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REP. MELVIN WATT (D-NC): Thank you, Mr. Chairman. And let me start by thanking the chair and the Senate yesterday for having these hearings, because I think it is absolutely important that we understand better what's going on, but that the American public get a better understanding of the potential consequences of bankruptcy of any of the automobile manufacturers that are based in the United States.
We are in much the same position that we were with the original bailout. We are very much between a rock and a hard place, and the hard place is coming from the public out there who has a great resistance to bailing out anybody else as they did in the original bailout.
So I apologize for having to step out and I hope I'm not being repetitive of questions that were already asked. I did consult with Ms. Waters, and I think both she and the second-ranking member on our side asked some questions about the use of this money, the projected use of the money.
I guess, to some extent, as a bridge loan, this can be used for anything. But I am aware that up and down the chain under the manufacturers, there is substantial stress at the dealer level; a number of them themselves either going out of business, have gone out of business, on the verge of going out of business.
And one of the questions I want to ask is, is there some plan here for a use of part of this money to address their urgent needs as well as the manufacturers' urgent needs? Can somebody address that for me?
MR. WAGONER: You bet. I think it's a very important consideration, because, just like we have ended up over the years with overcapacity in the manufacturers, we also have overcapacity in the dealer network and also in our supplier network. And we have been working together very closely with our dealers and our suppliers to improve their profitability, their throughput, their revenue, their productivity.
REP. WATT: Well, overcapacity suggests that a number of them will go out of business. And my experience is that some of the most marginal, some of the most distressed of those are the newest dealers, and they tend to be disproportionately minority dealers because they've come to the table more recently. What particularly are you doing to address that issue?
MR. WAGONER: Our data says that it isn't associated with how long they've been in business. It's their fundamental business acumen for all the dealers, all of them, not necessarily depending on how long they've been in business. And it's really an important thing that we keep working together, because we've got to get their profitability up per dealership, because it's the only way for them, just like us, to be competitive at going forward. But it's an ongoing thing that we're working on. We've made great progress. And we're going to continue to work it very closely.
REP. WATT: Now, a number of them are also experiencing challenges with the financial services sector because the financial services sector has withdrawn from this industry making any kinds of loans.
You're a lot more likely to get a loan to purchase a car than you are to sustain a dealership, as I understand it because all of the lenders have kind of taken a hike on your industry because they perceive that you are in distress. Will part of this money take up that slack? Or is this just operating money that you're requesting?
MR. NARDELLI: Sir, this is specifically operating money and, as we discussed, possibly when you were out of the room, that our affiliate financial companies, in parallel to what we're asking for here today, must gain access to the TARP funds. They are currently -- they currently have submitted requests for, in one case, a bank holding company. We have requests in for ILC that will allow them to have access to the secondary market to generate capacity and to improve liquidity. That is the most important thing we could do for these men and women, these entrepreneurs, these small businesspeople -- we have about 3,500 across the country -- to get vitality back into their businesses.
REP. WATT: Thank you, Mr. Chairman.
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