Tacoma Dodge with the Dodge dealers in 
Washington State, shows we have net earnings of $1,704,249, 
whereas the group average for the same period was $680. Yes, 
only $680 average per dealership.
    We enjoyed the same success with our parts business. The 
dealer scorecard for December 2008, a report prepared by 
Chrysler, shows that in 2008 Tacoma Dodge purchased $3,895,166 
worth of new parts from Chrysler, whereas the average dealer 
within the United States purchased a total of only $746,107 
worth of parts. Chrysler designates its top 100 dealers for the 
sales of parts as Mopar Master Dealers. We were one of these 
top 100. In fact, we ranked number 76 among all the Chrysler 
dealers in the United States for the sale of parts.
    In the area of customer satisfaction and retention, we 
consistently outperformed our peers. As of February, 2009, 
Tacoma Dodge had an over 25 percent customer retention average, 
as compared to approximately 17 percent average for all of the 
Chrysler dealers in the western United States.
    Our problems began when Chrysler assigned us an 
unreasonably high minimum sales requirement, requiring us to 
sell an unrealistically high number of vehicles. We didn't 
understand why Chrysler would assign us such an unreasonably 
high number, so we looked at the demographics they used and 
found they had made several errors in the traffic patterns and 
other demographics they used for our market area. We then 
pointed this out to Chrysler and asked them to recompute our 
minimum sales requirement based upon the correct demographical 
information. Unfortunately, Chrysler refused to even consider 
our request.
    In the spring of 2008, I attended the only dealer meeting I 
am aware of, whereby representatives of Chrysler explained 
Project Genesis to the Chrysler dealers in western Washington. 
Project Genesis is the name of their program to reduce the 
number of dealers. During that meeting, representatives of 
Chrysler stated that under Project Genesis there would be two 
Chrysler dealerships in Pierce County, Washington, and one of 
those dealerships would be in the City of Tacoma so that the 
needs of Chrysler customers in Tacoma would be adequately 
addressed.
    On May 14, 2009, I received notification from Chrysler that 
it intended to terminate Tacoma Dodge as a dealer. In the State 
of Washington we have a Franchise Act to protect dealers from 
manufacturers unreasonably terminating a dealer. Under the 
Washington Franchise Act, Chrysler would never have been able 
to terminate Tacoma Dodge, since Tacoma Dodge was one of its 
most outstanding dealers, using any yardstick you want to use 
to measure our performance. However, the notification from 
Chrysler told us we were being terminated under the U.S. 
bankruptcy laws, which provide no such protection to dealers.
    The termination of Tacoma Dodge leaves the city of Tacoma, 
which is the second largest city in western Washington, with a 
population of almost 200,000, without a single Chrysler 
dealership. Chrysler's termination of us also leaves Pierce 
County, which has a population of almost 800,000 persons and is 
the second most populous county in the State of Washington, 
with only one Chrysler dealership.
    As a result of Chrysler's actions, Tacoma Dodge, which in 
April was ranked the number one Dodge dealer in western 
Washington, can no longer sell any new vehicles, nor can we do 
any warranty work on any new vehicles. We have been reduced to 
being a used car lot and a neighborhood automobile repair 
facility. In the process, 35 faithful and loyal long-term 
employees have lost their jobs; and Pierce County and the State 
of Washington have lost a payroll of approximately $1.3 million 
per year.
    Again, thank you for the opportunity you have given me to 
tell you how the TARP funds you authorized are being used.
    [The prepared statement of Mr. Kiekenapp follows:]

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    Mr. Stupak. Thank you, and thank you for your testimony.
    We have a vote on the floor. It is only one vote, so I am 
going to ask Members to--let's recess right now, go down and 
vote. We will come back. We will hear from Mr. Spitzer and Mr. 
Golick, and we will go right into questions.
    So please come back in 15 minutes. We are going to be in 
recess for about 15, 20 minutes, give you all a chance to 
stretch your legs. And see you back here in about 15, 20 
minutes.
    We are in recess.
    [Recess.]
    Mr. Stupak. The committee will come back to order, and we 
will wait for the rest of our folks to reassemble. No more 
votes today, so we should be able to continue our hearing 
uninterrupted.
    When we left off, Mr. Spitzer, I believe we were up to you 
to give an opening statement for 5 minutes, please, sir. Take 
your time. Pull that forward. You are on.

                   TESTIMONY OF ALAN SPITZER

    Mr. Spitzer. Chairman Stupak, Ranking Member Walden, 
distinguished members of the subcommittee, I want to thank you 
for the honor of appearing here today. I would especially like 
to thank Congresswoman Sutton for her role in providing this 
opportunity to represent my fellow dealers.
    We are losing seven dealerships because Chrysler, the 
bankruptcy court, and the executive branch of our government 
have acted precipitously to deny us our economic rights. This 
is a public policy issue worthy of your time and worthy of 
congressional legislation, since without your prompt 
intervention to restore rights to franchisees under State law, 
2,000 businesses and approximately 100,000 jobs will be lost. 
As a Nation, can we really afford to let this take place? I 
urge Congress to enact H.R. 2743, the bipartisan Automobile 
Dealer Economic Rights Restoration Act, next week.
    We have a long and proud history with Chrysler and GM. The 
majority of our stores sell these brands and these brands only. 
None of our stores are dualed with other brands. We have a 
combined 374 years of business relations with Chrysler alone.
    We are passionate about both Chrysler and GM, and we want 
both companies to succeed. We are committed to helping them do 
so. That is why we are both disappointed and perplexed by the 
recent actions to terminate us and over 2,000 other dealers.
    We are not perfect. During those 374 years of operations, 
we have made mistakes. Like Chrysler's managers, our managers 
aren't perfect either. Nevertheless, we have stood shoulder to 
shoulder with Chrysler during good times and bad. In fact, my 
Uncle Del, as the President of the Dodge National Dealer 
Council, lobbied this very Congress for funds to bail out 
Chrysler the first time. We never quit on them, and they 
shouldn't quit on us and the hundreds of other dealers who 
remain committed to Chrysler.
    This issue is not about the Spitzer family or our seven 
dealerships that are being terminated or even the 300-plus 
employees who work in them. It is about destroying the entire 
net woth and life's work of hundreds of entrepreneurs and the 
thousands of people they employ. And I fear that these actions 
by Chrysler and GM will lead to their demise. And all of it is 
unnecessary.
    First, our dealerships do not cost manufacturers one dime. 
All products and services which Chrysler and GM provide are 
charged back to the dealership at a profit. Whether it is 
special tools, training, or even those colorful brochures, we 
pay for all of it. We build our own facilities, we provide our 
own operating capital, we hire our own people; and if we lose 
money, it comes out of our pocket.
    Second, Chrysler has argued that the 789 dealerships 
terminated were for performance reasons or to put all brands 
under one roof. As demonstrated by the sworn testimony of 
myself and dozens of other dealers in the bankruptcy court, 
many of the terminated dealerships were high-performing or 
Genesis stores or both.
    Chrysler did not terminate dealers for the stated reasons 
but rather to rid themselves of outspoken dealers and will now 
redistribute to other dealers while skirting around the laws of 
all 50 States, laws which otherwise prohibit this type of 
arbitrary and capricious action. Profitable, high-performing 
dealerships will be given to our fellow remaining dealers with 
no due process and no compensation whatsoever.
    It is unconscionable for a failed private business to 
bankrupt another private business which was succeeding. But 
when our government uses its power, its influence, and our 
money to aid and abet such action, it is downright unAmerican.
    At a time when our government is spending billions of 
dollars to stimulate the economy and create new jobs, this 
action will destroy 37,000 jobs with Chrysler dealers and quite 
likely another 60,000 or more at GM dealerships and millions 
and millions of local tax dollars will be lost and all for no 
good reason.
    In fact, this plan may ultimately destroy the new Chrysler 
and severely damage GM's hopes of survival. Dealers are their 
only customers. We are the face of these once-proud car 
companies in our communities. The fact that we have survived 
and prospered over the last hundred years, even as they often 
produced vehicles American consumers did not want, proves that 
independent entrepreneurs find ways to survive and create 
employment opportunities even in tough times.
    If Congress does not step in, dealers will be unwilling to 
invest in new facilities, purchase millions of dollars in 
inventory, and otherwise risk their capital if State law 
protections are meaningless and if it could all be taken away 
in the next downturn. Fewer dealers today means fewer sales of 
Chrysler and GM products tomorrow, leading to a further erosion 
of market share for both companies.
    Allow the marketplace to select who lives and who dies, not 
some committee in Detroit. As of today, approximately 350 of 
the 789 rejected dealers have accepted their fate by not 
objecting to their terminations. Thus, the accelerated 
reduction of dealerships has already occurred for those who 
believe such a reduction was necessary. There is no need to 
eliminate those of us who remain committed to Chrysler and GM's 
success.
    I thank you, Mr. Chairman, and I can assure you that I will 
work tirelessly and will not rest until H.R. 2743 becomes law, 
which already has over 100 cosponsors, Congressman Maffei, 
Congresswoman Sutton, Congressmen Hoyer and Van Hollen and 
others who have supported our bill, and we have only been out 3 
days.
    So thank you for your time, and I will answer any 
questions. Thank you.
    [The prepared statement of Mr. Spitzer follows:]

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    Mr. Stupak. Thank you, Mr. Spitzer. You want to hand that 
mike to Mr. Golick.
    And we will hear from Mr. Golick.

                   TESTIMONY OF JAMES GOLICK

    Mr. Golick. Distinguished members of the subcommittee, 
thank you for this opportunity to testify today. I am one of 
the 789 dealers that Chrysler is terminating, and I am here to 
give you my views on the situation and to advise you on what 
you can do to help us.
    My dealership is located in a suburb of Pittsburgh. We have 
been there since 1935 and been in our present building since 
1948, and we are a family-run dealership. I am the third 
generation to sell new vehicles at our facility.
    One of the distinguished members of your subcommittee, 
Congressman Doyle, has bought three new vehicles some us and 
sent some of his friends and family to our store, so he knows 
firsthand what we are all about and how we run our business. My 
family and employees have worked very hard to maintain our 
excellent reputation. The Golick name has been synonymous with 
trust and integrity.
    I want to tell you next about the pressure that Chrysler 
placed on me several years ago to purchase the Chrysler 
franchise from a neighboring dealer. They pushed me into paying 
hundreds of thousands of dollars to buy that franchise and told 
me that my facility was fine and that I could stay in my 
present location indefinitely.
    Now that my franchise has been stripped from me, I have 
been deprived of recovering that money, as I could have sold my 
franchises locally for hundreds of thousands of dollars.
    Last week there was a Senate hearing on June 3rd, and the 
president of Chrysler, Jim Press, said these words, and I 
quote, that ``Chrysler wants to bring the performers along that 
will allow us the best return on our investment. In the case of 
the dealers not being taken forward last year, we lost 55,000 
units of sales,'' unquote.
    I would like to let everyone know that I am one of their 
performers. I have always been at 150 percent of my required 
minimum sales responsibility and 150 percent of my required 
working capital. My customer satisfaction rating has been among 
the highest in the State of Pennsylvania for many years, and I 
have always been profitable.
    Now I would like to talk about why us dealers do not cost 
the factory any money or very little money. In the case of my 
dealership, the total cost to the factory, I really believe, 
would be about $2,000 per year. To arrive at that number, I am 
guessing my district manager's annual salary is, say, $52,000. 
I divide that by the 26 dealers in my district, and thus I come 
up with the $2,000 per dealer cost. Last week at the Senate 
hearing, Jim Press said that each dealer cost the factory about 
$41,000 per year, which is a far cry from the $2,000 that I am 
coming up with.
    He gave his side of the story as to why Chrysler needed to 
eliminate 789 dealers. Mr. Press said that the dealers should 
have sold 55,000 more units than they did last year, and that 
cost the factory $1.5 billion in lost revenue. What he didn't 
say is that, when we are gone, they will lose 140,000 units in 
annual sales, and the factory is going to lose $4 billion 
annually.
    So, let's see, you are worried about the 55,000 units, but 
you are going to lose 140,000 units. No wonder you are in 
trouble, I mean, with that kind of thinking. I just don't see 
the logic.
    Second, he said us dealers cost the factory $1.4 billion a 
year in development costs. That is a very large sum of money. I 
would really like to see the breakdown of those numbers and how 
the 789 dealers cost you that much.
    I mean, you went into this theory about how you have to 
have two separate minivans, the Chrysler and the Dodge, and 
that costs you money to build an extra minivan. You put on 
different hubcaps, different wheels on the car, different 
grill, and different seat fabrics. I don't see the real cost, 
heavy cost involved with that. I really don't.
    Next I would like to talk about the process of selecting 
the 789 dealers. In Chrysler's viability report that they 
submitted to the government in February, Chrysler indicated 
that 25 percent of their dealers were in financial trouble. I 
am not in financial trouble. I would like to know how many of 
those dealers that were in financial trouble are still with the 
company.
    If Chrysler was bent on eliminating 25 percent of their 
dealer body, the prudent thing to do would be to get rid of the 
25 percent that were in financial trouble and represented a 
liability to them. My guess is that many of the financially 
troubled dealers were picked to continue with the new Chrysler.
    I would now like to talk about the rationale of cutting any 
dealers at all in this tough economy. Ford Motor Company is not 
cutting any of its dealers, and they are doing pretty good 
right now. In the 1970s, when Chrysler was in financial trouble 
and the government stepped in, how many dealers did Lee Iacocca 
cut? He didn't cut any.
    One would never think that we would see the day when 
someone could just take your business from you in the United 
States of America. But this very day is now upon us. Why can't 
we let the free market decide which dealers survive or fail? 
Why dictate it under the cloak of bankruptcy? That was un-
American.
    No matter what the outcome here, I really think that the 
bankruptcy laws should be changed to protect executory 
contracts, such as new car franchise agreements, as I believe 
they represent a pure revenue stream to the factory. And we 
must protect the dealers' rights and protect the manufacturers 
from their own imprudence.
    I would also like to say that at least the GM dealers that 
were being eliminated were given some money. You know, they 
were given 10 months to wind down, and GM offered each dealer 
anywhere from $100,000 to $1 million to help with the 
transition. The Chrysler dealers' ``soft landing,'' quote, was 
3 weeks long, and we received absolutely no compensation--
nothing, not one penny. That was an unconscionable act.
    In closing, I would like to give some facts and figures 
that should point the way forward from here. I took a look back 
at the past 8 years of Chrysler's financial statements, and I 
have discovered that they did not have a year where they made 
more than $2 billion profit in any 1 year. In fact, they lost 
money in 5 of the last 8 years.
    The point I am trying to make here is that I really want 
the new Chrysler to succeed. They will need every order and 
every sale from us dealers that they can get in the next couple 
of years to survive. They have exited bankruptcy owing over $13 
billion to the Treasury. The past shows that it is very 
difficult to even make $2 billion profit in any 1 year as an 
auto manufacturer.
    The pragmatic approach to getting that money paid back to 
the Treasury is to reinstate us dealers and let us order our 
140,000 vehicles annually. This will give Chrysler $4 billion 
in annual revenue to help them survive and pay back that money.
    I am extending an offer to Sergio Marchionne from Fiat to 
welcome us with open arms. And I am urging Congress to sign on 
to bill H.R. 2743, which will restore our rights and our 
protection under the State franchise laws to where they were 
before Chrysler entered bankruptcy. If Chrysler wants to pare 
back their dealer body, why not let them do it within the 
framework of the State franchise laws, which were enacted to 
prevent this very thing from happening?
    Again, I would like to thank everyone for taking the time 
to hear me out, and may God bless America.
    [The prepared statement of Mr. Golick follows:]

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    Mr. Stupak. Thank you, Mr. Golick.
    And thank you to everyone for your testimony.
    We are going to go to questions, 5 minutes each. I am going 
to hold the line on the 5 minutes, and we will probably go more 
than one round.
    Let me ask Mr. Press and Mr. Henderson this. The committee 
staff has received reports that some dealerships that have been 
chosen to go forward, in other words not being closed, are 
being told that they should resign from positions of the 
National Auto Dealers Association, NADA, and from positions on 
State auto dealer associations because of NADA's support of 
legislation to reinstate State franchise agreements. That is 
the Maffei bill, H.R. 2743.
    So are either of you, Mr. Henderson or Mr. Press, aware of 
any such calls being made on behalf of GM or Chrysler to tell 
people not to be on these boards and State boards?
    Mr. Henderson. Mr. Chairman, I am not aware of any of those 
calls.
    Mr. Press. I am not only not aware of them, if I had 
anybody in my company doing that I would like to reprimand them 
or perhaps let them go.
    Mr. Stupak. Will you commit, Mr. Press and Mr. Henderson, 
will you commit to sending out a letter, a correspondence, a 
message to the employees of your companies instructing them 
that such intimidation would not be tolerated?
