Panel II of a Hearing of the House Financial Services Committee - Stabilizing the Financial Condition of the American Automobile Industry

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REP. MAXINE WATERS (D-CA): Thank you very much, Mr. Chairman.

Again, I thank you for this hearing. It is extremely important that we hold these hearings to find out as much as we possibly can about what's going on in these industries and these companies that are coming before this Congress asking for government assistance.

I'm still traumatized by the hearing that we had yesterday and Secretary Paulson's denial of not paying attention to the loan modifications that we thought we would be getting as a result of the $700 billion bailout bill that we worked so hard to pass.

So on the heels of that, we have here today the automobile companies asking for their share of support from the Congress of the United States, from the people to make sure they're able to maintain their businesses. And what we basically get here are the big boys, the big industries who are well connected, have a lot of influence and basically are too big to fail.

Today and long after today, we're going to hear a lot about arrogance and mismanagement and a refusal by these big automobile manufacturers to recognize that they could not continue to build certain kind of automobiles. And we're going to hear a lot about the refusals to comply with some of our concerns about CAFE standards, on and on and on, ad nauseam.

But in the final analysis, there are people who are going to roll. They're going to roll, and you're going to get what you're asking for. If I had my rathers, the 25 billion (dollars) that we've already given you, I would say take it and run, and we'll deal with the environmental concerns a little bit later.

However, many of our members do not agree with that. So you will probably get an additional 25 billion (dollars).

Here's what I want to ask you. Mr. Nardelli talked about the car dealers. And we just heard my colleague talk about his experience with his car dealerships. I have here correspondence from the National Association of Minority Car Dealers, and I'm going to read you something.

"As you consider the request for financial assistance to the automobile industry, I urge you to also consider provisions to provide financial assistance to automobile dealers, especially ethnic minority dealers. These dealers have been negatively affected by financial and -- (inaudible) -- institutions with their increase in floor planned interest rates, the curtailing of lines of credit, the canceling and/or non-renewal of floor-plan loans and the overall lack of lending to automobile dealers. As a result of this credit crunch, it is estimated that over 600 dealerships and 30,000 jobs have been lost already. Of that 600, it is estimated that over 150 were owned by ethnic minorities. If immediate assistance is not provided to automobile dealers, extremely negative consequences will be felt within the dealer program and the industry, that will directly and adversely affect the economy in the United States, both short and long term."

You basically said that, too, Mr. Nardelli. You talked about the lack of liquidity and the inability to have the floor plan that would provide the capital that's needed, I guess, for inventory to these car dealers.

Having said that, I'm about small business as well as about big business. And I've had enough experience here to know that oftentimes when we help the big businesses, they say that they're going to help the small businesses but it never quite works that way. How many of you would be willing to dedicate a portion of this money, say $1 billion of the 25 billion (dollars), to make sure that there was lending opportunities to these automobile dealerships? How many of you would agree to something like that?

Let me start with Mr. Wagoner.

MR. WAGONER: Yes. What we're trying to do, Congresswoman, is also work on the ability of our finance companies to be able to go back to the kind of traditional funding that they've offered to all of our dealers. And we've been working with the captives, either fully owned or, in our case, partially owned to work with the Fed to get the --

REP. WATERS: Well, GMAC has a letter here to your dealers that says, "In response to difficult credit, market conditions and recent actions by the Federal Reserve Board regarding the federal funds rate, GMAC is making a change to its wholesale floor plan finance program. The following change is effective." It goes on to talk about what it can no longer do.

So what I'm asking you is, in addition to the work that you do with your captives, will you also commit to the floor plans that you're involved with to at least dedicate $1 billion of this money to assist these dealerships?

May I get those answers, Mr. Chairman?

MR. WAGONER: We really need the amount of money we're talking about here for the operating business. But at the same time, as Mr. Nardelli says, we are working with the Fed to try to get better credit availability for our finance companies so they can provide --

REP. WATERS: Mr. Nardelli, would you be willing to dedicate $1 billion of this money to help the dealerships.

MR. NARDELLI: Madame, we would be willing and open to any suggestions from this committee or Congress. But I want to make the point, as I said, this is a parallel request. Your comments are spot on. Our affiliates and captive finance companies are in desperate need -- desperate need -- of access to liquidity. There is no secondary market. And it is causing tremendous hardship. The consumer cannot --

REP. FRANK: Mr. Nardelli, we've got to be more specific than that. We don't have time for --

REP. WATERS: So he basically agrees.

Mr. Alan Mulally, what do you think, from Ford Motor Company? Would you be willing to dedicate $1 billion whether it was the 25 billion (dollars) that --

REP. FRANK: I think the question has been put. We really have to --

REP. WATERS: -- or the 26 billion (dollars).

REP. FRANK: -- be on time. Let's have the (answer ?).

MR. MULALLY: I think that the actions we've taken with the Fed to free up the credit is absolutely the right thing to do which will help all of the dealers.

REP. WATERS: So your answer is yes?

MR. MULALLY: Pardon me?

REP. WATERS: Your answer is yes?

MR. MULALLY: I think the actions are in place right now where the Fed are doing exactly what you are asking for.

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