and that called us here into water earlier this year the house small business committee held a hearing examine both how small parts manufacturers are fearing the reconstruction automotive industry during today's hearing the subcommittee will look at another vital link in automotive supply chain automotive dealers traditionally our domestic automotive dealers makers will rely on a network of twenty thousand local dealers throughout the nation to sell vehicles to the american public these entrepreneurs are the nexus between manufacturers and car buyers making them a critical component in the overall automotive sector the small businesses are also an important source of employment nationally dealerships employing more than one million workers and support a payroll of twenty fifty four billion dollars on average each new car dealer ship employees fifty four people and supports a payroll of two point six million dollars these employees in return spend their wages buying goods and services from local businesses and rural areas like west north carolina the economic role of auto dealers is magnified beyond providing a source of livelihood for their workers dealers also offer rol american an important service often the closest dealership can be as far as fifty miles away this means that dealers this means that dealers service role areas are an important option for americans looking to purchase new vehicles these dealers also service vehicles want to and rule america public transportation is often not readily available in short if you live in rural america you are more likely to drop to work to bring your kids to school or to pick up groceries or if you live in a big city on average the distance you drive is likely to be greater than it is for americans who live in congested areas or in areas unfortunately in recent years automotive dealers have encountered unprecedented economic pressures plunging sales have hit all parts of the automotive industry hard the number of cars and light trucks sold in the us declined by almost three million between two thousand and seven and two thousand and eight in two thousand and eight things went from bad to worse as a combination of rising gas prices the credit crisis and a recession put a serious automotive sales in the u s auto sales fell to a twenty six year low that year and the industry estimates sales could drop by three hundred million more this year of course automotive dealers are not alone in facing these challenges all of the american automotive industry is undergoing reconstruction and the entire sector response is responding to this climate g m is eliminating several brands both chrysler and g m are closing plants and w employee fewer workers during the first six months of this year at least fifteen auto parts suppliers have sought chapter eleven protection including the two largest suppliers as a committee heard earlier this year an increased number of small auto parts suppliers are going out of business are causing hardships in communities across it is my hope that today's discussion the auto dealer closings on rural communities and a special thanks to taken the time to provide this committee with their testimony this is undoubtedly a difficult issue to examine the health of the american auto industry is directly tied to the economic health of our nation on a smaller scale but no less important the financial wellbeing of local our dealerships especially in rural areas is very closely tied to the economic health of our own small towns and farm communities automobile manufacturers rely on extensive network of approximately twenty thousand independently owned dealers sales and service of their vehicles provide the local connection between manufacturers and car buyers and dealership system is one of the several key players in the complex web of relationships th make up the u s automobile industry while there is a consensus about the overall role in value of dealer network manufacturers and dealers have demonstrated that there is a wide gulf between them on the appropriate size of that network the flexibility of the dealerships and running their business really good testimony by great panel here and mr thomas the heart goes out to you know how much you've done for your community and i can relate to drawn up in a small town like that as mr allison has always performed let them use it for a day or so you know how sometimes that getting people to where they need to go it means a tremendous amount and when you have that payroll and you have that impact to a community especially a growing community wow i so that just goes to show to me that you are in a growing community i guess mr dr one of the first questions i have is when you look at the overall impact in the communities expect the rule areas what is the impact to these communities when one dealership goes and then to the people i mean the things that we don't hear about you know very significant so the decisions of travel time for example that's not in the matrix of decision making and i think the biggest problem one of the largest problems from my standpoint is the lack of transparency to the banks that we're spills over into wholesalers which spills over into restaurants and so on and so forth you've got very significant impacts and again it's particularly large relative to the economy in these small communities where there may be no decisions g m and chrysler is making decisions that will last forever for these communities these are communities in the middle section of the country perhaps not on the coast in north carolina but in missouri and nebraska where population losses are quite significant and something we need to pay attention to and the population so this is another nail in the coffin in some cases for some of these communities and again without transparency without lot of the feeling is that we've done business yet we've got no tarp funds and now we're being in the case of auto dealerships being punished even though we're a viable going concern show us where where is the analysis show us why this is happening because again mr allison mr thomas of demonstrators just playing by the rules not getting tarp funds yet being shuttered anyway that that message is getting process that you're having to go through now and some of the obstacles that you know with your employees and the benefits that they have in health insurance and briefly touch on that some of the i know you told me the story about you kind of read the my concern is that this reduces competition and that's i think certainly that's the intent one of the goals is to reduce competition what they say is a condom use what they see is a condom use a scale i don't know if there is a condom in scale in terms of dealerships