    Mr. Press. We had an all-field conference call with all of 
our field organizations prior to starting this, and that was 
exactly the instructions that was given to them, to make sure 
that this was done in a very positive manner.
    Mr. Stupak. Right. My question, though, would you put that 
in writing and send it to everybody?
    Mr. Press. Absolutely. There is no--I would like to know if 
anybody in our company did that. If you have that information, 
I would like to have that.
    Mr. Spitzer. Right here. Right here is an e-mail from one 
of them right here.
    Mr. Stupak. OK, OK. You can't do that. If you have such an 
e-mail, why don't you give it to one of the Members here? They 
can ask the question then more specifically on that.
    Mr. Henderson?
    Mr. Henderson. Mr. Chairman, I will put that in writing.
    Mr. Stupak. OK.
    So I take it, Mr. Press and Mr. Henderson, you will put it 
in writing then for us. OK, thanks.
    Let me ask this. Mr. Henderson, it is my understanding, 
when you testified last week at the Senate, there was no appeal 
process for the closed dealers. And then at the Senate you 
announced an appeal process. And you said you were under 
review, and 45 dealers had those decisions then reversed.
    So you didn't have an appeal process until you testified 
before the Senate, right?
    Mr. Henderson. No, sir, we had planned to have an appeal 
process.
    Mr. Stupak. You planned, but you didn't have one. I mean, 
those dealers who were closed, when they were given their 
notice they were closing, they did not receive a way to appeal. 
You announced it that Wednesday, and then Thursday the process 
was made, e-mailed to everybody, and they had until Monday to 
submit their documents on appealing, right?
    Mr. Henderson. Yes, they needed to submit their documents, 
sir.
    Mr. Stupak. OK.
    Does Chrysler have any appeal process for any of dealers 
that were closed?
    Mr. Press. No, sir.
    Mr. Stupak. So, if I may, Mr. Press, then the dealers you 
closed, there could have been some mistakes made then.
    Mr. Press. Our situation, I think, is different from 
General Motors, and therefore the conditions are not really--
would be favorable for having an appeal process.
    Mr. Stupak. Because of the short time frame?
    Mr. Press. No, not the short time frame. The reason is that 
in General Motors, I believe, and I am not totally aware, I 
think they have a term agreement which is not being renewed, 
and there is a process to go through for nonrenewal.
    Our situation is quite different from a standpoint that our 
company went bankrupt, a new company was formed----
    Mr. Stupak. Correct.
    Mr. Press [continuing]. To take a different dealer body 
forward. And, strategically, that dealer body that was taken 
forward was based on criteria not performance-oriented, but 
strategic performance criteria with regard to single lines 
versus tri-branding and many other aspects that really--for 
example, locations or even the population and demographic 
projections.
    Mr. Stupak. But the single line and tri-vehicle, that is 
not the dealer's fault. That is Chrysler's fault. I mean, if 
you got two minivans that are the same thing other than the 
seats, the grill, and the design, that is not their fault. That 
is really Chrysler's fault. So why are they being punished?
    Mr. Press. Great question, sir. I understand why you would 
ask that, and I understand the passion----
    Mr. Stupak. You know, I drive an Oldsmobile. They did away 
with it. I drove an Oldsmobile all my life. My last one here I 
am nursing along, I have pretty close to 200,000 on it, and I 
don't want to leave it. But at least I got other options. But I 
am mad that they closed Oldsmobile.
    Mr. Press. Yes, sir.
    Mr. Stupak. But I understand the double branding. So why 
couldn't----
    Mr. Press. I have been with the company a short time. I 
came from Toyota for 37 years.
    Mr. Stupak. OK.
    Mr. Press. And I think that everybody understands the 
difficulties that our company has had with regard to integrity 
of product, quality, and appeal. In asking why that is, it 
isn't because people don't want to build good cars and trucks. 
There are insufficient resources available to do the 
engineering and development necessary to build winning formula 
vehicles.
    In our case, it isn't just wheel covers and grills. It is 
about $250 million to $300 million per sister vehicle.
    Mr. Stupak. Sure.
    Mr. Press. And that investment doesn't return any 
incremental sales, and it requires that we advertise the two 
cars against each other. And it is one of the most important 
reasons why the company went bankrupt, is that we kept kicking 
this problem down the road instead of addressing it, which is 
what we did.
    Mr. Stupak. My time is up. But that's your decision; the 
dealers. Even the dealers who survive, it's not their problem 
that we have a sister vehicle, as you call it. That's really 
Chrysler's problem. And the new Chrysler has got to address it.
    So drop one, like you did on my Oldsmobile. Drop one.
    Mr. Press. We did, sir. We did. And 555 of the dealers that 
are discontinued were selling not 3 brands, but 1. That was a 
necessary part of this. It wasn't our desire. It wasn't a plan. 
But 555 of these dealers that had only 1 brand won't have 
viable products coming. And unless all three brands are under 
one roof, the dealer body isn't going to be viable.
    Mr. Stupak. My time is up, but a retort would be: Why not 
allow those one-brand dealers to sell all three of your 
vehicles and keep them open?
    Mr. Press. Well, because our volume has gone from over 2 
million a year to 700,000, and the only way our dealers will 
ever survive--and I think these dealers all really understand 
that--is to have all three brands under one roof, where they 
can put together the synergy, the total customer base, and the 
fixed costs will be covered. That's something that everybody 
wants. We've known that for 10 years.
    Mr. Stupak. Then let them do it.
    Mr. Walden, for questions.
    Mr. Walden. Mr. Henderson, a question for you. Who is the 
purchaser of GM?
    Mr. Henderson. The purchasers of General Motors, sir, will 
be 60.8 percent the United States Government, 11.7 percent the 
Canadian Government, 17\1/2\ percent of the shares will be held 
by a VIVA Trust, and the remaining approximately 10 percent 
will be held by the unsecured claimants of General Motors.
    Mr. Walden. And so the vehicle acquisition holdings is 
really dominated by the U.S. Treasury.
    Mr. Henderson. They will be the primary shareholder.
    Mr. Walden. So, in your filing in the bankruptcy court, 
when you say on page 40 here, ``Because there are now far more 
dealerships than the company's market share can support, 
including, in some cases, multiple dealers in a single 
contracting community and dealerships that have become poorly 
situated as a result of changing demographics, the purchaser is 
not willing to continue all dealerships.''
    That purchaser, you've told me now, is the U.S. Treasury.
    Mr. Henderson. Yes, the purchaser, the largest shareholder, 
is the U.S. Treasury.
    Mr. Walden. And it goes on to say here in your comments to 
the court, ``Among the dealerships the purchaser is not willing 
to continue, for example, are those approximately 400 dealers 
who sell fewer than 50 cars per year and those approximately 
250 dealers who sell fewer than 100 cars per year. 
Approximately 630 other dealerships are not being continued 
because they are dealers who, in whole or substantial part, 
sell brands that are being discontinued.''
    Mr. Henderson. That's correct.
    Mr. Walden. So the question we've been trying to get to the 
bottom of, who is dictating how many dealerships are allowed to 
go forward for General Motors? You've told me here, under oath, 
that it's the purchaser--I mean, that's what you testified in 
the bankruptcy court, that it was the purchaser who made that 
decision. And that purchaser is the U.S. Treasury.
    So doesn't that lead us back to the Auto Task Force making 
the decision that you're now having to implement?
    Mr. Henderson. The Automotive Task Force, as we've gone 
through this process, has asked us to go through the process of 
right-sizing our dealer body. They said if they're going to buy 
the company, they want to have a right-sized dealer body. So 
they asked the management to develop a strategy to accomplish a 
world-class, correctly-sized dealer body. They were not willing 
to take on our dealer body as it stood, sir.
    Mr. Walden. OK. But I thought I've read that some of you 
have said they didn't have anything to do with setting the 
dealer levels.
    Mr. Henderson. They did not tell us a number.
    Mr. Walden. Yet, in your testimony in the bankruptcy court, 
you say, for example, are those approximately 400 dealers who 
sell fewer than 50 cars and those approximately 250 dealers who 
sell fewer than 100 cars per year.
    Mr. Henderson. That's true, yes.
    Mr. Walden. These are ones the purchaser is not willing to 
continue.
    Mr. Henderson. Amongst others.
    Mr. Walden. So the purchaser did tell you they're not 
willing to continue those dealerships.
    Mr. Henderson. The purchaser asked us to develop a strategy 
to have a competitive world-class dealer body. One of the 
issues that we had were the approximately 400 dealers who sold 
less than 50 cars per year, in terms of not----
    Mr. Walden. So you're telling me the task force didn't tell 
you that these dealerships that sell fewer than 50 cars per 
year had to go.
    Mr. Henderson. What I'm saying, sir, is that the task force 
advised us to develop a strategy to have a world-class dealer 
body, properly sized, and address what they considered to be 
serious concerns, which they articulated, for example, in the 
March 30th findings on our viability plan.
    Mr. Walden. On page 5 of your testimony, you have, ``We 
have not terminated any dealers.'' Do you believe that?
    Mr. Henderson. Yes. Can I explain?
    Mr. Walden. Yes, please.
    Mr. Henderson. What we've done is we've offered dealers who 
will not continue with us wind-down agreements. The intent of 
those wind-down agreements is to provide a period of time with 
which to wind down their facility, provide compensation to 
them, allow them to purchase parts, perform warranty service, 
and, over time, we wouldn't renew their contract, and they 
would no longer be with us.
    Mr. Walden. OK. And beginning this fall they can't buy the 
2010 model year cars from you, can they?
    Mr. Henderson. They will not be able to purchase new 
vehicles, that's correct, sir.
    Mr. Walden. So it sounds to me more like you've diagnosed 
them with terminal cancer, just not going to take them out--Mr. 
Thomas, do you feel terminated?
    Mr. Thomas. Very much so. I feel terminated.
    Mr. Walden. Why do you feel terminated?
    Mr. Thompson. Well, because I don't have an opportunity to 
be a full-fledged General Motors dealer anymore. I can't order 
new cars, I can't return parts. I'm partially in the game, but 
I'm not really in the game.
    Mr. Walden. How about the gentleman next to you? Mr. 
Blankenbeckler, do you feel terminated?
    Mr. Blankenbeckler. Absolutely.
    Mr. Walden. Why?
    Mr. Blankenbeckler. The same reasons that Mr. Thomas said. 
The marketplace where I do business has viewed us as going out 
of business. The press has been to our dealership. TV stations 
have been to our dealership. My employees are extremely worried 
and extremely nervous. It's just like----
    Mr. Walden. I think you mentioned that you've had sort of 
standing offers from people to buy your dealership over the 
years.
    Mr. Blankenbeckler. There have been people that approached 
me. I'm sure Mr. Thomas has had people. Anybody who has a good, 
viable business.
    Mr. Walden. Could there have been a different strategy 
here, where if you weren't meeting the goals that General 
Motors set for you, you could have been given time to sell your 
dealership? Did they give you an opportunity to change up what 
it was?
    Mr. Blankenbeckler. No, sir.
    Mr. Walden. And when they've evaluated you in the past, did 
they ever say, look, if you don't do these seven things, the 
next reauthorization we are not going to be there for you?
    Mr. Blankenbeckler. No, sir, they didn't. Outside of 
bankruptcy, they couldn't say that. That's why they wouldn't.
    Mr. Walden. My time has expired, Mr. Chairman. Thank you.
    Mr. Stupak. Thank you, Mr. Walden.
    Mr. Dingell for questions, please.
    Mr. Dingell. Mr. Chairman, thank you.
    Mr. Chairman, we are engaged in a very difficult business 
here. We have to decide how we are going to protect the rights 
of the dealers and at the same time see to it that we 
restructure our American automobile industry so that we save 
the rest of the dealers, as many of the workers as we can, the 
jobs in the communities that are affected. That will be one of 
my questions today.
    First of all, to Mr. Press and Mr. Henderson, do you have 
written rules for the closure of dealers and for the 
termination of the dealers? Yes or no?
    Mr. Press. Yes.
    Mr. Dingell. Mr. Henderson.
    Mr. Henderson. Yes, sir.
    Mr. Dingell. Would you please submit each of them to the 
committee with such accompanying remarks you would like to 
make?
    Now, there's no appeal right for a dealer, in the case of 
Chrysler; is that correct?
    Mr. Press. That's correct.
    Mr. Dingell. Are there appeal rights for General Motors?
    Mr. Henderson. Yes, there are, sir.
    Mr. Dingell. Would you submit to the committee the precise 
character of those appeal rights?
    Now, would you tell us, please, Mr. Henderson and Mr. 
Press--just give us the number--how many of the dealer 
terminations have been changed by the companies under your 
appellate procedures or under your categories and standards?
    Mr. Henderson. At this point we've changed 45 decisions. We 
are not completed with reviews, but that's the status as of 
this morning, sir.
    Mr. Dingell. Mr. Press.
    Mr. Press. We have had no change.
    Mr. Dingell. I've heard of a dealer who was terminated--I 
won't tell you which company it was--where a big storm had 
caused the collapse of a bridge, and that dealer was 
essentially shut off from access to his customers. And he was 
terminated, but the company involved has seen fit to reinstate 
the dealer because they understand the facts.
    Do you have provisions in your termination agreement, Mr. 
Henderson and Mr. Press, that would permit you to address that 
kind of a problem?
    Mr. Henderson. Yes, sir. That was a General Motors dealer. 
And when we relooked at the facts after the submission, we 
concluded that we were in error in our decision, and we 
reversed that decision.
    Mr. Dingell. Now, Mr. McEleney, if the legislation that we 
are working on passes, and if it screws up the bankruptcy 
process and causes the collapse of either or both of the 
companies down the road, we're going to have a rather nasty 
situation on our hands. Part of it is going to be that we're 
going to see all the dealers out of business, all the plants 
close, all the communities hurt, all the workers and all the 
suppliers hurt. What do we do about that situation?
    Mr. McEleney. Sir, I think that with that situation--you 
know, this is not a normal bankruptcy. This is, as you well 
know, a government-negotiated bankruptcy.
    Mr. Dingell. I understand those things, but what are we 
going to do if that result is occasioned by the situation we 
confront?
    Mr. McEleney. I don't think that will happen. I think that 
the fact that the government is involved in this, they are 
going to prevent that from happening.
    Mr. Dingell. Is that a statement or a hope that it is not 
going to happen?
    Mr. McEleney. I guess that is a hope, a fervent hope.
    Mr. Dingell. I join you in that hope.
    Mr. McEleney. Thank you.
    Mr. Dingell. Mr. Press, Mr. McEleney asserts this: None of 
Chrysler's submissions to the government prior to the May 14 
announcement could have been interpreted to put Chrysler 
dealers on notice of the scope of the terminations that 
followed.
    Is that statement true, yes or no?
    Mr. Press. I'm sorry?
    Mr. Dingell. Mr. McEleney states as follows: None of 
Chrysler's submissions to the government prior to the May 14 
announcement could have been interpreted to put Chrysler 
dealers on notice of the scope of the terminations that 
followed. Yes or no? Is that true?
    Mr. Press. We've had a Genesis program, dealer 
consolidation program, in place for more than 10 years. I think 
the majority of those dealers had a good, long time to prepare 
for that.
    Mr. Dingell. Would you submit for the record your comments 
that prove that this is not the case?
    Now, Mr. McEleney, did General Motors give adequate warning 
prior to its May 15 announcement that it would be winding down 
approximately 1,200 dealers? Yes or no?
    Mr. McEleney. Yes.
    Mr. Dingell. Mr. Press, please describe briefly what 
Chrysler is doing to reclaim and redistribute the inventory of 
the 789 dealerships it announced would be closed.
    Mr. Press. Mr. Dingell, just 1 second. I now think I 
understand your question about notification to the dealers 
versus knowing that there was a reason they may not stay in 
business. The notification to dealers, there was not any 
additional time given. The primary reason for that was until 
April 30 at 6 o'clock at night, before we had to file for 
bankruptcy, we did not plan to. This was not a plan to go 
forward. We had no knowledge of this. After that, May 1 is when 
we began to develop this program. So there was no notification.
    Mr. Dingell. Now, Mr. Press, if you please, what is 
Chrysler doing to reclaim and redistribute the inventory from 
the 789 dealerships it has announced will be closed?
    Mr. Press. Well, we have committed that we will 
redistribute every single vehicle and every part.
    Mr. Dingell. How about specialized equipment?
    Mr. Press. And specialized equipment. And I'm happy to say 
that 100 percent of the vehicles have already been committed 
to. They have started moving. We're at 80 percent on the parts 
and about the same on specialized equipment. We will continue 
to work until that commitment is fulfilled and all of those 
burdens are relieved.
    Mr. Dingell. Now, I want you to listen to this question 
carefully. How much is it going to cost each dealer that is 
being terminated on each car from the termination? Are there 
any fees associated with that? Do they get the full value of 
the car? Is it a distressed price? How will that be addressed?
