Panel I of a Hearing of the House Financial Services Committee - Auto Industry Stabilization Plans
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REP. SCOTT GARRETT (R-NJ): Thank you, Mr. Chairman. Obviously the panel sitting before you is a lot of experts on how to run an auto industry in this committee. I thank the chairman for holding this hearing. I understand also why the panel came before us several weeks ago asking for, in essence, a blank check with no strings attached. I think that was because Congress, just previous to that, gave away $700 billion to the banks, likewise with no strings attached or no direction to the banks on operation or detailed information on how the banks will actually use the money. So I think that explains why you came before.
I'm pleased that three companies have now submitted a more detailed proposal. I do still have some concerns how these new plans will be the saving grace for our domestic auto manufacturers. The purpose of the plans is to provide what is called a bridge loan to the Big Three domestic auto manufacturers. My concern, quite candidly, is to make sure that this is not a bridge to nowhere. As I understand it, GM is essentially out of time right now, so the question is as we close dealerships in 2012 or restructure union obligations in 2011, none of that's going to help us right now. Things have to be done sooner.
I do have concerns with regard to the preemption of states' rights and how that impacts upon the dealerships, and I would like to hear some information on that with regard to what their actual cost savings are in there and how implications of implicating the states' rights issues will play out. I also have concerns that the actual future sales numbers will be considerably lower than the projected ones in these reports.
So I'm confused. If the federal government provides these temporary loans without the proper restructuring, I think all we're really doing is kicking the can down the road and delaying the day of reckoning at the expense of the taxpayer. And so for the reasons I've said before, in addition to the ones on the demand side that have been raised by several others, I look forward to your testimony.
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REP. SCOTT GARRETT (R-NJ): I thank the chairman.
Again, thanks to the members of the panel for being here.
Let me just follow up on a line of questioning. It seems that there's a spectrum of ideas out here of potential actions or inactions that Congress could take. On the one end, Congress could say they're not going to do anything. On the other end of the spectrum, Congress could come back and say we're going to pass a piece of legislation with all the bells and whistles of oversight so on and so forth for the full $34 billion. And somewhere in-between, of course, there's maybe alternatives.
One of the alternatives that the gentleman from Texas was referencing a moment ago -- I think it's one of the alternatives -- is the idea, his phrase, of reprogramming the $25 billion that's already approved and signed into law and what have you.
So let me just throw that question specifically out to you. If we're not going -- if Congress in its wisdom decides not to take either end of the spectrums of actions today or in the next few days on this, is it an alternative to take the reprogramming idea -- and if we did craft some sort of legislation with regard to reprogramming that $25 billion -- could we do it in a way that we would, say, reprogram a portion of it? And numbers that I'm hearing here off the back of the page was around $9 billion, four and then four and then so on.
So is there a cumulative aspect of say, we just reprogram a portion of that $25 billion to free up those dollars in cash to your hands without the restrictions that those bills have right now?
MR. NARDELLI: In the short term, at least from Chrysler's perspective, we're certainly open to whatever makes the most sense for Congress as far as making the bridge loan available to help us get through this trough, point one.
Point two: In our plan, to be absolutely clear, we've got a request in for $7 billion in the bridge loan, but we also -- our original request in for the 136 money was about $8 billion. We were told to assume somewhere between 70 to 80 percent. We have $6 billion built in our plan -- assuming we would get some of that starting in 2010, '11 and '12 -- based on the process as we understand it today.
REP. GARRETT: Okay. And the other gentlemen?
MR. MULALLY: We have sufficient liquidity.
MR. WAGONER: From our perspective, we've said however the short- term funding comes is up to the Congress.
I would need to point out, though, that we've already filed $8 billion worth of -- actually not projects, but the expected funding from those that would come out over a several year period under 136. So if that was all drawn down now for short-term needs, you know, in the future we would hope that 136 could be replenished as well.
REP. GARRETT: Right. I only say this, because I know the dilemma that Congress finds itself in, as far as the two ends of the spectrum, and also the fact that we know from your testimony here and the Senate testimony as well -- and other questioning -- that we hear that the numbers may be larger down the road, besides the $34 billion.
And this -- and I think one of you gentlemen, I forget who, testified in the Senate that March 1st, March 31st might be a point in time that you would be coming back after negotiations and everything were all done. This might be that middle ground.
Secondly, one of the questions or comments I made during my opening statement was with regard to one of my major concerns and that is state's rights and the issues of the dealers that are out there.
Can any of you address the issues of what really would be the savings and why is there savings with regard to the dealers out there and shrinking the dealerships? Because I'm told that as far as the dealer is concerned, you know, he operates his own shop. He pays his own bills. You may have some give backs for advertising and that sort of thing like that, but he buys those cars sitting on his lot, right -- are financed, but those are his cars.
Can you explain to me why there would be such a significant savings by violating the state's rights and the contract agreements that are already out there?
MR. NARDELLI: Sir, for us -- or Chrysler -- I mentioned the two points about the 500 dealers, 250 or so are already gone, because they've had to declare bankruptcy. The other 250 are on credit hold.
Our program, we call it Genesis, is more about helping assure the profitability of the dealers that are out there -- particularly in a metro area where we may be over dealered. And so we work in a harmonious way with them to make sure that the dealer consolidation -- as we try to go to one dealership with all three brands so that we don't have and they don't have the expense associated with trying to cover multiple brands in different facilities.
REP. GARRETT: But that's really their problem, though, isn't it?
MR. NARDELLI: But we want to help them! I mean, they are an integral part of our success. Without the dealers and strong financial dealers, we can't be successful.
MR. WAGONER: Are you talking about the issue of state franchise legislation?
REP. GARRETT: Mm-hmm. (In agreement.)
MR. WAGONER: Yeah. A lot has been discussed about that. Our plan can be accomplished without changing that. And you know, obviously, if you have more regulatory regime sometimes it can slow you down, but we are not assuming that there's a need to change state franchise legislation to accomplish our plan.
REP. GARRETT: And I see the yellow light. I have the time -- there's the red light.
REP. FRANK: (Sounds gavel.) The time has expired.
REP. GARRETT: Okay.