that they've yet to show the analysis of transparency from the from the non economists for that even for the economists and the dealers out there that are being close but especially the individual has yet to see why what's what's driving this where is the transparency why is my dealership going and another is staying the travel time as mr thomas has indicated are quite significant the m packed on that's not even part of it is the farm the farmers who in fact do get repairs in many of these dealerships at least in the midsection of the country so i think i think  again that that's the motivation and the impact unfortunately for the consumer is going to be certainly negative there's no way you can reduce the number of dealerships and have the consumer better all because  that that again i think is a lot of the motivation for what's going on on here and that's certainly a concern from as an economist and back to my point about the volatility that we've seen and we're making decisions for generations in other words these dealerships have been in business for generations yet we're making our g m and chrysler is making the decisions that will be with these communities forever and the idea that somehow there was another dealer will come in many of these communities will not see that for example in auburn nebraska the community i discussed it's very unlikely or i would say not it is somewhere between zero and ten percent likelihood that there will be another investigation months we do a survey of three three different monthly surveys of about fifteen states and we asked that very question and the answer is a about ten to fifteen percent respond yes so that's meaning eighty five percent say no so that's one of the real issues that they see that the banks purchasing managers and these are all businesses that were serving not consumers thank you very  for putting this this hearing together the subcommittee and thomas having grown up in a small family owned business wasn't car dealership but knowing what a central role i'm sure you have in your communities my heart goes out to you with not any analysis that it was it was done by well some sort of map i have no idea that's what it was i'm saying there's no less reduce to eliminate this dealership that will provide more business for this dealership thirty five miles over and that's that that's probably the way it was done without any serious love examination of what it does to the communities that are affected wh does the profitability of the dealerships but more what i think and again i i'm not i'm a little suspect of any analysis that may have been done because of the speed that it would have that we would have had t represent very rural district as a lot of my colleagues do here is there any bias towards closing world dealerships any evidence of that i would i don't know that for certain but i would suspect there is that bias that into the price of the dealers the new dealership the ones that will be that the individual businesses will have to make so i think that that's the intent but i would question even that i'm not i'm just not certain that there's been any real analysis even from the private benefit and private cost let alone putting in the public benefit the public cost so i again the swiftness with which this took place is makes makes many of us question the communicate we all probably get those kinds of e mails you know people don't put their names on when they give us feedback but it's sad that now that you know you're dealing with a company that's someone to say ninety percent government those who are going to be participating and i've talked with some of those dealers as well and two specific things i want to get your reaction to if you're familiar with that one is participation agreement which rolls into one question which i'm hearing line of cars that you've always carried also that you doubt you're being dictated that you can no longer continue at least within your showroom that line of business and that kind of rolls into pushing because of government involvement now where  certain levels or maybe violations of the trust laws whereby g m are chrysler is eliminating competition and that does work against the consumer and at least work for those two companies but you are talking about eliminating and some of the profitable profitable dealerships and i know i'm repeating myself but in an effort to capture that that  the consumer surplus as we would call it in other words consumers having now to travel greater distances will go would be for g m and chrysler to in fact capture that i argue against that but a second really i'm not understand exactly how this occurred and as we seem to come today with no conclusion as to exactly what kind of business model would make these determinations and person my brother in law was a  chrysler for many years and he and i argued many times about the business model that they were using argue with us for a dozen years before he violates the company about the business model they were using where they were going but i have a couple questions dealership and you think that they will go to ford because obviously convenience probably the biggest factor there do you think that there would be another individual in your town who would say well ok mr thomas isn't here any longer then as you were you know as we were looking at the automobile industry in this country failing really in their business model did you have any concerns about about that long term were you concerned about where the business model was going as  obviously as many of us is going with you are very concerned about the many dealerships in my own district that have closed and as i said i'm trying to continue to understand so i guess just kind of staying on the gist of my time is expired but what would the cost be if you fully understand that and hopefully i'll get educated as well from the understand from the automakers standpoint maybe that's where i need to educate myself for the reasons of why they're being shut down it's hard when we have  and a fourth this year today i hope you know your son's here today that hopefully that be a fourth generation to be able to sell that g m product we need to make sure and you know one of things we have to do is we have to ensure that you know i don't want to lose g m chrysler or ford that would be devastating to our country we need to continue to produce things in this country far import way too much and so  participation and and i hope i get educated so on some of the things and maybe i can relay some of the messages to you that will be part of the i think that wall try to gather as much information to educate ourselves i mean there's always two sides of the story and i want to be able to see