    Mr. Press. The price is the invoice price they paid, less 
$350 for inspection, cleaning, and transportation to the dealer 
that will be selling the vehicle.
    Mr. Dingell. Can General Motors give me the same answer, 
Mr. Henderson?
    Mr. Henderson. Sir, in the case of General Motors, to the 
extent the dealer signs a wind-down agreement, we would expect 
them over the course of the next 17 months to sell down their 
inventory. And they would be afforded the same treatment as any 
other General Motors deal with respect to retail incentives and 
support for selling to customers.
    Mr. Dingell. How much cash money are they going to be out 
in the case of General Motors?
    Mr. Henderson. They shouldn't be out any.
    Mr. Dingell. So you're going to take back inventory, parts, 
vehicles, and specialized equipment.
    Mr. Henderson. In the case of General Motors, if a dealer 
chooses to wind down, we anticipate that through that period 
they would not only sell their cars, they would sell their 
parts by virtue of the fact they would be able to provide 
warranty and service to customers. And then finally the tools 
would be amortized.
    With respect to a dealer who terminates, if they just 
choose to voluntarily terminate, by virtue of our agreement 
with GMAC, a dealer can return the cars to GMAC, and we would 
redistribute the cars with no cost to the dealer.
    Mr. Dingell. Thank you. My time has expired.
    Mr. Stupak. Mr. Press, on Mr. Dingell's question, $350 for 
a 2009 model. But if they're turning back a 2008 model, it's 
$1,500.
    Mr. Press. There's a curtailment for the model year, it is 
$1,500, yes, sir.
    Mr. Stupak. Why do they have to pay you to take back the 
vehicles when you shut them down?
    Mr. Press. I'm sorry?
    Mr. Stupak. Why do they have to pay you $350 or $1,500 when 
you shut them down?
    Mr. Press. First of all, obviously the company filed 
bankruptcy. It's a defunct organization. The fact of the matter 
is in a bankruptcy all precedent would be that the inventory 
would be the responsibility of the dealer if the company that 
they are franchised with is no longer in business.
    There was not a provision in possession financing. It 
couldn't be provided to buy the cars back. And so our challenge 
was--and it was a good one--without using taxpayer money, to 
find a way to relieve the dealers of the inventory, and do it 
in a manner where it didn't cost the taxpayers, which we did 
through the redistribution program.
    And so that redistribution program was implemented, and we 
did redistribute 100 percent of the vehicles. We're happy to 
say that that's complete.
    Mr. Stupak. That had to happen very late last night, 
because as of 7 o'clock last night, we still had phone calls 
from dealers saying, we have cars and they won't take them 
back.
    Mr. Press. We will take every car; we will redistribute any 
car. We've made that comment. We've had written notices. It's 
been in the Senate. It's been in the newspaper. We will 
continue to provide the dealers information and evidence of 
that. We have redistributed the cars to other dealers. They 
physically may not all have left the lots, because we weren't 
able to begin moving them until yesterday when the new company 
formed, but we are at it.
    Anybody who has that, please give them my name. I'd be 
happy to talk to them.
    Mr. Stupak. We will. I know you mentioned taxpayers. Every 
one of these dealers are taxpayers, too.
    Mr. Barton for questions, please.
    Mr. Barton. Thank you, Mr. Chairman.
    As you know, there's another hearing going on, and so I 
have been kind of shuttling back and forth. I also need to 
alert Mr. Blankenbeckler that there's a plane to Texas calling 
my name. I may leave after these questions.
    I want to ask Mr. Press and Mr. Henderson--and you may have 
already answered this--but is there an established set of 
criteria for evaluation of which dealerships were to be closed 
and which were to be left open? Do you all have actual criteria 
in writing on how you evaluated dealerships for closure or 
remaining open?
    Mr. Henderson. Yes, sir, we do. And we submitted those last 
night, actually.
    Mr. Barton. The same for you, Mr. Press.
    Mr. Press. Yes, sir, we do.
    Mr. Barton. Did the dealers know of these criteria?
    Mr. Press. In our case they were not notified of the 
criteria prior to the notification.
    Mr. Barton. What about you, Mr. Henderson?
    Mr. Henderson. In our case we have identified what the 
criteria are, but, in fairness, haven't weighted that. So the 
dealers don't necessarily know what the weighting of all the 
individual criteria are, the two most important of which are 
sales effectiveness and customer satisfaction.
    Mr. Stupak. Mr. Barton, if I may.
    You say you submitted them last night. To who?
    Mr. Henderson. To the staff, I think, of this committee.
    Mr. Stupak. This committee.
    Mr. Henderson. We can resubmit them.
    Mr. Stupak. We don't have them.
    Mr. Henderson. We'll get them to you if you don't have 
them.
    Mr. Stupak. The point is you're under oath. And I don't 
want people to think that we're holding something back here. We 
don't have any criteria agreements.
    Mr. Barton. I think we have just established one of the 
puzzlements. It's somewhat unfair to Mr. Blankenbeckler and Mr. 
Thomas and the other dealers to be told that their dealerships 
are going to be revoked, and yet they didn't have any prior 
knowledge of the analysis and the criteria that were being 
used, and apparently to this day don't have the knowledge.
    Mr. Blankenbeckler, do you think that's a fair way to run a 
railroad?
    Mr. Blankenbeckler. No.
    Mr. Barton. Mr. Thomas.
    Mr. Thomas. I think it's been an opaque process.
    Mr. Barton. That's been one of the problems, I hope Mr. 
Henderson and Mr. Press realizes.
    Mr. Stupak. Is this the document?
    Mr. Henderson. I apologize, sir. Yes, this is the document. 
On page 3 of the document, we outline the dealer performance 
score. And the weightings are actually in there: 50 percent 
sales, 30 percent customer satisfaction. It's on page 3 of the 
document.
    Mr. Stupak. The staff took this as just a PowerPoint 
presentation. They didn't realize this was the criteria you 
used. After looking at it, they didn't think it helped much. So 
this would be the criteria you said you used then.
    Mr. Henderson. This was the dealer performance----
    Mr. Stupak. We'll have copies made and give it to everybody 
here.
    I'm sorry. Mr. Barton.
    Mr. Barton. Mr. Blankenbeckler, since you've received your 
two letters, has anybody from either company, Chrysler or GM, 
come to you and said, we want to explain why we've done what 
we've done, and we want to give you a chance to show us the 
error of our ways, and if you wish to continue a business 
relationship, here's what you need to do?
    Mr. Blankenbeckler. No, they have not.
    Mr. Barton. Mr. Henderson and Mr. Press, do you think it 
would be a reasonable business practice to give dealers that 
have, in some cases, had decades of relationships with the 
companies that you had some opportunity to know why they were 
evaluated the way they were, and give them some opportunity to 
show why they may have been evaluated unfairly?
    Mr. Press. Yes, sir, I do. I would like to add that because 
of the fact that our notification was coincidental with the 
bankruptcy action and a lawsuit that was brought, and the fact 
that we couldn't have a lawyer in an active lawsuit involved in 
every discussion, we were not in a position to do that until 
yesterday. And we are more than happy to have those discussions 
going forward, now that that lawsuit has been finalized.
    Mr. Barton. Mr. Henderson, would you like to comment on 
that?
    Mr. Henderson. Yes, sir. As of yesterday, we had received 
856 requests to reconsider our decision. As I said in my 
testimony, we had reversed 45 of them. We had expected to 
complete that review by today, but given the number of 
requests, we are planning to work through the weekend and into 
Monday to finish this, and certainly are willing and open to 
consider any and all requests for consideration.
    Mr. Barton. Mr. Blankenbeckler, you don't have to answer 
this question if you don't wish to, but you have told me 
privately the amount of investment you have in your dealership. 
If you wish to acknowledge that, I would appreciate if you 
would. But, in any event, if you don't, do you feel that before 
that investment, which has been built up over 84 years, is just 
wiped out, that you should have some opportunity to get some 
remuneration or at least have a reasonable discussion about 
remuneration with GM and Chrysler?
    Mr. Blankenbeckler. I can't imagine why that wouldn't be 
the case in the country. I don't see--as I said in my 
statement, I don't see how that can happen.
    Mr. Barton. Could you give a general parameter of the 
amount of the investment your family has made in these two 
dealerships over the years? You don't have to if you don't want 
that.
    Mr. Blankenbeckler. I really don't care to state that.
    Mr. Barton. I'll just state for the record, Mr. Chairman, 
it's substantial.
    Mr. Blankenbeckler. It's a large sum of money.
    Mr. Barton. It is orders of magnitude more than my net 
worth, Mr. Chairman. I will put it that way.
    With that, my time has expired, and I yield back.
    I do want to thank our witnesses. I want to thank, again, 
our Chairman. I do hope, when talking directly to Mr. Henderson 
and Mr. Press, you'll will come up with some protocol that 
dealers like Mr. Blankenbeckler that wish to continue a 
relationship are given a fair opportunity to present their 
case. I hope you will do that. Thank you, Chairman Stupak.
    Mr. Stupak. Thank you, Mr. Barton.
    Mr. Braley for questions.
    Mr. Braley. Mr. Press, do you know a Jennifer Fox?
    Mr. Press. I don't know. I may.
    Mr. Braley. Do you know a Jennifer Fox who works in 
Chrysler's Washington, D.C., office?
    Mr. Press. Yes. I don't know her last name.
    Mr. Braley. I assume if she uses an e-mail address that 
ends in Chrysler.com, that's an employee of Chrysler.
    Mr. Press. I assume, yes.
    Mr. Braley. Are you aware that Chrysler is attempting to 
convince Chrysler dealers who have not been terminated to 
engage in a lobbying effort to point out the positive aspects 
of the consolidation through bankruptcy that has been going on?
    Mr. Press. I'm aware of the fact that because of the 
publicity that has been provided, that there are 2,391 dealers 
who have benefited, and are dealers, and give to Little League, 
and long-time, 100-year-long dealers who want an opportunity to 
also make their position known, sir.
    Mr. Braley. Are you aware Chrysler has been sending out 
talking points under a heading ``Key Messages Memo'' that says 
things like Chrysler LLC made the appropriate business decision 
to move forward with the dealer network that overall can be 
thriving and profitable; and the automobile industry cannot 
support the number of dealers that currently exist; and dealers 
have known that Chrysler wanted to consolidate dealerships and 
locate all three brands under one roof. They started the 
process more than 100 years ago. And we understand that the 
process to evaluate the dealers was a thorough process based on 
data-driven metrics. And as a dealer moving forward with the 
new company, I plan to purchase some of the eligible inventory 
of some of the rejected dealers.
    Were you aware that was going on?
    Mr. Press. That's all in our testimony submitted to you. 
It's part of the consistent communication of those points. A 
number of dealers asked that they would like to be able to make 
their voice known as well through this.
    Mr. Braley. Let me just ask you about the one point, that 
dealers have known--this has come up during the testimony 
today--that Chrysler wanted to consolidate dealerships for more 
than 10 years.
    If that is truly the case, sir, then can you tell us why 
that didn't happen in the numbers we have seen until this 
bankruptcy arose?
    Mr. Press. It has been happening, yes, sir. A great 
question. I can understand why you would ask that.
    The fact of consolidation has been an ongoing process for a 
number of years. In fact, a year and a half ago when I came, we 
actually had meetings, and dealers were identified. They know 
which dealers were going forward, which locations would be 
going forward. We gave them a toolbox of things in terms of 
real estate, of tax planning to facilitate those discussions 
and transactions. And some of them did.
    Mr. Braley. You have to agree with me that the volume of 
closed dealerships over that 10-year period paled in comparison 
to the announcement that grew out of the bankruptcy; isn't that 
true?
    Mr. Press. That's because the bankruptcy was caused by the 
fact that we were made to support specific vehicles for 
standalone dealers. And the fact that we are a failed 
enterprise, that didn't get carried forward. A new company was 
formed that is going to go forward.
    Mr. Braley. I understand that. And I only have 5 minutes, 
so I'm going to move on to something else. You talked in that 
statement about these data-driven metrics. Is that the plan, 
the criteria that Mr. Dingell and Mr. Barton requested? Will 
those contain the data-driven metrics that you have justified 
in this memo?
    Mr. Press. Yes. And we have submitted in our testimony what 
the criteria is, and will provide additional data as requested.
    Mr. Braley. In your testimony before the Senate Commerce 
Committee, you said that Chrysler loses over a billion dollars 
annually and lost sales opportunities because of 
underperforming dealers. And, Mr. Henderson, you claimed in 
similar testimony that dealers add $1,000 of cost to every 
vehicle.
    So my question for both of you is: Do you have financial 
analysis that was conducted before the decision was made to 
terminate these dealer franchises that supports those 
allegations you made in your testimony?
    Mr. Press?
    Mr. Press. Yes, we have the analysis of the sales 
situation. That does exist. We knew what the number was.
    Mr. Braley. Was that submitted as part of your testimony 
for today's hearing? Do we have that information?
    Mr. Press. You do not have it by dealer.
    Mr. Braley. Can you provide it to the committee?
    Mr. Press. There is confidentiality in data that we receive 
from dealers.
    Mr. Braley. Well, I know that there are means to redact 
information to protect confidentiality and still provide the 
information that I'm seeking. If there's a way to arrange that, 
would you agree to provide it to the committee?
    Mr. Press. Yes, as long as it can be done within protecting 
the dealers' rights.
    Mr. Braley. The committee, I'm sure, will be happy to work 
with you.
    Mr. Henderson, the same question for you. Does GM have the 
data to support this statement that you made that these dealers 
are costing your company $1,000 per vehicle?
    Mr. Henderson. Sir, as I mentioned in my testimony, we have 
an overall cost of $1,000 per vehicle. That cost is articulated 
in the same package that we submitted last night. It's 
approximately $2 billion, 2 million units.
    Mr. Braley. Do you have the underlying data that was used 
to make that calculation, and is it in the materials that we 
have received?
    Mr. Henderson. Yes, sir.
    Mr. Braley. You can identify that for the committee.
    Mr. Henderson. On page 9, sir.
    Mr. Braley. All right. And so on that page where you made 
the calculation, do you have supporting documentation for the 
conclusions that show the portion for dealer margin, incentives 
paid directly to dealers, standards for excellence, and on and 
on? Those numbers aren't just published somewhere as a standard 
cost factor associated with the sales of each vehicle, are 
they?
    Mr. Henderson. What I outlined in my testimony, sir, is 
that these are costs which over time have come into our 
structure to provide direct support to dealers. Over time. 
Those are not identified per individual dealer because, in 
fact, they're provided to all of our dealers. But to the best 
of our knowledge, our best-in-class competitors do not supply 
that same sort of support.
    Mr. Braley. Mr. Chairman, my time has expired, but it seems 
to me there are still plenty of unanswered questions that the 
committee needs to explore on this subject.
    Mr. Stupak. Thank you, Mr. Braley.
    I ask unanimous consent to put this document that's from 
General Motors that looks like they may have e-mailed last 
night, 10 pages, the one we have been discussing, without 
objection.
    [The information was unavailable at the time of printing.]
    Mr. Walden. Mr. Chairman, without objection. But I would 
just make the point it might be helpful for the dealers to be 
able to see a copy of this to review.
    Mr. Stupak. Since it's in the record, we will go ahead and 
put it on the table. If they want to look while we're going 
here, that would be fine. It's part of the record.
    Next, I will move Mr. Burgess for questions, please. Five 
minutes.
    Mr. Burgess. Thank you, Mr. Chairman.
    I've got a map here of the United States. This actually 
pertains just to Chrysler for the moment. It looks like what a 
Republican might want the electoral map to look like.
    This reflects closed Chrysler dealers. You see my State of 
Texas. Although we've been relatively spared in the economic 
downturn, our State has been hit pretty hard with these 
closings.
    Now, there's a Member in a State way up in the Northeast--I 
think he's the Chairman of the House Financial Services 
Committee--that was able to make a phone call and get one of 
his dealerships or distributors to stay open. My question is: 
What is the number that I need to call? Is it 1-800-CAR-CZAR? 
Tell me who to call so that I can help the dealers that are in 
my area that have been so badly hurt by this.
    Mr. Press. You're asking that for Chrysler?
    Mr. Burgess. Yes.
    Mr. Press. I don't understand your question. With all great 
respect for the office, I have to say that I'm not aware of any 
dealer that was ever removed from the list that was submitted 
to the judge on the 14th. I have no knowledge of that. I would 
very much like to see, if I could get that.
    Mr. Burgess. Well, it was in all the papers yesterday, and 
I'm sure we can get a copy. Barney Frank made a call to someone 
and got his dealer to stay open. Again, it's unconscionable, 
with what's going on in this country. I also sit on the Joint 
Economic Committee.
    I beg your pardon. I was just told it was a GM dealer. 
Perhaps Mr. Henderson can answer that.
    Mr. Henderson. Actually, it's not a dealer at all.
    Mr. Burgess. Just tell me the telephone number that I call. 
That's really what I'm after here.
