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STABILIZING THE FINANCIAL 

CONDITION OF THE AMERICAN 

AUTOMOBILE INDUSTRY 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

NOVEMBER 19, 2008 

Printed for the use of the Committee on Financial Services 

Serial No. 110–146 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin, 

LINCOLN DAVIS, Tennessee 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

TIM MAHONEY, Florida 

CHARLES WILSON, Ohio 

ED PERLMUTTER, Colorado 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

DON CAZAYOUX, Louisiana 

TRAVIS CHILDERS, Mississippi 

SPENCER BACHUS, Alabama 

DEBORAH PRYCE, Ohio 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

DEAN HELLER, Nevada 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

November 19, 2008 ........................................................................................... 1 

Appendix: 

November 19, 2008 ........................................................................................... 107 

WITNESSES 

WEDNESDAY, NOVEMBER 19, 2008 

Gettelfinger, Ron, President, United Auto Workers ............................................. 22 

Hoekstra, Hon. Peter, a Representative in Congress from the State of Michigan ......................................................................................................................... 6 

Kilpatrick, Hon. Carolyn C., a Representative in Congress from the State 

of Michigan ........................................................................................................... 11 

Levin, Hon. Carl, a United States Senator from the State of Michigan ............. 4 

Levin, Hon. Sander M., a Representative in Congress from the State of 

Michigan ............................................................................................................... 10 

McElya, James S., Chairman and Chief Executive Officer, Cooper-Standard 

Automotive, Inc. ................................................................................................... 85 

Miller, Hon. Candice S., a Representative in Congress from the State of 

Michigan ............................................................................................................... 8 

Mulally, Alan R., President and Chief Executive Officer, Ford Motor Company ....................................................................................................................... 20 

Nardelli, Robert, Chief Executive Officer, Chrysler LLC ..................................... 18 

Sachs, Jeffrey D., Director, The Earth Institute, and Quetelet Professor of 

Sustainable Development and Professor of Health Policy and Management, 

Columbia University ............................................................................................ 86 

Slaughter, Dr. Matthew J., Professor of International Economics, Tuck School 

of Business, Dartmouth College .......................................................................... 88 

Sykora, Annette, Chairman, National Automobile Dealers Association ............. 83 

Upton, Hon. Fred, a Representative in Congress from the State of Michigan ... 3 

Wagoner, Richard G., Jr., Chairman and Chief Executive Officer, General 

Motors Corporation .............................................................................................. 17 

APPENDIX 

Prepared statements: 

Castle, Hon. Michael ........................................................................................ 108 

Hoekstra, Hon. Peter ........................................................................................ 138 

Kilpatrick, Hon. Carolyn C. ............................................................................. 110 

Levin, Hon. Sander M. ..................................................................................... 119 

Miller, Hon. Candice S. .................................................................................... 124 

Pascrell, Hon. Bill, Jr. ...................................................................................... 129 

Gettelfinger, Ron .............................................................................................. 131 

McElya, James S. ............................................................................................. 146 

Mulally, Alan R. ............................................................................................... 178 

Nardelli, Robert ................................................................................................ 198 

Slaughter, Dr. Matthew J. ............................................................................... 207 

Sykora, Annette ................................................................................................ 212 

Wagoner, Richard G., Jr. ................................................................................. 221 

Page

IV 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Frank, Hon. Barney: 

Article by Ben Stein entitled, ‘‘Ben Stein Votes ‘Yes’ on Big Three Bailout,’’ dated November 16, 2008 .................................................................... 225 

(1) 

STABILIZING THE FINANCIAL 

CONDITION OF THE AMERICAN 

AUTOMOBILE INDUSTRY 

Wednesday, November 19, 2008 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 10 a.m., in room 2128, 

Rayburn House Office Building, Hon. Barney Frank [chairman of 

the committee] presiding. 

Members present: Representatives Frank, Kanjorski, Waters, 

Maloney, Gutierrez, Velazquez, Watt, Ackerman, Sherman, Meeks, 

Moore of Kansas, Capuano, Clay, Baca, Lynch, Miller of North 

Carolina, Scott, Green, Cleaver, Moore of Wisconsin, Davis of Tennessee, Hodes, Ellison, Klein, Wilson, Perlmutter, Murphy, Donnelly, Foster, Speier; Bachus, Castle, Royce, Manzullo, Jones, 

Biggert, Capito, Hensarling, Brown-Waite, Neugebauer, McHenry, 

Campbell, Bachmann, Roskam, and McCotter. 