    Mr. Henderson. Sir, what we were asked to do was look at 
the timing of three after-sales warehouses which belonged to 
General Motors and were part of our restructuring plan, 
including facilities to be closed.
    Mr. Burgess. I'm going to direct you, in the interest of 
time. The fact is that a Member of Congress made a call, and a 
distributorship was not closed that was slated for closure. It 
is fundamentally unfair. You see the people that are sitting at 
this table. You've heard their stories. They represent families 
back in everyone's district across the country.
    This process has to be open and transparent and fair. We 
have a President who was elected on the promise of transparency 
and fairness. I don't think that is being delivered right now.
    Now, who wrote the language of the wind-down agreement? Can 
either of you answer that?
    Mr. Henderson. In our case, it would have been General 
Motors, the staff of both the sales organization as well as our 
counsel.
    Mr. Burgess. And for Chrysler?
    Mr. Press. There is no similar agreement. We have a very 
different situation. We have no wind-down agreement.
    Mr. Burgess. With whom in the White House have either of 
you communicated regarding the restructuring of both of your 
organizations?
    Mr. Press. Our restructuring plans have been part of our 
bankruptcy and part of our application for funds. As the TARP 
funds were available through U.S. Treasury, they have been made 
aware of our process in discussions. But absolutely 
operationally they have not had any input or direction in what 
we're doing.
    Mr. Burgess. Would this committee be able to get access to 
the e-mails between your company and the White House regarding 
the restructuring and, in the case of General Motors, the wind-
down?
    Mr. Press. Yes, absolutely.
    Mr. Burgess. Will it be necessary--we, of course, can 
subpoena, if I can convince the Chairman to do so, but it would 
be easier if that could just be made available to us.
    Mr. Henderson. Sir, in our case I have no idea how many 
that is. But we have been keeping--we would keep some of them 
that would be subject to litigation hold and some that wouldn't 
be. I will come back to you.
    Mr. Burgess. Let me ask you this: Have either of you ever 
spoken to Brian Deese?
    Mr. Henderson. I have.
    Mr. Press. Yes.
    Mr. Burgess. Have you exchanged e-mails with this 
individual?
    Mr. Henderson. I think so, yes.
    Mr. Press. I don't think I've ever addressed one to him. I 
may have seen some e-mail.
    Mr. Burgess. Mr. Chairman, I would just submit that I would 
be particularly interested in those e-mails to be made 
available to the committee and made part of the record.
    And I do want to spend some time with Mr. Golick before I 
finish up.
    Here's the deal. TARP funds, taxpayer funds, taxpayer funds 
paid by the employees of these dealerships have gone to fund 
the closing of these dealerships. I sit on the Joint Economic 
Committee. We saw unemployment numbers for last month in excess 
of 9 percent, heading for 10. And what's that number going to 
look like after you decimate these dealers across the country? 
Now, that's a rhetorical question. I don't expect an answer.
    Mr. Golick, I do need to ask you--and I didn't intend to 
ask this--but your story is so similar to a story I heard down 
in my district; a gentleman being required, badgered, brow-beat 
into buying a dealership, and now he's faced with having to 
close his original dealership and the one he purchased.
    Are you aware of other areas in the country where that 
occurred?
    Mr. Golick. Now, it's general--for some reason there's 
always some kind of animosity between the factory and the 
dealer. It doesn't need to be. Ford right now has--there's no 
animosity between the factory and the dealerships. I think 
they're going to come out of this OK.
    Mr. Burgess. Let me ask you this before my time is up: Are 
you getting remuneration from the manufacturer to dispose of 
your inventory and your light bulbs?
    Mr. Golick. I'd love to tell you about that. Mr. Press 
makes it sound like sunshine and lollipops. Your exact words 
were: Invoice minus $350. We're selling the cars for invoice, 
minus the holdback, minus the floor plan, minus the PPA, then 
minus the $350. We're selling the cars for $1,500 below 
invoice, on average.
    We normally sell to the public at invoice. That's 
generally--right around there. So we're selling the cars for 
$1,500 less than we normally do to the other dealers.
    Mr. Burgess. What about your parts inventory?
    Mr. Golick. Mine hasn't been addressed yet. I don't know. 
I'm still in a state of shock over everything.
    Mr. Burgess. I was told when Chrysler came in to see me 
yesterday evening in anticipation of this hearing, I was told 
they took care of all their dealers that they were closing; 
inventories would be purchased, cars would be purchased, parts 
inventories would be purchased. Is that your experience?
    Mr. Golick. What needs to be understood, there's no written 
procedure as to how we're going to get paid for these cars. 
Thank God I only have two new cars left, but some people have a 
half a million dollars worth of cars. From what we hear, cars 
are going to be trucked away, and then we're going to wait for 
the money somehow. I haven't seen anything on paper that says 
how we're going to get paid. Now, that's a very important 
aspect of everything here. Is there a written procedure?
    Mr. Press. First of all----
    Mr. Stupak. Last question, Mr. Burgess.
    Go ahead, Mr. Press.
    Mr. Press. I'd really like to respond to the issue about 
the reimbursement. The dealers are being reimbursed what they 
paid for the vehicle--what the vehicle cost them, less $350. 
The word invoice--when we invoice the dealer, their invoice 
includes these holdbacks that we collect and give back to them. 
But they're being paid what they paid us, less $350.
    Mr. Stupak. That's just for 2009; $1,500 for 2008.
    Mr. Press. Yes. In terms of the process, we have published 
to the dealers the process for the redistribution. We have 
asked the dealers to sign an agreement that would allow us to 
take that responsibility. Some of the dealers have done that, 
some of them haven't. About 78 still haven't. But all the other 
dealers have been notified what the process is. It's available 
for them to understand that that can be used.
    Mr. Stupak. Mr. Spitzer, I know you're jumping here to jump 
in on this one.
    Mr. Spitzer. You'd asked the question if Mr. Golick knew of 
other dealers in similar situations. Of our seven stores that 
were terminated, three of them were Project Genesis stores. One 
of them was underway. We purchased a piece of land at 
Chrysler's insistence for $1.6 million in the reorganization of 
the Akron market, and that store was in an area that they 
wanted to get away from.
    And we were operating interim while we were undergoing 
construction, and they agreed to hold off construction because 
of the market conditions for 1 more year, and then they 
canceled the franchise. We still own the dirt, and they are 
penalizing us for results in an area that they want us to get 
out of.
    Mr. Burgess. Mr. Chairman, I know my time is up. This just 
cries out for further investigation. I hope this committee will 
do a much--very thorough job as to what's been going on here. 
Again, in Texas it looks like we've cleared the decks. I don't 
know how we're clearing them from. Someone is likely to make a 
great deal of money off the reemergence of Chrysler. I'd like 
to know who that is and what's in the plan and what's in the 
works.
    I have a nagging suspicion that there is a political 
calculation here. And it is extremely distasteful when you look 
at these gentlemen who have had what I think unconstitutional 
takings of their private property.
    And I'll yield back.
    Mr. Stupak. Ms. DeGette for questions, please.
    Ms. DeGette. Mr. Press, I wanted to ask you if Chrysler has 
a similar set of written criteria as GM does for its closures.
    Mr. Press. I'm not familiar with this document.
    Ms. DeGette. Let me ask you this: Does GM have a written 
set of--I'm sorry, does Chrysler have a written set of 
procedures for its closures? Yes or no?
    Mr. Press. Yes. We've published that.
    Ms. DeGette. Does this committee have that?
    Mr. Press. It's been published.
    Ms. DeGette. Do you know if this committee has it, yes or 
no?
    Mr. Press. I can't answer that.
    Ms. DeGette. Mr. Dingell suggests that we have you submit 
that for the record. And we would appreciate that.
    Mr. Press. If you don't have it, I will.
    Ms. DeGette. Thank you very much.
    Secondly, I heard both of you, Mr. Henderson's and Mr. 
Press's testimony, about what could make a dealer profitable; 
that it could be coming from selling used cars or parts or 
service or other things. I guess my question, and I will start 
with you, Mr. Henderson, is: If a dealer is profitable, and 
it's buying cars from the manufacturer, which it's then 
selling, what does it matter if that profit center is derived 
from the service center, used sales, or new cars?
    Mr. Henderson?
    Mr. Henderson. Good question.
    Ms. DeGette. Thank you.
    Mr. Henderson. First, in the case of the dealers who are 
impacted in our wind-down situation, 69 percent of them were 
not profitable.
    Ms. DeGette. My question is: If a dealership is profitable, 
then what should you care about what center that profit is 
deriving from? Very quickly, please.
    Mr. Henderson. In general, we look at overall 
profitability, not individual centers.
    Ms. DeGette. Right. But if a dealer is profitable from 
whatever source, and buying cars from GM, why would you care 
if--I mean, if it's profitable, why not let it stay in 
business?
    Mr. Henderson. If a dealer is profitable we don't care if 
it's from parts----
    Ms. DeGette. Right. But why would you close a dealership 
like that?
    Mr. Henderson. Not in all cases our profitable dealers, for 
example, have high levels of customer satisfaction.
    Ms. DeGette. So now it's customer satisfaction.
    Mr. Henderson. There were multiple criteria, yes.
    Ms. DeGette. What about you, Mr. Press. What's your answer 
to that question?
    Mr. Press. My answer is, first of all, we have too many 
dealers.
    Ms. DeGette. Why would you care if they're profitable and 
buying cars from Chrysler?
    Mr. Press. Because the only way we're going to survive is 
to have all three franchises up under one roof. The only way 
any dealers will survive will be to have tribranding, first of 
all.
    Ms. DeGette. So one criteria is they have to have all three 
brands under one roof, right?
    Mr. Press. Directionally. That's the position that we are 
going to achieve. That's one, but not the only one.
    Ms. DeGette. Then you can talk about the other one. In 
Colorado, Chrysler has terminated five of the seven top-
performing dealers, including John Medved's Chrysler store in 
Castle Rock, which is not in my district, but it's south of my 
district. They sell all three brands under one roof, and they 
are profitable.
    So what would you say to them? You probably don't know each 
specific.
    Mr. Press. I think it's difficult to get into going through 
each individual dealership.
    Ms. DeGette. But what would your criteria be for a store 
like that?
    Mr. Press. First of all, I'm not sure if I understand. You 
say the top-performing store. I don't know what that means.
    Ms. DeGette. Five of the--the Chrysler dealerships are five 
of the seven top-performing dealerships in Colorado. And so 
this Medved dealership in Castle Rock is profitable, and it has 
all three brands under one roof. So for people like them, not 
them in particular, what would another criteria be?
    Mr. Press. One criteria would be if it's not top 
performing, its costing us sales.
    Ms. DeGette. So needs to be top performing, needs to have 
all three. And what else?
    Mr. Press. They have to have a minimum sales responsibility 
covered so that we're not losing money, revenue in that store.
    Ms. DeGette. Is that minimum sales responsibility covered 
in your written policies that have been distributed and what 
you're going to provide to us?
    Mr. Press. A minimum sales responsibility is a basic part 
of our agreement. Dealers all know what that is.
    Ms. DeGette. So it's in their agreement.
    Mr. Press. It could also be that the market that they are 
in is no longer viable. The fact of the matter is we have gone 
from 2 million units to 700,000. We don't have enough available 
product to support all the dealers in every market.
    Ms. DeGette. I don't mean to interrupt you. I understand 
what you're saying. But like Castle Rock, I'm going to tell 
you, is one of the fastest-growing areas. Douglas County, 
Colorado, is one of the fastest-growing counties in the 
country.
    So I guess, without getting into the particulars--I know 
you don't know the particulars of each single one, but I heard 
you say that, unlike GM, Chrysler does not have an appeal 
process. So my basic question to you is: Do these dealers 
know--people like Medved--do they know exactly why their 
dealership was terminated? Have they been given that 
information?
    Mr. Press. Because of proceeding in bankruptcy and the fact 
this coincided with a lawsuit, we were not in a position to 
communicate. I want to clarify that, because that was asked 
before, that now that we've come out of bankruptcy, we are in a 
position we will communicate to the dealers and let them know 
what the factors are.
    And we had a very robust process that was fair and 
equitable. It was tested and approved by the bankruptcy judge, 
by the appeals court in New York, and the Supreme Court of the 
United States. I would be more than happy to allow the 
committee members to see the same information. It's difficult, 
but we can go through individual dealers as you wish. We'd be 
happy to do that.
    Ms. DeGette. What you would say is that you did not tell 
these dealers before exactly why they were terminated. So you 
can understand why they are upset.
    Mr. Press. I understand their anger and upset. I can 
understand in my soul the whole situation. Being bankrupt is 
not a spectator sport.
    Ms. DeGette. Well, obviously. You know, I used to be a 
lawyer in a different life. I don't know of any provision in 
the bankruptcy rules that says you can't tell people. Maybe 
that was the bankruptcy judge that told you not to tell people. 
But it seems to me you to give people the information.
    Mr. Press. There was a lawsuit filed as part of that 
bankruptcy on behalf of the dealers, and it became very 
difficult for information, other than discovery, to go forward. 
Now that we're out of bankruptcy, we're fully prepared----
    Ms. DeGette. What's your time frame for that, sir?
    Mr. Press. We're fully prepared at any point to become 
transparent with the dealers that would like to.
    Ms. DeGette. So you can get that out, what, in the next 
week you think?
    Mr. Press. Perhaps sooner.
    Ms. DeGette. Great. Thank you.
    Thank you very much, Mr. Chairman.
    Mr. Stupak. Mr. Doyle for questions.
    Mr. Doyle. Thank you, Mr. Chairman.
    I am a cosponsor of H.R. 2743. It took me about 2 seconds 
to sign that one.
    Mr. Press, I'm trying to understand this. So you're saying 
that you have a very objective methodology to determine what 
dealers survived and what dealers didn't. I mean, you could 
feed the dealer data into a computer, and then you had this 
very objective criteria, and then a computer would spit out, 
without--was it that kind of a deal, or was there any 
subjective part to this?
    Mr. Press. We have over 200 people in the field from local 
markets that were part of the process of collecting the 
appropriate information. We have a data service that provides 
demographic and location information and identification of 
future trends. We have the process of understanding what 
franchises that we have, the criteria from the dealers' own 
scorecards.
    It's a number of pieces of information. It wasn't just a 
computer. It was vetted through a number of levels.
    Mr. Doyle. OK. Thanks.
    So one of the criteria is--why would a dealer who had maybe 
two of your three brands and was a performing dealer and a 
profitable dealer, why wouldn't they be given the opportunity 
to just pick up--that you start selling the third brand to 
them? What stops you from doing that?
    Mr. Press. Well, there's a couple of reasons. One of them, 
of course, is that you don't want to have two dealers that may 
be next door to each other selling the same products. I don't 
think the dealers really want that either. In fact, there are 
some laws that provide 10-mile separation, which should be 
respected. And so we have got to be careful to craft the right 
dealer network going forward that has the distance and the 
appropriate market so the dealers can survive.
    Normally, many of these locations where we have the single-
brand dealerships, they're in so close proximity that they have 
to be brought up into one. That means that one dealer may be 
chosen, and one may not. We have here that process, where the 
dealers that weren't chosen are in front of you.
    Mr. Doyle. Thank you.
    Mr. Golick, you sold two of the three brands, right?
    Mr. Golick. Yes.
    Mr. Doyle. Now, this minimum sales deal, have you met that?
    Mr. Golick. Yes. I have always been--by the way, there are 
two criteria--two main criteria that a manufacturer can use to 
terminate a dealership under the State franchise Laws. And the 
two main things are your minimum sales responsibility and your 
minimum working capital requirements. We have always been at 
150 percent of both of those.
    There's one other criteria, and it's taking care of the 
customer--your customer satisfaction. We've always been just 
about the highest in the State.
    Mr. Doyle. Mr. Chairman, I want to submit for the record, 
there's a site called DealerRater.com, where you can go on and 
look up dealerships. And they do ratings.
    I have Golick Jeep here, who consistently has a 5 out of a 
possible 5 customer satisfaction. Their 24-point rating, by the 
way, is 5.0, the highest you can get.
    I have another dealer--I won't name them out of respect for 
them--also in the same market area, that was kept--that their 
dealer rating is 1 on a scale of 1 to 5. This is a surviving 
dealer. Mr. Golick is a dealer--I'd like to submit these 
ratings for record.
    Mr. Stupak. Without objection.
    [The information was unavailable at the time of printing.]
    Mr. Doyle. Mr. Golick, I want you to grab that book on the 
table and turn to tab 14 on that book. Now, if you're looking 
at tab 14, this is an article that appeared in Automotive News 
on February 5, 2009, and it describes a conference call at 
which Mr. Press, the president of Chrysler, urged dealers to 
buy 15,000 cars from the company in order to save it.
    Now, let me read you to what Mr. Press reportedly said to 
the dealers: ``You have two choices. You can either help us, or 
you can burn us down.''
    Mr. Golick, are you familiar with this call?
    Mr. Golick. Yes. Very familiar.
    Mr. Doyle. The article also quotes Mr. Press as saying 
this: ``If you decide not to do that, we have got a good memory 
of who helped us and who didn't.'' Do you recall that, Mr. 
Golick?
    Mr. Golick. I very much do.
    Mr. Doyle. How did you feel about that? Did you take that 
as a threat?
    Mr. Golick. I have never heard that from an auto executive 
in my life. I've been in the business all my life. I never 
heard anything like that.
    Mr. Doyle. Mr. Golick, as a result, did you buy additional 
cars?
    Mr. Golick. You know what, I honestly can't remember. I 
think if I had to look it up, I probably did not on that 
particular month, but I did on the other months. I think 
Chrysler could provide you with that. But I have a feeling I 
did not that particular month he said that comment, as I 
fluffed it off and told my family I couldn't believe this guy 
said this.
    Mr. Doyle. Mr. Kiekenapp, did you get a similar call? Were 
you on that call?
    Mr. Kiekenapp. Yes, I was.
    Mr. Doyle. These quotes that were attributed to Mr. Press 
in the article, do you recall hearing that?
    Mr. Kiekenapp. Yes, I did.
    Mr. Doyle. Did you buy cars as a result of that call?
    Mr. Kiekenapp. No, I did not.
    Mr. Doyle. How about you, Mr. Spitzer?
    Mr. Spitzer. I was on the call. In some cases we bought 
them; in some of our stores we just couldn't take them.
    Mr. Doyle. 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.
    Mr. Spitzer. That's right.
    Mr. Doyle. Let me ask you, Mr. Press, is that an accurate 
quote in the paper, or you deny saying this?
    Mr. Press. It's accurate.
    Mr. Doyle. It's accurate.
    So let me ask you something, Mr. Press. You get on the 
phone and you ask your dealers to help you survive. You ask 
them to buy some more cars. You basically say you've got a good 
memory, and you'll 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--if dealers said we take that as a threat, and 
we resent it, and we're not going to buy any additional cars, 
would that be used to maybe retaliate against the dealers?
    Mr. Press. Absolutely not, at all, in any way, shape or 
form.
    Mr. Doyle. How do you take a statement like: We have a good 
memory of who helps us and who doesn't? If I made that call to 
you and asked you that, how would you take that call?
    Mr. Press. May I put that in context?
    Mr. Doyle. Sure.
    Mr. Press. I understand your question, and I also fully 
realize the way that that could be used in a manner that may 
not be accurate. But the situation was that we had a shutdown 
in December before Christmas. We made no production. We had 
asked for and received a very small part of our TARP funds. We 
had asked for TARP funds for the first quarter. We got 1 month. 
And we had to extend through February 14 our timing to submit 
to get additional TARP funds.
    In the month of February, we had insufficient production to 
meet cash flow targets that would have caused the company to 
liquidate. We had continued and were committed for everyone's 
sake to avoid bankruptcy and not liquidate the company.
    We did make an appeal to the dealers to please understand 
that we need to buy the February production. I realize that 
you're not out of cars, but if the company is going to make it 
through February, and we have a chance at getting the TARP 
funding--which we finally did, and we're still here today--we 
would need that help.
    Seventy percent of the dealers had purchased cars, 30 
percent hadn't. And my quote was something like, if you don't 
buy the cars today, we liquidate. We're gone. If we buy the 
cars and we can stay in business, at least we have a shot at 
getting to the end of this tunnel and getting some money.
    It's like a bucket brigade, and everybody's got a bucket.
    Mr. Press. Seventy of you have----
    Mr. Doyle. That statement's fine. I don't have a problem 
with that.
    Mr. Press. And 30 of you don't. And then I said, those of 
us in the bucket brigade will know which ones are in and which 
ones aren't, using the peer pressure of all of us, recognizing 
who's there.
    I am a dealer guy. I would never threaten a dealer. You can 
ask anybody in the United States, that 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's why we were so insistent on our redistribution 
program to make sure any dealer that took cars would be 
reimbursed. We added incentives.
    We had the best sales--in February, after that, we had a 
retail month, for the first time in history we outsold Ford. We 
sold those cars. We didn't want the dealers to store them. We 
wanted to save the company and get to this point where we could 
emerge from bankruptcy.
    Mr. Doyle. Three months after those guys did that for you, 
you cut those guys loose.
    I see my time is up.
    Mr. Stupak. Ms. Sutton of Ohio for questions, please.
    Ms. Sutton. Thank you, Mr. Chairman.
    There are just so many things I'd like to pursue, but I 
just want to start; Mr. Henderson, you said that GM has an 
appeal process. We've heard about that. I just want to ask you: 
Why? Why do you have an appeal process?
    Mr. Henderson. Our process was initially certainly intended 
to be data driven, but the data isn't always right, which is 
why I think we felt certainly compelled to have a review 
process which would reconsider facts that may not have been so 
clear in the data. And that review process has certainly borne 
out that it was the right thing to do, because there were cases 
where we were wrong.
    Ms. Sutton. So would you say it was a matter of fairness?
    Mr. Henderson. Yes. We thought it was the fair thing to do.
    Ms. Sutton. And in those decisions where your decisions 
were overturned on the appeals, can you tell us examples? We 
heard the one about the devastation of the bridge that stopped 
the business from going forward. Can you tell us some other 
examples of what was overturned?
    Mr. Henderson. Recently--I don't have the full knowledge of 
the 45--but another recent example was we had a small town that 
had a Buick and GM store and a Chevrolet store, and our initial 
plan would be to consolidate those two. The conclusion, after 
reconsideration, was no, let's leave the two, for example. That 
would be another one.
    Ms. Sutton. 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 that Chrysler has no such thing for 
those who have been shut out?
    Mr. Press. Great question. I understand the contrast. The 
fact is, though, that our situations are completely different.
    Ms. Sutton. But the employees are affected the same way, 
and the dealerships are affected the same way.
    Mr. Press. They are both dealerships, and they are both 
auto companies, but the factors that led to the appeal process 
don't exist for Chrysler. That is a completely different 
situation, because we don't have a term agreement that comes 
up----
    Ms. Sutton. With all due respect, the factor that was a 
determining factor of whether or not they were going to have an 
appeals process was fairness. And that applies to Chrysler as 
well; does it not?
    Mr. Press. In our case what we had is a situation where the 
company went bankrupt.
    Ms. Sutton. I understand. I understand.
    Mr. Press. A new company was formed to go forward and 
selected specific dealers based on criteria of beyond dealer 
performance from a standpoint of a strategic dealer network, 
the number of dealers, the location----
    Ms. Sutton. I understand the criteria, but, again, I think 
we're leaving out the point. And the point is both companies 
have an obligation, I would suggest, to make sure that 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, I understand the business perspectives here. But what 
Mr. Henderson just referred to is something that applies to 
both companies, and that is a matter of fairness.
    I will move on, but I am a little bit perplexed because I 
would suggest, Mr. Press, that regardless of your criteria, if 
it were OK at the inception, and it was all perfectly 
subscribed to in terms of being appropriate, 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 that they cost the companies a lot of money. So if I 
could just get from Mr. Press and Mr. Henderson a yes or no 
answer to these questions.
    Is it true that the dealers pay for the cars before they 
receive them?
    Mr. Press. Yes.
    Mr. Henderson. Yes.
    Ms. Sutton. Is it true that the dealers pay to have the 
cars shipped to them?
    Mr. Henderson. Yes.
    Ms. Sutton. Do the dealers pay for the parts as they 
receive them?
    Mr. Henderson. Yes, ma'am.
    Ms. Sutton. And do the dealers pay for their signs?
    Mr. Henderson. Yes.
    Mr. Press. Yes.
    Ms. Sutton. Do they pay for their buildings, including the 
taxes?
    Mr. Henderson. Yes, ma'am.
    Ms. Sutton. Do they pay, obviously, their employees and all 
of those related taxes?
    Mr. Henderson. Yes, ma'am.
    Ms. Sutton. Do they pay for the brochures that they hand 
out in their showrooms?
    Mr. Henderson. Yes.
    Ms. Sutton. So, Mr. Press, last week you testified that the 
dealers cost you somewhere in the neighborhood of $3 billion. 
Have you provided substantiation of that number somewhere?
    Mr. Press. Yes; in our testimony.
    Ms. Sutton. That's what you are submitting as the 
substantiation?
    Mr. Press. We have submitted written testimony.
    Ms. Sutton. I have your testimony. There's nothing 
supplemental to provide for any additional substantiation; just 
your testimony?
    Mr. Press. Yes.
    Ms. Sutton. Mr. Press, don't all the States allow you to 
terminate dealer agreements provided that there is just cause?
    Mr. Press. It depends on the State. There are different 
franchise laws that exist.
    Ms. Sutton. I understand. But do they all provide you with 
the opportunity to terminate for just cause?
    Mr. Press. I can't answer your question.
    Ms. Sutton. Fair enough.
    How many dealer shipments did Chrysler terminate last year 
because of substandard performance?
    Mr. Press. I can't answer your question. There were some, 
but I don't know how many.
    Ms. Sutton. Would you please provide that to me, because 
now we have 789 being terminated, and it's a huge number.
    Mr. Press. It's not the same reason.
    Ms. Sutton. It would be interesting to see how many were 
terminated under the just cause standard in the last year.
    Mr. Press, did I read correctly that you said that it cost 
$41,000--or in your testimony--per dealer to have staff call on 
dealers, or, was it some other number?
    Mr. Press. Not just staff; for providing training, to have 
the computer systems, to have our Internet program up, to have 
all of the record inside the dealerships inside our country; 
all the audit information that we have; the computer data; the 
field organization--not just a traveler, but we have a full 
field office, transportation, logistics, parts, service. It's a 
fairly large enterprise of administrative costs, and it's 
$41,000 per dealer.
    Mr. Dingell [presiding]. The Chair recognizes the 
distinguished gentleman from Vermont, Mr. Welch.
    Mr. Welch. Thank you very much, Mr. Chairman.
    You have been hearing very clearly 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 on the dais is 
whether this is a decision--each of these decisions on closing 
a dealer was made by Chrysler and GM, or was it orchestrated by 
the White House.
    I know you were asked about that in the Senate hearings, 
and I just--and it's very important that it be clear who bears 
the responsibility here and accepts the responsibility.
    So, Mr. Henderson, let me ask you, is it, in fact, the case 
that the Treasury was not involved in any way in the selection 
or the development or guidance on the number of dealers that 
would be closed?
    Mr. Henderson. Could you repeat the question, sir? I'm 
sorry.
    Mr. Welch. Basically, the question is: Who made the 
decision on how many dealers to close and which dealers should 
close?
    Mr. Henderson. Management.
    Mr. Welch. And that is you, making that decision according 
to your best judgment about what was in the interest of General 
Motors, correct?
    Mr. Henderson. Yes, sir.
    Mr. Welch. The Treasury was not involved?
    Mr. Henderson. Treasury was involved as a purchaser in 
making sure we had a properly sized dealer body, but they were 
not involved in individual decisions, nor what the exact 
numbers should be.
    Mr. Welch. So you will acknowledge that that decision, 
whether it was right or wrong, is a decision that you made, not 
the White House.
    Mr. Henderson. Yes, sir.
    Mr. Welch. How about you, Mr. Press? Same question.
    Mr. Press. It was not made by the White House. It was made 
by our company, Chrysler.
    Mr. Welch. OK. The basic question here is not just a matter 
of fairness, although I agree with my colleagues on that, it's 
a matter of business judgment. Somebody's right, and somebody's 
wrong. You two gentlemen on behalf of your companies have come 
to the conclusion that closing down dealers, including dealers 
in longstanding who've done a good job for a long time, in some 
cases generations, that it's in the interest of the company to 
close them down; is that right?
    Mr. Press. In our case it's the only way we will survive 
going forward.
    Mr. Welch. And there's obviously a lot of evidence that's 
been presented to you at this hearing that those dealers are 
not costing you money, but actually can be a lifeline to 
reenergize sales in their local community. So you're going to 
bear the responsibility if, in fact, it turns out that you're 
wrong and they're right, correct?
    Mr. Henderson. Yes, we will bear the responsibility.
    Mr. Welch. On this appeal question, here is the dilemma 
that 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 a result of business situations 
that developed over decades, had there not been a 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?
    Mr. Press. The bankruptcy was caused by a market that ended 
and no credit.
    Mr. Welch. I am not asking about the cause. Once you go 
into bankruptcy, all of the rules that used to apply, 
contracts, agreements, relationships, are thrown out the 
window. The law allows that to happen, but it is the nuclear 
option, correct?
    Mr. Press. It was not our desire or plan, it was a failed 
enterprise that stopped operating and it doesn't exist any 
longer.
    Mr. Welch. Right. What it did was allow the court to throw 
out contract law that had applied or State statutes that 
provided some equity between the dealers and the company. You 
are not responsible for what bankruptcy law is.
    This is the question to you and Mr. Henderson. Given the 
fact that bankruptcy is a brutal tool, in some cases it may be 
necessary, do you believe that that entity, General Motors and 
Chrysler, which resorts to bankruptcy with the best of 
intentions, I will stipulate to that at the moment, should bend 
over backwards on the side of giving the benefit of the doubt 
to dealers that have been loyal, effective, and largely 
profitable partners to the manufacturers?
    Mr. Henderson. I can't really speak on what the bankruptcy 
court should or shouldn't do.
    Mr. Welch. I am asking what the company should or shouldn't 
do.
    Mr. Henderson. The reason we developed our approach to 
wind-down agreements was to try to handle this as responsibly 
as we could.
    Mr. Welch. The bottom line here is that the law probably 
allows you to do what you are doing. I have no doubt that you 
have probably made a decision which you think is consistent 
with the exercise of your responsibilities. You have tough 
jobs. But we have a unique situation here where the brutal 
unfairness of the law is imposing enormous, frankly, 
unspeakable hardship on some pretty good people. And you will 
acknowledge, I am sure, that you are fallible and you made your 
best judgment, but that doesn't guarantee you are right, and 
the request I have of you is whether, in the exercise of your 
judgment, you will give the benefit of every doubt that can 
possibly be given to people who have been doing a good job for 
a long time?
    Mr. Press. This was not using the law. With great respect, 
I 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 were selected to go forward. The cause of 
this was it became a failed enterprise.
    Mr. Welch. I yield back the balance of my time.
    Mr. Stupak. Thank you. There is interest here, and we are 
going to go another round.
    Mr. Henderson, let me ask you this. Canada has part 
interest in the new General Motors?
    Mr. Henderson. Yes.
    Mr. Stupak. Are we closing dealerships in Canada?
    Mr. Henderson. Yes. We actually went through a very similar 
process.
    Mr. Stupak. Did you have hearings and things like that up 
in Canada?
    Mr. Henderson. No.
    Mr. Stupak. Mr. Press, we have the new Chrysler and old 
Chrysler. Will the new Chrysler dealers be required to sell 
Fiats?
    Mr. Press. We have not yet established a brand position and 
a product plan going forward of exactly what products from our 
alliance will be branded Fiat or branded some other brand.
    Mr. Stupak. Was that one of Fiat's considerations for 
helping our here with the new Chrysler, is to get their product 
line in the United States?
    Mr. Press. Well, part of the new company is definitely 
going to benefit from the $10 billion worth of resources and 
product development and hardware from Fiat that gives us 
tremendous car entries and technologies that we will bring into 
our product line.
    Mr. Stupak. Sure, but are you going to be required to sell 
Fiats? That is what I am asking.
    Mr. Press. We are going to have cars that have Fiat 
technology or engines.
    Mr. Stupak. But a car that says ``Fiat''?
    Mr. Press. There may be. We have not yet determined which 
brands or what names will be on the vehicles. A vehicle could 
have a Fiat name on it, and it may not. It may have a Chrysler 
name on it.
    Mr. Stupak. Mr. Barton said I hope 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 the bankruptcy, there is no way for any of these 
Chrysler dealerships that are being closed to get their car 
dealerships back; is there?
    Mr. Press. That is correct. And my answer to him was that 
we will be transparent and share with them the information.
    Mr. Stupak. We have to be honest, none of these gentlemen 
here are going to get their dealerships back?
    Mr. Press. That is correct.
    Mr. Stupak. And there was no appeal process for them to get 
their dealerships back?
    Mr. Press. That is correct.
    Mr. Stupak. And in bankruptcy, those contracts were broke 
and therefore you don't have to offer them anything else, 
correct? Those franchise dealership agreements, they are broke, 
the bankruptcy discharged them?
    Mr. Press. But we took responsibility for the 
redistribution of the inventories.
    Mr. Stupak. That is what bothers me. Those are old Chrysler 
parts, so how can the new Chrysler, if it doesn't give these 
gentlemen an appeal process, or even consider taking them back, 
how can the new Chrysler take stuff that was old Chrysler? It 
seems like you are being selective in what you are going to 
take.