Also present: Representatives Pascrell, Kaptur, Jackson-Lee, 

Levin, Kildee, and Ehlers. 

The CHAIRMAN. The hearing will come to order. We are going to 

begin right away. There is—and I apologize for the schedule conflict—going to be a Republican Conference today, so we are going 

to accommodate our Republican colleagues. The ranking member is 

here. He is needed at his conference. I notice Mr. Upton has come 

to testify. I am going to take the Republicans right away because 

they do have their conference to go to. So I am now going to recognize for his opening statement the ranking member of the committee. 

Mr. BACHUS. Thank you, Mr. Chairman. If the U.S. automakers 

didn’t play such a central role in the American story we wouldn’t 

be here today. But the Big Three stand as emblems of the American dream. And they have been an integral part of the American 

economy for generations. Because of that, they are special to all 

Americans. 

GM, Ford, and Chrysler have hit hard times. They are now asking for taxpayer help. Even though all Americans, I would hope, 

want this industry to succeed, and the workers who work at those 

factories, I cannot support a plan to spend taxpayer money to bail 

them out. My initial problem justifying these loans to the Big 

Three is when I speak to my constituents, and it is a fairness issue. 

The vast majority of my constituents are not making anywhere 

near what General Motors, Chrysler, and Ford pay their employVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
2 

ees. Even with recent changes, the average hourly wage at General 

Motors is still $75 an hour. That is 50 percent, 100 percent, or in 

some cases, 3 or 4 times what my constituents are making. 

My constituents do not understand why their taxpayer dollars 

should go to support what they consider less efficient businesses. 

And that raises a second issue, which is that a bailout is not a solution to the fundamental problems of the Big Three automakers. 

A bailout of the auto industry would just push the problem further 

down the path. 

To survive, the Big Three are going to have to change and become more efficient and competitive. I am not sure that management and labor are willing to make that sacrifice. Both management and labor at the Big Three have pay and wage scales that 

are substantially higher than their competitors. That is not being 

anti-management or anti-union; it is just being truthful. 

A bailout to me raises fairness issues, and does not solve the 

problem. Additionally, a bailout is not good economics and is not 

the American way. We believe in fair competition and free markets. 

The markets are unforgiving and they can be hard, but they are 

very good at showing business the path to long-term success. 

The American way to solve this problem is not to depend on the 

government for a solution. The government handing them taxpayer 

money and telling them how to run their business is also not the 

American way, and will only lead to prolonged pain. The American 

way to solve this challenge, and it is a challenge for all of us, is 

for all the parties involved to sit down at the table and hash out 

a solution that will make these companies competitive in the long 

term and assure their survival. Once they have done this, and not 

until they have, I believe they should not come to Congress and the 

American people and ask them to sacrifice. Once they have made 

this sacrifice, I believe the American people and this Congress will 

be more receptive. 

Unfortunately, the parties have not had the fortitude and foresight to make admittedly difficult decisions that needed to be 

made. They have made some. They made them last year in some 

wage issues. But it is not enough. 

Unfortunately, in the case of the Big Three, the parties have 

been unable to make the difficult decisions that could be made to 

strengthen their businesses. It is important that management and 

the union stop kicking the can down the road, sit down, and resolve 

these important issues. Sacrifices will be required, as in the case 

of all challenges and changes. 

Now, let me conclude by saying if we continue down the path of 

taking money from more efficient and competitive companies and 

giving them to companies with less efficient models and those that 

are in trouble because of bad management and bad decisions, even 

with good intentions, our overall productivity as a country will continue to suffer. While we will avoid a certain amount of pain in the 

short term, we make the situation far worse in the future. By rewarding failure, we send a signal to the marketplace that we would 

live to regret. 

Finally, we need to protect the taxpayer. The American people 

have bailout fatigue. During hearings last week and again yesterVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
3 

day I said we needed an exit strategy from the string of bailouts. 

We still do. 

I yield back the balance of my time. 

The CHAIRMAN. We will now go to our congressional witnesses. 

And again given the Republican Conference going on, I will begin 

with the gentleman from Michigan, Mr. Upton. 

STATEMENT OF THE HONORABLE FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Thank you, Mr. Chairman. I appreciate your willingness to go out of regular order to allow us to do that as we are expecting votes perhaps as early as 10:30 within our Republican Conference. 

Our economy is in trouble. That is not news. There is uncertainty 

in the market, and job losses are mounting. It is our responsibility 

as lawmakers to act decisively to reverse this economic downturn 

and save millions of American jobs. We all know what is at stake. 