    Mr. Press. Sir, that is a great question. The restriction 
is to dealers, not to our company. So what we did was we 
provided for a distribution of the vehicles that were in old 
Chrysler dealers' inventories, and they are being moved into 
new Chrysler dealers' inventory.
    Mr. Stupak. So there is $350 that I have to pay to get my 
2009 Chrysler moved off my lot since I am being closed. Who 
gets that money? Where does that money go?
    Mr. Press. That goes for the inspection, the cleaning of 
the vehicle, and for the transportation, the logistics. It is 
an outside third party company.
    Mr. Stupak. So new Chrysler doesn't receive that money or 
distribute that money in any way?
    Mr. Press. No, sir.
    Mr. Stupak. Go ahead, Mr. Kiekenapp, if you have a 
statement. No, you can't ask questions. Sorry.
    Mr. Henderson, let me ask you this. Did you have a 
conference call on June 10 with GM executive retirees?
    Mr. Henderson. Yes.
    Mr. Stupak. Two days ago?
    Mr. Henderson. Yes.
    Mr. Stupak. Was a statement made along the lines of no 
executive level GM retiree will receive a retirement benefit 
package of more than $100,000 at the direction of the Treasury 
Department or the Auto Task Force?
    Mr. Henderson. The discussion had to do with pensions that 
applied to executives' nonqualified plans. As part of a total 
number of liabilities, one of which was that, there were six 
liabilities that were unfunded and unsecured. And as part of 
our bankruptcy filing, the purchase and sale agreement 
suggested that we would have to reduce the total amount of 
those liabilities by two-thirds. Then management had the 
responsibility to allocate the two-thirds reduction.
    So as part of doing that, we identified a plan with respect 
to the executive retirees, that any executive retiree whose 
combined qualified and nonqualified benefit was less than 
$100,000, they would be unaffected. And to the extent that 
their benefits in total were more than $100,000, the extent of 
the unqualified plan would be reduced by two-thirds.
    Mr. Stupak. Was that a decision made by the new General 
Motors or was that a decision made by the Treasury Department?
    Mr. Henderson. The overall framework was part of the 
purchase and sale agreement. So the purchaser identified what 
amount of liabilities they were prepared to accept. The actual 
recommendation as to how to allocate that, including this 
particular recommendation, was management's.
    Mr. Stupak. General Motors' management?
    Mr. Henderson. Yes, sir.
    Mr. Stupak. So to place the blame for that on the White 
House Task Force or the Treasury Department wouldn't be 
accurate?
    Mr. Henderson. In the case of unqualified pensions such as 
this, sir, we had indicated to our retirees that in most 
bankruptcies that is zero. So in this particular case, this was 
considered to be a fair approach to it.
    Mr. Stupak. Today is June 12. That is the day that the 
wind-down agreements have to be returned to General Motors in 
Detroit, correct?
    Mr. Henderson. Correct.
    Mr. Stupak. So of those dealers that are going forward or 
are going to be lost, closed, what happens if they don't sign 
it?
    Mr. Henderson. Well, first of all, 96 percent as of today, 
this morning, had either signed it or had verbally said it was 
coming in. We anticipate a high percentage of those dealers 
will sign the wind-down agreements. A very high percentage.
    In the event that they don't, those contracts would not be 
assumed by the new company. They would be left in the old 
company and they would be rejected.
    Mr. Stupak. So they would basically be out of business 
anyways?
    Mr. Henderson. They could terminate their contract, yes.
    Mr. Stupak. But any financial incentives that would be in 
the wind-down agreement would be lost?
    Mr. Henderson. Correct.
    Mr. Stupak. Go ahead, Mr. Walden.
    Mr. Walden. So they are not signing that under duress?
    Mr. Stupak. But if there are a thousand more dealers that 
are going to be closed, right, a thousand more GM dealers, so 
if I don't get my contract in right away or protest too loudly, 
I could be one of those 1,000 other dealers?
    Mr. Henderson. In terms of the participation agreement, 99 
percent of those are in, and we expect to have all of them in.
    Mr. Stupak. Mr. Spitzer, did you have something to say on 
this?
    Mr. Spitzer. I had a couple of comments. One on the 41,000, 
Mr. Press. I would submit that the cost per dealer will go up 
after these dealers are terminated because first of all, I 
think it is 40 percent or so get no representation at all. It 
is all done electronically. The smaller dealers, there is no 
personnel. I would also submit that they will cut very few 
field people, if any. With fewer dealers, those costs are 
almost fixed, or semi-fixed. That will go up.
    The other comment that I was going to make, the minimum 
sales responsibility, just to quickly educate just in a couple 
of sentences the committee, they take the State average 
penetration for their brands and they expect every dealer to 
hit State average penetration. The problem with that is, and 
just to take an example of how that can be skewed and how it is 
an unfair measurement, in fact we have found at least in Ohio 
there are rooms full of testimony, expert testimony, and they 
have been thrown out in many cases, minimum sales 
responsibility as a criteria. In Sheffield, one of the 
terminated, rejected stores in Congresswoman Sutton's district, 
there is a Dodge dealership in the middle of Ford country. 
There are two Ford plants, one of them was just shuttered. But 
still, there are still a lot of residual buyers and owners 
still living there, retirees and so forth, and then a plant 
still going in Avon Lake. This dealership is right between 
them.
    A hundred miles to the west there is another dealership 
near a Jeep plant in Toledo, Ohio. The dealer in Toledo and my 
dealership in Sheffield is held to exactly the same standard. 
That is absurd.
    Mr. Stupak. One more question, and then I will go to Mr. 
Walden.
    Mr. Henderson, does GMAC have part of the new GM, or does 
GM still own part of GMAC Financing?
    Mr. Henderson. GM will own shares in GMAC. We will own 
approximately 9.9 percent. The other remaining shares of 
General Motors are currently held in a trust to be sold because 
as part of our passivity agreement with the Fed, we agreed that 
we would sell down our interest to 9.9 percent.
    Mr. Stupak. Mr. Walden for questions.
    Mr. Walden. Thank you, Mr. Chairman.
    I would like to pick up on the GMAC part. I have talked to 
a lot of folks in my district, and one of their complaints is 
the flooring issue with GMAC. I had a dealer tell me that after 
GMAC got their government dollars due to flooring, they 
immediately raised the interest rate by 6 percent. They made 
this dealer pay $10,000 just to be able to stay on. It is 
nonrefundable. He had been with them 27 years and had no 
problems. In the last 7 months, they have changed his contract 
14 times, always with the threat of curtailment, and then 
micromanage and manipulate floor stock. He told me that they 
told him he had too many cars and so he cleaned out his 
inventory, sent them to auction. Then they called to say that 
they had an inspection and his cars numbers were inaccurate.
    He said, I did what you asked.
    They said, You should call us to tell us you are doing what 
we asked.
    He said it would be illuminating to have a congressional 
member in the room listening to the dealer conversation with 
the GMAC employee.
    This is not unique, unfortunately, in terms of that side of 
this issue.
    Well, let me go to Mr. Thomas and maybe Mr. Blankenbeckler 
as well. Is this the first time you have seen the criteria upon 
which the decision was made in your wind-down agreement?
    Mr. Thomas. It is the first time. I have seen the DPS one 
other time in the last few weeks. I have asked for things that 
are in this paper prior to making the wind-down agreement 
commitment, and it would appear that I made the wrong decision.
    Mr. Walden. How so?
    Mr. Thomas. Well, it says in the case of a rejected 
dealer----
    Mr. Walden. What page are you on?
    Mr. Thomas. This is page 5. At the very bottom, for GM 
dealers, that floor plan with GMAC, which unfortunately we are 
floored with Wells Fargo, and I don't know if this would 
pertain or not, but it says for GM dealers that floor plan with 
GMAC, if the dealer agreement is rejected, we expect that the 
dealer would turn in new vehicle inventory which GM would then 
redistribute.
    Now this idea of playing out for 17 months, it sounds good 
and compassionate in a sense, perhaps for the employees, but it 
is a hard sell to convince someone why they should buy a past 
model car from you when you are not even going to be there. I 
mean, that is tough.
    Mr. Walden. Is it hard to sell a model car from a 
manufacturer who people aren't convinced was going to be there?
    Mr. Thomas. That as well.
    Mr. Walden. Has that affected your sales?
    Mr. Thomas. It has affected them.
    Mr. Walden. Do you think that was taken into account?
    Mr. Thomas. I think there is something which has been taken 
into account, but I don't really see it as being sufficient. We 
took four cars to auction about a year ago, two Cadillacs and 
two Corvettes, and we stood to lose $65,000 on four 
automobiles. If I project that forward, it is not a pretty 
picture.
    Mr. Walden. So do you feel like this information provided 
to the committee would give you an adequate understanding of 
how they evaluated the wind-down agreements versus the go-
forward agreements?
    Mr. Thomas. The whole document, I asked specifically for a 
definition of what would be my fate in this state of rejection, 
and it was really--there are really two choices. If you were 
wind-down, you could either fall into--sign the wind-down 
agreement, very tough language, or fall into rejection, and no 
definition of what that really meant.
    Mr. Walden. So you didn't know what the option really was?
    Mr. Thomas. Well, I asked for it.
    Mr. Walden. Did you get it?
    Mr. Thomas. I didn't get something as thorough as this. I 
got rather short answers.
    I had asked, on the e-mail question line, I asked about Mr. 
Henderson's comments about redistributing inventory that I 
think were made in the Senate hearings. The e-mail response 
comes back, you are going to have to call the call center. I 
call the call center. They don't have information about that 
comment or its implication.
    Mr. Walden. So, Mr. Henderson, do you want to answer Mr. 
Thomas's question?
    Mr. Henderson. Yes, sir.
    In the case of vehicles, the first thing I would say is 
that the total compensation in the wind-down agreement is 
intended, in all cases, to be superior to termination. That is 
the reason why there is such a high percentage.
    Second, if someone chooses to voluntarily terminate, and we 
have 50 dealers doing that today. We had 50 dealers last month 
voluntarily terminate.
    Mr. Walden. You say 80 a month on average will terminate.
    Mr. Henderson. We had 50 last month with people knowing 
this agreement was there. What happens in that case, to the 
extent they floor plan their cars with GMAC, GM has an 
obligation and an agreement with GMAC that the dealer could 
turn the cars back to GMAC and then we will redistribute the 
cars. That is how it works.
    Mr. Thomas. And if you are with a bank for flooring?
    Mr. Henderson. We don't have such agreement. It would have 
to be bank by bank. The highest percentage of our dealers floor 
plan with GMAC.
    Mr. Walden. What does that mean for you, Mr. Thomas?
    Mr. Thomas. I would have to talk to my bank.
    Mr. Walden. Do you have that agreement with Bank of America 
or Wells Fargo?
    Mr. Henderson. I don't know. I would have to follow up. 
This would apply only in the case of a termination as opposed 
to a wind-down. In a wind-down, we would continue to work with 
the dealer through October of 2010.
    Mr. Walden. I guess the question, and I realize my time is 
over here, but to both the GM dealers in wind-down, what effect 
does it have on your ability going forward not to be able to 
have the new product line going into this next year? You are 
still going to be with a lot there, right?
    Mr. Thomas. We will, and we won't have the current 
offerings.
    Mr. Walden. How does that help GM then? I don't understand 
that part. What am I missing here? How does them not being able 
to buy your new model vehicles help the 2010 vehicles?
    Mr. Henderson. First of all, the one element of our wind-
down agreement that we needed to apply was that they could no 
longer purchase new vehicles. They could purchase used 
vehicles, they could purchase parts to provide service.
    Mr. Walden. My question was why? Help me understand why 
that makes sense? You make money by selling vehicles you make, 
right?
    Mr. Henderson. Yes.
    Mr. Walden. And they make money by turning around and 
selling those same vehicles, so why wouldn't you want them 
buying their 2010 vehicles? Then it is their problem, right? 
They go out of business at the end of October 2010?
    Mr. Henderson. The purpose of the wind-down agreement we 
did provide as part of compensation, for example, incremental 
resources for the vehicles they had in inventory, and this was 
for providing a 17-month period to wind down their facilities 
in an orderly basis as opposed to replenishing new stock and we 
would have a problem at the end of the contract.
    Mr. Thomas. My sense is that when the model change occurs, 
everything we have will be yesterday's news; and it will be 
very hard to get from October 2009 to October 2010.
    Mr. Walden. That gets to my point. I have been kidded a bit 
up here because apparently I asked you if you felt terminated, 
Mr. Thomas. I meant to say if you felt your dealership had been 
terminated. Isn't that exactly what has happened here, in 
effect? It is a much shorter term termination. I realize you 
are buying some things out, but in effect, it is taking effect 
this fall, right?
    Mr. Thomas. That is my sense, yes.
    Mr. Walden. Mr. Blankenbeckler, do you track it the same 
way?
    Mr. Blankenbeckler. In regards to the handout that was just 
given out, I could get no information to speak of in regards to 
what your fate was should you not sign the wind-down agreement. 
I was repeatedly, repeatedly, repeatedly called by GM, Where's 
your agreement? Where's your agreement? Do you understand? I 
said I can read. I know what it says.
    You ask about what are the provisions of not signing?
    You will be rejected.
    What does that mean? Let's talk about it.
    I do have some floor. I have a lot of paid vehicles, I can 
go floor every vehicle I have got, and if I can just pick the 
phone up and call GMAC and tell them to come get approximately 
$4 million worth of inventory, which 90 days, and right now 
they are starting to produce 2010. And you have got a business 
that appears to be going out. It is a long leash to 2010, 
October.
    I would like to make one other comment while I do have the 
floor. One of the provisions of the wind-down agreement, I am 
paraphrasing this, states that in my case I will produce 
potentially 84 years of sales records. My customers' names, 
telephone numbers, my service customers' telephone numbers, and 
I am given 25 percent of my wind-down money.
    I get one person, one attorney come to me and say--and the 
purpose, I am paraphrasing, the purpose of these electronic 
lists of all of my customers are to be used, given to another 
third party, another dealer, that is how I read it, my 
replacement dealer. What I have earned for 84 years, these 
are--the bulk of these people are my personal friends, that I 
have to give their names. And you helped me with the Federal 
statute name. I am not an attorney, but I see this as a huge 
liability to a dealer, to turn over their customer lists. They 
are confidential. You wouldn't go to a doctor's office and ask 
for somebody's medical records and get it. One customer would 
more than negate the amount of money that was given.
    Mr. Walden. You mean one customer that brought an action?
    Mr. Blankenbeckler. Yes, brought an action against me. And 
in this world, I can't see how that wouldn't happen.
    My question to GM was, Why do I have to supply my 
customers' names? Everything I do is sent to you 
electronically. Every sale I make, I give. All of my warranty 
records, I get VIN number, labor operation number. It is given 
to them. Again, all of these data processing deals are thrown 
back on us. We pay for those things. I would really like to 
hear what Mr. Henderson would say in response to my fear of 
turning over my customers' identity.
    Additionally----
    Mr. Walden. Can he respond to that? Does GM assume the 
liability?
    Mr. Henderson. GM has a privacy policy. We have had 
excellent experience with being able to properly control 
customer and consumer information in our corporation's history.
    Mr. Blankenbeckler. It says in the agreement that it is 
going to be given to a third party. If it is given to a third 
party, I don't know how you have control.
    Mr. Henderson. As I said, we have been able to manage 
customers' identity.
    Mr. Blankenbeckler. Now let me ask you this. Would GM be in 
a position to indemnify me for that from a lawsuit?
    Mr. Stupak. We have to do the questions from here. Sorry.
    Mr. Dingell.
    Mr. Dingell. Thank you, Mr. Chairman.
    Mr. McEleney, what is your opinion of GM and Chrysler's 
respective dealer closure plans with regard to both substance 
and procedure? Would you please submit your response for the 
record?
    Mr. McEleney. In the case of Chrysler, I think they were 
too quick and too deep in terms of numbers.
    Mr. Dingell. I would like specific criticism, and I would 
ask you to submit it for the record because I only have 5 
minutes. And submit as part of that how could those be improved 
to result in fairness, in your view, to the dealers.
    Mr. McEleney. In the case of both GM and Chrysler, it was 
not a transparent process. In the case of GM, there was an 
appeal, which was favorable. And none with Chrysler, which I 
think is problematic. I think with the information we received 
today that the Chrysler dealers will be provided that criteria, 
it would seem to make sense that there be an appeal process so 
those Chrysler dealers who have been canceled can evaluate 
that.
    In the case of GM, the wind-down is much more favorable, 
allowing dealers potentially through next October to sell off 
their parts and inventory and tools and reasonably close their 
businesses in a rational format.
    In the case of Chrysler, the wind-down was very abrupt, 26 
days. I think it created all kinds of problems for dealers and 
their employees. So I would not think very highly of that.
    Mr. Dingell. What is it going to cost per car for a GM 
dealer to wind down? How much is he going to lose per car, and 
how much is a Chrysler dealer going to lose per car?
    Mr. McEleney. Sir, it would be very hard to project. I have 
been a dealer for 36 years. I would guess in the case of GM, 
there would be some cars. When you get to the tail-end of the 
process, you have some of the less popular models left. Dealers 
could lose several thousand dollars in those cases, but it just 
depends on their own situation.
    In the case of Chrysler, those dealers that have vehicles 
left don't have a franchise, they don't have a license, they 
can't sell them or get Chrysler incentives. The costs could be 
many thousands, five, six, $10,000 per vehicle.
    Mr. Dingell. What charges are in the two closure plans that 
are detrimental to the dealers and how could that aspect of it 
be improved?
    Mr. McEleney. I am sorry, sir, I don't understand the 
question.
    Mr. Dingell. I am not sure I do either.
    What is there in the two plans which is particularly 
hurtful in terms of costs to the dealers, and how could those 
matters be improved?
    Mr. McEleney. Sir, in the case of both GM and Chrysler when 
a dealer is losing their franchises, like these gentlemen at 
the table are and so many around the table, the value of the 
franchise is going to zero.
    Mr. Dingell. I want to know about the specific charges per 
car. In other words, Chrysler has a $350 item that they have to 
pay. Are there other charges like that in either one of these 
plans that would impact upon the dealer?
    Mr. McEleney. Not that I am aware of. In the case of 
General Motors, they are not buying the cars back but they are 
providing the wind-down dealers an opportunity to sell them 
down over the next 15 months.
    Mr. Dingell. I am going to submit to you a letter, and 
there will be other letters submitted to others, and I ask 
unanimous consent, Mr. Chairman, that those letters and 
responses be inserted into the record.
    Mr. Stupak. Without objection.
    [The information was unavailable at the time of printing.]
    Mr. Dingell. Mr. McEleney, given your assertion that 
dealerships do not in fact cost money to maintain, why do 
foreign transplants have significantly fewer dealerships in the 
United States than their domestic competitors?
    Mr. McEleney. I happen to be an import dealer as well, a 
Honda and Toyota dealer, so I have some perspective on that. 
The business model for the import, the transplant 
manufacturers, is quite a bit different than the domestics.
    GM, Ford, and Chrysler have a very strong market share in 
the rural markets, much like where I live in Iowa. Mr. 
Henderson mentioned earlier that they have a 10-point market 
share advantage in those areas. So it is a competitive 
advantage for Ford, Chrysler, and GM to have representation in 
communities less than say 75,000 or 100,000 people on average; 
where Toyota, Honda and Nissan have no interest. They will not 
go in and backfill some of these locations that are being 
closed with franchises.
    Mr. Dingell. Why would they choose not to back those kinds 
of franchises? That is really at the root of the question.
    Mr. McEleney. I can't speak for them. Based on my 
experience, I would say they don't see the market opportunity 
for their brands as they do in more metropolitan areas.
    Mr. Dingell. Now, Mr. Press and Mr. Henderson, Mr. McEleney 
has indicated in his testimony that dealer franchises in fact 
do not cost manufacturers money to maintain. Do you agree with 
his position or not?
    Mr. Press. I do not.
    Mr. Dingell. Mr. Henderson?
    Mr. Henderson. I do not.
    Mr. Dingell. Mr. Press, why? Mr. Henderson, why, please?
    Mr. Press. In our situation, one of the main reasons that 
caused our bankruptcy and weak product engineering is the 
requirement that we provide individual models for each stand-
alone franchise as sister models that cost a substantial amount 
of money and took resources that had negative returns, no 
incremental sales, only costs, as one example. That is a huge 
cost.
    The second one is the fact of lost sales, lost volume. In a 
market that is underperforming, those sales don't provide 
revenue for us. We lose that revenue. In our case it was about 
$1.5 billion.
    The development of individual models is about $1.4 billion. 
And so we have--and that is a very real situation.
    Third, because we have so many dealers and our average 
dealer loses money, we are not having a competitive dealer 
network that can compete with the other manufacturers in terms 
of customer satisfaction, location, facilities, trained people, 
advertising, et cetera. So it is a substantial cost to the 
company.
    Mr. Dingell. Mr. Henderson, if you please, give me your 
comments.
    Mr. Henderson. Mr. Dingell, in my testimony I talked about 
the costs that the company over time has incurred to provide 
support for a dealer body in total that has been substantially 
weakened. So there are the costs articulated in my testimony.
    Second, our principal issue, General Motors' market share 
in rural and small towns in the U.S. Is 10 full market share 
points higher than it is on average. It is a source of strength 
for us. And even when we are done with our restructuring, we 
will still have the most extensive dealer body in rural 
America.
    What costs us today is that we have insufficient 
distribution in metropolitan markets where we have many, many 
locations and we have few strong ones. That is a significant 
problem today.
    Mr. Dingell. Mr. Press and Mr. Henderson again, it has been 
estimated that the average throughput for a foreign transplant 
dealer is twice that of a comparable domestic dealer. Is this 
true, yes or no?
    Mr. Press. I don't know exactly double, but it is 
substantially higher. Perhaps in that range, yes.
    Mr. Henderson. It would be our estimate that a Toyota, for 
example, versus Chevrolet, would be approximately double.
    Mr. Dingell. If this is true, and apparently it is, why is 
that the case? Mr. Press.
    Mr. Press. Well, the reason in Toyota's case is they sell 
about 2 million cars and trucks a year out of 1,200 dealers. 
And if we didn't have this restructuring, we would sell about 
700,000 cars and trucks a year at retail out of 3,100 dealers. 
So the average sales per dealer is substantially different.
    In Toyota's case, as Mr. McEleney said, the product line 
they have is less truck oriented. They sell mainly cars in more 
metro markets or sunshine States, less presence in smaller 
rural areas or secondary markets. And they also don't have an 
80-year legacy of having had a substantially higher dealer body 
and seeing the volume disappear.
    Mr. Dingell. Mr. Henderson?
    Mr. Henderson. Sir, I wouldn't have anything to add to Mr. 
Press' comments.
    Mr. Dingell. Gentlemen, do you believe that your respective 
numbers of dealerships has been reduced per your 
rerestructuring plans? And if so, has parity been achieved 
through these plans in a way which will be adequate with regard 
to your foreign transplant competitors?
    Mr. Press. We tried to achieve a dealer network going 
forward that had the minimal impact on removing dealers. There 
have been critics that say that we didn't go far enough, but we 
didn't want to go all of the way to have parity. We think we 
are in a very good position to continue to go forward with 
business and have that dealer network emerge over time.
    But through the bankruptcy and through the emergence of a 
new company, we have the optimum number of dealers going 
forward, 3291.
    Mr. Dingell. Thank you. Mr. Henderson.
    Mr. Henderson. As I mentioned in my testimony, we would 
expect that at 3,600 dealers approximately, even with only a 
modest improvement in the market next year and conservative 
market share assumptions, that throughput would almost double.
    Mr. Dingell. Very quickly, gentlemen, it has been said that 
the dealers should be permitted to remain open where you are 
terminating them to provide service and maintenance. What is 
wrong with that arrangement?
    Mr. Press. In our situation, of course, because there are 
existing dealers that are surrounding them that are taking, in 
many cases, 555 cases, the franchise. For example, the Dodge-
Jeep dealer, may be taking the Chrysler franchise. They are 
spending money and adding facility and overhead. That is part a 
part of the business in terms of loyal customers and part of 
the business that would travel with it.
    Mr. Dingell. Are you telling me this would have an adverse 
impact on adjacent and nearby dealers?
    Mr. Press. It would have an adverse impact on adjacent 
dealers. There are some cases where there may be a single point 
that may have a real customer situation where they can't 
achieve the location. Then we have always had an opportunity to 
take a look at a very minimal number of companion points. But 
in this particular case, it would substantially reduce the 
ability of the dealers that go forward to derive the full 
benefit of their business.
    Mr. Dingell. Thank you. Mr. Henderson.
    Mr. Henderson. I would have the same response, sir.
    Mr. Dingell. Mr. Chairman, I thank you for your courtesy. 
My time has expired.
    Mr. Stupak. Thank you, Mr. Dingell.
    Mr. Braley for questions, please.
    Mr. Braley. Gentlemen, I don't think it is any coincidence 
that with the exception of Mr. Walden, the remaining members 
all come from States that are represented in the Big 10 
Conference. Our constituents built your cars and trucks, or in 
my case they built tractors and combines and heavy equipment, 
and the workers who build those products are so brand loyal to 
your company that they have created a dominant market share for 
you in U.S. auto sales that has lasted right up to this moment 
in history.
    Mr. McEleney and my uncle and my brother-in-law, who are 
Chevy dealers, advertise your products on Big 10 sports 
networks so that your products are sold in this area where you 
have this dominant brand loyalty. And yet I look at page 4, Mr. 
Henderson, of your proposal, and what do I see: Wind-down 
dealers by State: Pennsylvania, 90; Ohio, 79; Illinois, 66; 
Wisconsin, 50; Michigan, 58; Indiana, 48; Iowa, 46.
    And after your description of why these foreign automakers 
are not playing in this part of the country, I find it very 
difficult to believe that you will perpetuate your brand 
loyalty in light of these massive dealer closures in my State, 
in Representative Stupak and Congressman Dingell's State and 
Congresswoman Sutton's State. I see the evaporation of your 
market share because of this practice.
    I just wonder whether as part of your restructuring you 
have given consideration to that? Mr. Henderson?
    Mr. Henderson. Sir, first of all, I am a Wolverine, born in 
the State of Michigan. Second of all, when we are done, General 
Motors will still have what we believe is the largest 
distribution system for rural and small towns in the U.S. 
Approximately 1,500 of our 3,600 dealers will be located in 
those small towns, and we do believe we will be able to 
maintain a strong position, sir.
    Mr. Press. Actually, through the new dealer network we have 
increased the share of dealers that are in rural markets and 
reduced the share of dealers in metro markets. We do realize 
the importance.
    The difficulty is from our volume going from a peak of 2 
million to 700,000, we don't produce enough vehicles to have 
every dealer stay in business. It is unfortunate, but it is a 
fact. We are trying to make sure that the dealers have a high 
enough volume that they can stay in business and have a good 
operation going forward to compete with the transplants.
    Mr. Braley. Well, with all due respect to the two of you 
who have accomplished much in your careers, I would submit that 
the people sitting on this side of the table have a much deeper 
sense for the attitude of our constituents, and I would be 
shocked to see your brand loyalty maintained in light of these 
shutdowns.
    One of the things that we know, and Mr. Walden referenced 
this in his opening statement, both companies have been doing 
advertising to talk about their business strategy going 
forward. And, Mr. Henderson, we have seen the GM ads that talk 
about how your company is going to stand behind the products it 
sells going forward. But in reality, you are not standing 
behind your products because one of the things that we know as 
part of these bankruptcy proceedings, every existing and future 
product liability claim that your company could be responsible 
for for selling a defective product is going to be 
extinguished; isn't that true?
    Mr. Henderson. In our case, warranty recall will all be 
assumed by the new company. But in the case of product 
liability, purchasers in the normal 363 process do not assume 
that sort of obligation.
    Mr. Braley. So they will be extinguished in the bankruptcy?
    Mr. Henderson. They would be unsecured claimants of the old 
General Motors.
    Mr. Braley. And they will be extinguished because we all 
know what happens to those unsecured claimants?
    Mr. Henderson. Likely.
    Mr. Braley. Yes. Now, have you informed your dealer network 
that you are going to be passing on a massive cost shifting to 
them because of that?
    Mr. Henderson. No, we are not going to be passing on.
    Mr. Braley. Yes, you are, sir, because I can tell you in 
the State of Iowa Mr. McEleney is currently immune from 
liability as a distributor of your product if the manufacturer 
is in existence and is not in bankruptcy. That is a fact in 
almost every State under State product liability law. So if you 
disappear as a potential claimant in that process, every one of 
these dealers is going to be on the hook, not just your 
remaining dealer network, but existing dealers that no longer 
have a franchise?
    Mr. Henderson. In our case, both wind-down agreements as 
well as the continuation agreements will be assumed by the new 
General Motors and the indemnification provisions that GM has 
today will continue.
    Mr. Braley. The indemnification provisions. So you are 
going to assume responsibility and pass that liability on?
    Mr. Henderson. As part of our obligation, we will continue 
to indemnify the dealers who sign a new agreement with new 
General Motors.
    Mr. Braley. So they are going to have to rely upon you to 
step up after they have been sued and they pass that on to you, 
and then they are going to have to have counsel involved 
because of that status?
    Mr. Henderson. Sir, I think that by virtue of the 
indemnification continuing to the new company, we did that 
purposely to try to avoid the situation where a dealer could be 
badly hurt.
    Mr. Braley. Mr. McEleney, I want to give you the last 
opportunity to talk about the impact on every one of the 
dealers that you represent as Chairman of NADA who haven't had 
a seat at the table and haven't had an opportunity to tell 
their story because I am guessing you have been getting a lot 
of phone calls. What has it been like for you and what types of 
concerns are you hearing?
    Mr. McEleney. Well, we are hearing many of the concerns 
that have been expressed earlier today by some of the dealers 
on the panel. There are dealers who are sometimes third, fourth 
generation. My family has been in business for 95 years. 
Fortunately, we are going forward, but there are a lot of 
dealers like me who are not. Most dealers, the net worth of 
their enterprise, their life savings is represented in the 
value of their real estate, if they own it, and the value of 
their franchise.
    In the case of dealers being terminated by either GM or 
Chrysler, the franchise value is zero immediately. And the real 
estate value with single purpose real estate, particularly in 
this commercial real estate market which is pretty stressed 
anyway, would be severely devalued even to the point where in 
many cases dealers will owe more money on the property than it 
is worth. Or they may have a lease that they are obligated to 
for a number of years and have no way to generate revenue to 
pay for that lease.
    Those are some of the issues. There are dealers who have 
made significant investments in facilities with the expectation 
that they would have a franchise going forward as long as they 
met the requirements of the franchise agreement that are being 
left with those obligations.
    So there are a myriad of stories that are very tough, 
personal bankruptcies in many cases, dealers and their 
employees having to take personal bankruptcy. And the 
dealership employees, we haven't talked a lot about. They earn, 
on average, about twice what is paid in retail. So these are 
good jobs. Most of these people will not be able to go to other 
dealerships and find employment, particularly in this market, 
in a 10 million market, I don't know of any dealers that are 
hiring people. I suspect there may be some as this 
rationalization takes place and dealers have bigger market 
areas. But for the most part, those 120,000, 130,000 employees 
of terminated dealerships will have to find work probably 
outside of the auto sector, and it is a tough market to find 
employment in right now.
    So there are some pretty devastating stories out there.
    Mr. Stupak. Thank you, Mr. Braley.
    Ms. Sutton for questions.
    Ms. Sutton. Thank you, Mr. Chairman.
    I was talking to Mr. Press about the appeal process and I 
talked about the State law, and under State laws across this 
country it is my understanding that you can terminate for just 
cause. You can terminate dealerships. Is that your 
understanding; Mr. Henderson? Mr. Press wasn't certain.
    Mr. Henderson. I have the same recollection. I think there 
are provisions, but they do depend by State. But yes, in 
general for cause.
    Ms. Sutton. When you say they depend, there may be 
differences, but they all have some sort of just cause 
standard; is that correct?
    Mr. Henderson. I can't answer the question, ma'am.
    Ms. Sutton. Well, I can tell you in Ohio there is a law 
that allows for termination based on just cause, so we can just 
go with that understanding.
    Let me ask you, how many dealerships did GM close last year 
based on just cause under State law?
    Mr. Henderson. I would have to get back to you with an 
answer.
    Ms. Sutton. Do you have any idea?
    Mr. Henderson. No.
    Ms. Sutton. How many are you slated to close through this 
bankruptcy?
    Mr. Henderson. As we talked about, we will move from 
approximately 6,000 dealerships to approximately 3,600 over 
time.
    Ms. Sutton. So 2,600; is that about right? 3,600?
    Mr. Henderson. No, no. About 2,400.
    Ms. Sutton. 2,400. Thank you.
    Mr. Henderson. The reason, by the way, is that number isn't 
perfect. So it can go anywhere from 3,400 to 3,800.
    Ms. Sutton. I want to follow up on some of the discussion 
that was going on a while back about information being 
transferred from the dealerships that are being closed and the 
discussion, you said that GM has a record of securing that data 
in a way that is appropriate. It was mentioned that it is going 
to go obviously to third parties. So who are those third 
parties exactly? Are they all identifiable at this point?
    Mr. Henderson. We can identify them for you. These would be 
parties that we would typically use to sell vehicles to 
customers, to make sure that their service is taken care of, to 
provide surveys. There are many reasons why we would want to 
contact customers.
    Ms. Sutton. Right. I would appreciate you submitting all of 
the third parties that might receive that information to the 
committee.