The financial rescue plan that Congress passed just before the election was for a large part opposed by many of our constituents. Most 

Americans saw that bill as a bailout for Wall Street, when help is 

desperately needed for Main Street. 

I opposed the Administration’s initial proposal, and later pressed 

Secretary Paulson to use the authority granted under the measure 

to help average citizens, not just $147 billion for AIG, especially as 

AIG’s execs were holed up in a posh resort on Uncle Sam’s dime. 

My concerns were answered with a plan that I supported containing stronger oversight and a variety of positions intended to 

help Main Street. 

They have failed in meeting that congressional intent, and Secretary Paulson said of the vote, ‘‘This was obviously a very important vote. It was a vote to protect the American people, protect 

their jobs, their economic well-being. It was to protect the small 

businesses, people’s savings.’’ 

That is what he said. Well, I ask Secretary Paulson, does allowing the U.S. auto industry to die and losing millions of jobs supported by this vital industry fulfill his definition of protecting 

American jobs or small businesses? Denying support to the auto industry, losing millions of jobs across the country, runs counter to 

the initial intent of Congress in passing a rescue package. 

That is completely unacceptable. President Bush and Secretary 

Paulson should know that the U.S. auto industry is Main Street. 

The auto industry is American jobs. The auto industry supports 

countless small businesses all across the country, and the U.S. auto 

industry created the middle class and the manufacturing sector, 

the backbone of our very economy. You don’t get more Main Street 

than the U.S. auto industry. And turning our backs at this time 

would be a disaster for our economy. 

Earlier this week, everyone in the financial sector cringed when 

Citibank announced the layoffs of over 50,000 employees. Now 

imagine the economic impact of multiplying those job losses by 50; 

that is the magnitude of what is at stake today. If we lose one of 

the Big Three, we will lose literally perhaps as many as 21⁄2 million 

jobs almost overnight, and the ripple effect will be devastating on 

4 

the national scale. Not only will we lose those jobs, we will also 

lose over $100 billion in tax revenue and $275 billion in middle 

class income over the next 3 years. So let’s look at what we are talking about here: $25 billion in loans that is going to get paid back versus $100 billion in lost tax 

revenue; millions of jobs lost in a prolonged economic crisis. 

There is vast support for helping automakers and their millions 

of employees survive this crisis. There is fear out there, not just in 

Michigan, that the collapse of GM, Ford, and Chrysler could and 

would trigger an economic depression. Americans understand that 

the auto industry is extremely important to the U.S. economy, not 

just for Michigan. 

The legislation that we passed wasn’t supposed to be about bailing out Wall Street, but rather protecting working families, students, retirees, and all taxpayers, every one of them, from the consequences of a financial meltdown. If the White House won’t use 

its existing authority to protect Main Street jobs, then Congress 

must act again to ensure that they do. 

The people of Michigan are suffering tremendously, big time, 

with the highest rates of unemployment and home foreclosures in 

the country. And while there is plenty of blame to go around, we 

cannot stand idly by as the pillar of our economy collapses, the 

aftershocks of which would further damage our Nation’s economy. 

The State of Michigan already has an unemployment rate of 

nearly 10 percent. To do nothing and watch the domestic manufacturing sector crumble would further fan the flames of unemployment on a national scale in a way which we haven’t witnessed in 

our lifetimes. 

I yield back the balance of my time. Thank you, Mr. Chairman. 

The CHAIRMAN. Next, we will go to the Levin of your choice. Who 

goes first? Are we going by age or branch? 

Senator CARL LEVIN. We have never disagreed on anything in 

our entire lives, and we are not disagreeing on this one. 

The CHAIRMAN. Our colleague. We will go by age. Our colleague 

from the House. 

Senator CARL LEVIN. That is the one thing we disagree on as a 

matter of fact. 

Mr. SANDER LEVIN. If you are going to go by age, the Senator 

goes first. 

STATEMENT OF THE HONORABLE CARL LEVIN, A SENATOR 

FROM THE STATE OF MICHIGAN 

Senator CARL LEVIN. Mr. Chairman, members of the committee, 

thank you so much for the opportunity to testify this morning. 

When today’s hearing is over and our witnesses go back to the 

challenges they face to save their companies and to save this economy, the spotlight is going to be on Congress. It is going to be on 

what is our response to the plight of an industry which results 

from an economic downturn not of their own making. The collapse 

of our domestic automobile industry would be, in the words of 

President-elect Obama, a disaster for the entire economy. 