    Mr. Spitzer, I want to thank you again for coming to 
testify today.
    You spoke earlier about some of the investment that you 
have put into this life's work of yours representing Chrysler 
and their products. How much have you invested in Project 
Genesis so far?
    Mr. Spitzer. Working closely with the people from the 
management of the business center, which is the Great Lakes 
Business Center, it includes Michigan and Illinois, and so 
forth, and has the responsibility for most of our dealerships 
except one, working very much in concert with them and 
sometimes almost at their direction, I won't say insistence but 
let's say strongly urging, we have consolidated two Genesis 
stores. One of them is in Florida with a different business 
center, was the first one in the State, or very close. It 
actually was called Project Alpha at that time.
    We have spent in concert with Chrysler Corporation, I 
think, about $6 million in acquisitions at their urging and 
insistence. In fact, in two or three cases I was called by 
Chrysler and they said, This is the guy you have to buy and 
here is what you have to do, call them and buy them out and 
that way we will consolidate. That is in just goodwill, blue 
sky. That has gone away.
    Over and above that, we have invested in Project Alpha--
excuse me, Project Genesis now, they changed the name somewhere 
along the line. They didn't change anything but the name, but 
in bricks and mortar about $10 million. That doesn't count the 
land. That is just in buildings done in concert with Chrysler 
to consolidate and accomplish Project Genesis.
    With all due respect to Mr. Press, who I have had a healthy 
respect for over the years, going back to his days with Toyota, 
we have known Mr. Press for probably 30 years, the arbitrary 
way in which these dealers were selected has no connection to 
Project Genesis or all three brands or stand-alone.
    From my own experience I can assure you of that, and also 
anecdotal observations from other dealers that I know that 
where stand-alones went forward where Genesis got canceled, and 
all of the permutations and combinations that are out there.
    Ms. Sutton. Have you received the written criteria 
explaining why your dealerships have been canceled?
    Mr. Spitzer. We received nothing. We didn't even receive 
termination. It was on the Web. I was told about it by other 
people that saw it on the Web. We didn't even get notification 
of who was going forward directly.
    Ms. Sutton. I see. I want to just like to give Mr. 
Kiekenapp a chance to speak. If you could ask a question here 
today, what would that question be?
    Mr. Kiekenapp. I think what is frustrating is that we are a 
very good dealership and we have done a good job and there are 
other dealerships that surround us that have lost financing, 
that don't have the ability to buy cars. We own all of our cars 
outright. We didn't have a financing problem. And now there are 
dealerships within GM and Chrysler that don't have the ability 
to finance their vehicles. They are now having to get bailed 
out by the Small Business Administration, and it is 
frustrating. I think there are probably some things that I 
might have said that created frustration with the factory and I 
think it cost employees' jobs. But I think we have done a great 
job.
    I know that within Tacoma they want a point, and we are 
applying for that point. I just hope, you know, that they take 
a look at us because I think we are the dealer, and if we were 
to have conversations with them in regards to maybe moving the 
point to someone else, we will do whatever it takes. I believe 
in the product. I believe in what they are doing is right. I 
don't believe eliminating the dealer body did any good. I 
believe the bankruptcy was something that was inevitable. But 
the products that they make are far superior. The Dodge 
Charger, the Challenger, the new 1500 are phenomenal and I 
believe in the product. It is just unfortunate that when we 
have such a well-run business and there are other dealers that 
are out there that are substandard. You can really look at any 
metrics from any dealership and shoot holes in every one of 
them, and I don't believe it was----
    Ms. Sutton. Fair. I appreciate your testimony. Thank you.
    Mr. Stupak. Well, thank you. I am just going to follow up 
and clean this hearing up a little bit and then we will 
adjourn.
    Mr. Henderson, if the government is going to own 68 percent 
of the new General Motors, and even Mr. Press, I guess I am 
concerned in my opening statement about the rural areas, 
especially where I live. Some of you have talked about 100,000, 
80,000. I don't have a county in my district that has 70,000. I 
am vast, rural area, and I think we have like six Chrysler 
dealerships being closed, maybe four or five, maybe more than 
that in my district of General Motors.
    How are people going to get service? I mean, if I bought a 
car this year, a General Motors or a Chrysler and my dealer is 
closed, how am I going to get service on that car? Am I going 
to have to drive 2 hours when my service light comes on? How do 
you do it?
    Especially when you talk about the loyalty is in the rural 
areas, you have 10 percent greater loyalty base in the rural 
areas, but we are getting hard hit here.
    Mr. Press. Mr. Chairman, I appreciate your concern, 
especially for the customers. That is a very fair question. 
Customer satisfaction is very important. In our particular 
case, after the reorganization, we have actually increased the 
share of our dealer body that is in rural markets. A higher 
portion of metro market dealers were actually removed.
    Mr. Stupak [presiding]. I guess I am saying if you improved 
the rural market why did you close in my district? You cant get 
much more rural than me. We lost six of them.
    Mr. Press. The largest impact was on metro markets where 
the dealers were too close to each other.
    Mr. Stupak. I don't have any metro markets.
    Mr. Press. I know that.
    Mr. Stupak. Miles from my one in my district to the next. 
Very few people in between.
    Mr. Press. I realize that. I am very familiar with your 
area. I go there on weekends often, so I appreciate that. 
Actually, in terms of customer convenience, from the old dealer 
group to the new dealer group, the distance from a customer to 
a dealership increased 9.4 miles. So we were very careful to 
make sure that we were able to retain the convenience to 
customers. There may be----
    Mr. Stupak. That has got to be nationwide.
    Mr. Press. That is for all rural markets.
    Mr. Stupak. How can it be--like 1 mile more for rural 
markets?
    Mr. Press. There will be a few rural markets that we will 
no longer be represented in.
    Mr. Stupak. The only way to do that is then you will have 
to take these dealerships that you shut down and move other 
dealers in their places.
    Mr. Press. Well, there are other dealers that have access 
to these markets or are adjacent. Especially in a case where 
there is a Dodge dealership that goes out, the Dodge franchise 
will go to the Jeep dealership that is in the same place. So 
the distance from repairs may not increase or be very minimal 
in terms of the number of locations.
    And then second, I think from the standpoint of those 
markets if there is a market--there may be some markets where 
we are abandoning the market if there is no longer a potential 
for long-term growth and with 700,000 units of production we 
don't have enough vehicles to put to them.
    Mr. Stupak. I trusted you guys. I bought a car this year 
when the push was on. And when you abandon those markets you 
abandon me. And if I remember, the Federal Government said we 
are going to guarantee the warranties for 5 years. And I, the 
Federal Government, am going to guarantee the warranties for 5 
years when you abandoned my part of the area? I might need that 
F-15.
    Mr. Press. I am not aware of any F-15 trips that are 
necessary for service. We did look at the average distance. But 
we will sure take a look at your area and see what the distance 
difference would be. The Jeep dealership that closed, the 
repairs of that Jeep dealership can now be made in the Dodge-
Chrysler dealership that exists in the same market area. So the 
customers will have another service outlet available.
    Mr. Stupak. Mr. Henderson? Do you want to----
    Mr. Henderson. Certainly. We tried as much as possible to 
manage the drive times for service. We looked at State by 
State. We looked at averages. We looked at averages across the 
United States. If I look in the Upper Peninsula average of 
Michigan, 19 to 23 minutes. In Oregon for Chevrolet--this is in 
miles--from 10 to 14-1/2 miles. The issue we have is on the 
extremes, because there will be situations where we clearly 
will have a problem.
    Mr. Walden. Mr. Chairman, if I might.
    Mr. Stupak. Go ahead.
    Mr. Walden. You are closing the Klamath Falls dealership. 
It is probably at least 100 miles to Medford. That is the 
nearest Chevy, any kind of Chevrolet. So the people in southern 
Oregon will go from Klamath Falls, I suppose they could go to 
Lakeview. Burns, you are closing Burns. There is 136 to 
Payette, Idaho, is the nearest dealership; right?
    Mr. Henderson. That is what I said. We will have situations 
where we have problems and we will have to solve those 
problems.
    Mr. Walden. How will you solve the problems? By putting the 
dealership back in?
    Mr. Henderson. That actually is not our intent.
    Mr. Walden. How do you solve it?
    Mr. Henderson. First of all, other General Motors 
franchises can provide service work.
    Mr. Walden. There is not another one in Klamath Falls, 
Burns----
    Mr. Henderson. The second thing we said is in the event we 
need to put a location back, one of the things we committed to 
the Senate and I will commit to you today is if we need to 
provide a spot there we will provide the existing operator an 
opportunity to look at that first.
    Mr. Walden. OK. Let's go to Bend, Oregon. You have closed 
Bend, you closed Redmond and you leave Madras. What is the 
process that is going to be put in place that allows Mr. Thomas 
maybe to go get his dealership back? You are telling me you are 
going to look at it and you are going to decide.
    I would not be asking these questions if it weren't 
taxpayer dollars funding this whole thing. I would let you all 
figure it out under the laws of the land. It is not that. These 
are the questions that are coming at us. I actually voted for 
TARP. I didn't vote for the auto bailout. I admit it. I voted 
for TARP.
    Mr. Henderson. What we will do, as I said, we have location 
by location. If we have made mistakes in the future and we 
concluded that we cannot take care of customers in the location 
and a point needs to be put back, we would go to whoever the 
individual who was affected and give them the first chance to 
do that.
    Mr. Stupak. All right. We may follow that up further. 
Because I am just looking at Chrysler and here is Michigan, 
even though we have the Upper Peninsula, very small. Marquette 
and Escanaba are my two biggest cities. The dealers are gone. 
That is my two biggest cities in the Upper Peninsula. They are 
gone. And now next one closest across the bridge is Sheboygan. 
That is gone. Next one is Petoskey. That is gone. Next one is 
Rogers City. That is gone. With the Cadillac dealer there is no 
one in northern Michigan. Well, Traverse City--I will take that 
back, no longer part of my district--there isn't a Cadillac 
dealer around there with some of these ideas. Not that I drive 
Cadillacs; I told you I am an Oldsmobile guy. You took that 
away from me, too. So I am hurting now.
    The point is the distances we have to travel I will have to 
follow that up. Just looking at the map and the things that 
have been closed just doesn't make sense. I know this district 
and those miles in between very, very well. That is where 
members say it could probably hurt you, especially in the rural 
areas where you have the most loyal customer base. I agree. 
Plus the Federal Government says we are going to guarantee 
these warranties. I don't know how we will service them.
    Any other members? Mr. Braley? Ms. Sutton?
    Mr. Braley. I wanted to add one thing, Mr. Chairman. I 
think that because of the concerns we have raised today about 
one of the other critical aspects of these bankruptcies; that 
is, the responsibility going forward for any products that may 
be defective and the implications for U.S. taxpayers and the 
dealers in this room, I would strongly urge the committee to 
take up that issue as well and flesh it out in more detail. I 
think it has enormous economic consequences even for people who 
have lost their franchise, and I would like to explore that in 
further detail.
    Mr. Stupak. Mr. Walden?
    Mr. Walden. I think that this flooring issue with GMAC--I 
continue to hear from dealers about flooring in and of itself. 
Just to reiterate, I know that Dr. Burgess had to leave. I know 
he entered into the discussion with both you, Mr. Press, and 
Mr. Henderson, about e-mail traffic to Mr.--I think Dees and 
the White House and all of that, and I understood you both to 
indicate you would supply that e-mail. We will follow up. I 
think Dr. Burgess, the appropriate process would be for him to 
follow up with a letter of request, but I sense that subject a 
problem for you all to provide those e-mails.
    Mr. Stupak. Ms. Sutton?
    Ms. Sutton. Thank you, Mr. Chairman. I just want to add, of 
course, as you can see who has stayed here at end of this 
hearing. As it was pointed out, the CARS Act that we passed 
this week, Representative Braley, he was an original cosponsor, 
and Chairman Stupak and Chairman Dingell were involved in the 
process of getting that bill done, and it is intended to have a 
concrete impact because we really do believe, as Mr. Kiekenapp 
said, we want Chrysler and GM to be a success because we know 
how linked it is to our communities and we know how linked it 
is to jobs and the food that it puts on the tables of the 
people that we are so honored to represent. And so it is 
painful for us to be here and in this position.
    But the pain that we feel listening to this is nothing 
compared to what we have heard displayed here of the folks who 
are losing their dealerships, and I want to thank all of you 
who came here today to put a human face and perspective about 
costs of what is going on on this major problem.
    So thank you all for coming. And Mr. Chairman, thank you 
for holding this hearing. We do want you to be successful.
    Mr. Stupak. Well, thanks. And that concludes all of the 
questions from members. I think the hearings have been helpful. 
Since the Senate hearing we now have a field process with 
General Motors to help out some of these dealers. There is GM 
and the Auto Dealers Association working together trying to do 
some things. I think that is positive. I think we have further 
explanations.
    But we will continue to monitor this. There is H.R. 2743 
sitting out there, GMAC, and others. And it has been a long 
hearing and we appreciate everybody for coming. And if there is 
something anyone wants to add I will give you a minute to add 
something or so. We really do appreciate especially the dealers 
and Mr. Henderson and Mr. Press and others coming some 
distance. And I know that during this hearing once you have 
raised your hand and that, but because of the rules of the 
hearing I couldn't recognize you at times. So if there is 
something you wanted to add--Mr. Golick, I know you did--go 
ahead. Mr. Spitzer, if anyone wants to add something. Then we 
will wrap this up. We will keep this brief.
    Mr. Golick. I am just perplexed when Mr. Press last week 
said that in the case of the dealers not being taken forward 
last year they lost 55,000 units of sales. That number is real 
important to them, apparently. But then like I say, they are 
going to lose 140,000 units of sales when these dealers are 
removed. I know that he says they can only produce 700,000 
cars, but there has to be a plan in place for growth if the 
market improves. I am sure he could build another 140,000 cars.
    That is why--I am perplexed over that. I thought I would 
throw that in.
    Mr. Stupak. Thank you and thank you for coming. Mr. 
Spitzer. Do you have anything?
    Mr. Spitzer. Just that the marketplace was moving the 
industry to a number of dealer outlets rapidly close to where 
they are taking us immediately through consolidations, buy-
sells. And we, in the case of Chrysler, had all of our generous 
points and projects on the table working with, buying out, or 
selling out what it is, to accomplish the goal painlessly. I 
don't know why it couldn't have just kept going a year or two 
and we would be where we are going to be anyway.
    Mr. Stupak. Mr. Kiekenapp? Mr. Press?
    Mr. Press. I really appreciate the opportunity to 
communicate with the committee and provide this information. It 
has been a very good learning experience for us. This will be 
good communications going forward. I don't know that I am 
looking forward to our performance review when I come back, but 
I guess this will be the forum to do that.
    Thank you.
    Mr. Stupak. Mr. Henderson?
    Mr. Henderson. Like Mr. Press, I want to thank you, Mr. 
Chairman, and the committee for your time. Thank the dealers 
for joining us here very, very much. I appreciate it. Because 
this is a very difficult time for all of us, I very much 
appreciate the professionalism. So thank you very much.
    Mr. Stupak. Mr. McEleney?
    Mr. McEleney. Thank you, Mr. Chairman. Again, we appreciate 
the opportunity to be here on behalf of 19,000 new car dealers 
in the country. I guess I would say in this difficult 
environment, and we know how tough the economy is, particularly 
the auto sector, if a dealer is able to keep his doors open, 
make the payroll and keep his customers coming in, floor plans, 
inventories, they are probably a pretty good operator. I know 
there are other elements that play into this, but that is 
important to remember as we look at this.
    So thank you.
    Mr. Stupak. Thank you. Mr. Paddock?
    Mr. Paddock. No, other than just saying thank you for 
giving me the opportunity today. Thank you.
    Mr. Stupak. Mr. Blankenbeckler?
    Mr. Blankenbeckler. Thanks for letting me come. I think I 
have a story and I think everybody who is here today has a 
story. It is not a happy time. Thank you very much for 
listening to me.
    Mr. Thomas. I would close with a rhetorical question, and 
that would be with all these closings, will other makers go to 
these institutions that have facilities available and bring 
their new products and convey them to the public, instead of 
the established makers? Thank you very much.
    Mr. Stupak. Well, thank you all and thank you very much. 
That concludes our questions and concludes our hearing. I thank 
all of our witnesses for coming today and for your testimony.
    The committee rules provide that members have 10 days to 
submit additional questions for the record. I ask unanimous 
consent that the contents of our document binder, with the 
exception of tabs 1 and 3, be entered into the record, provided 
that committee staff may redact any information that is 
business proprietary and relates to privacy concerns or is law 
enforcement sensitive.
    Without objection. Without objection, the documents will be 
entered into the record.
    [The information was unavailable at the time of printing.]
    Mr. Stupak. That concludes our hearing. The meeting of this 
subcommittee is adjourned.
    [Whereupon, at 2:30 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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