The auto industry is like no other industry in this country. Ten 

percent of the Nation’s jobs relate to this industry. The industry accounts for 20 percent of our retail sales. Their dealers are on every 

5 

Main Street in America, and their suppliers exist in most of our 

States. 

So where are we in Congress today? Where is the Congress? The 

President says that he supports bridge loans. The President-elect 

says that he supports bridge loans. The Speaker supports bridge 

loans. The majority and minority leaders in the Senate support 

bridge loans to the auto industry. So where is the problem? What 

are the barriers when that leadership supports bridge loans for the 

auto industry? 

Well, there is no disagreement over the fact that conditions need 

to be attached to the loans. Everybody who supports the loans 

agrees that these loans must be accompanied by strong oversight, 

taxpayer protections, and a financial plan which outlines the companies’ steps to produce energy efficient, advanced technology vehicles and to achieve financial recovery. There is agreement that 

there should be a limit on executive compensation, bonuses, and 

golden parachutes. 

The problem now is that there is no agreement on the source of 

the funds for the bridge loans. My preferred course is contained in 

legislation that Senator Reid introduced Monday to provide bridge 

loans to the auto industry. That approach would take just 4 percent of the $700 billion made available by the Emergency Economic 

Stabilization Act, which after all was enacted to try to restore stability and assure stability in this economy. But the White House 

says no. They don’t like that source of the funds although it is only 

4 percent, and the failure of this industry would have this kind of 

a destabilizing impact. 

What the White House wants is to use the so-called Section 136 

Energy Department funds, which we provided earlier to support development of energy efficient, advanced technology vehicles. Now, 

some of the Section 136 supporters say no to that source of funds. 

Time is shorter than short. People in communities across this 

country are anxiously awaiting what Congress is going to do when 

there appears to be so much support, at least among the leadership 

here and between the President and President-elect. Where there 

is that kind of support, are we going to permit a difference over the 

source of funds for these loans to destroy an opportunity to help an 

industry so essential to this economy? 

Now, I know there is frustration with past actions of the U.S. 

auto companies. Blame them if you want for quality problems in 

the 1970’s, or for paying their executives and their workers too 

much, or for not moving aggressively enough to produce advanced 

technology, fuel-efficient cars. But don’t throw millions of jobs and 

a vital segment of this industrial and defense economy overboard 

in that frustration. 

There was an article in this morning’s paper which to me was 

the most important of all the articles in the papers this morning, 

as important as our hearings were yesterday in the Senate and 

your hearings are here. This article is headlined the following: 

‘‘Facing a slowdown, China’s auto industry presses for a bailout 

from Beijing.’’ This is not just the domestic automobile industry 

which has problems because of this global economic slump. This is 

a worldwide problem. 

6 

And the question is: Will we have an auto industry when this 

slump is over? China is going to have an auto industry. Germany 

is going to have an auto industry—Read what Chancellor Merkel 

said: She is going to make sure Opel gets enough money, if necessary, to keep going. European automakers have asked for $56 billion in loans. No auto-producing company in the world will permit 

their industry to go under. They are being asked for and will provide loans for those industries. We can do no less. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. I just want to acknowledge that this 

is a matter of great interest, and while we have a number of Michigan representatives here, we have been joined by the gentlewoman 

from Ohio, Ms. Kaptur, who is here because of the importance to 

the State of Ohio, and also the gentlewoman from Texas, Ms. Jackson Lee. Any members who want to sit up here—and of course our 

very distinguished colleague from Michigan, Mr. Kildee, whom I 

think is waiting a chance to get there. I wonder if it would be all 

right with Ms. Kilpatrick and Mr. Levin, there is the Republican 

Conference, could I go now to Mr. Hoekstra, to Ms. Miller and Mr. 

Hoekstra? Are you in a great hurry if I could get them? 

Let me also say to Mr. Upton, I consulted with the ranking member. I believe we could save our questions for later. If we have 

questions, we will get to you on the Floor. We know where to find 

you. So having testified, feel free to leave. I know you have your 

conference. It is not a sign of your lack of interest. 

I will go first to Mr. Hoekstra, then to Ms. Miller, and then we 

will continue with the others, for 5 minutes, please. 

STATEMENT OF THE HONORABLE PETER HOEKSTRA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. HOEKSTRA. Thank you, Mr. Chairman. It is good to be here, 

and I am glad you are having this hearing. I will submit my statement for the record— 

The CHAIRMAN. Without objection, all statements from all members will be printed in the record. 

Mr. HOEKSTRA. Let me just summarize the points that I would 

like to make today. Clearly, the automobile industry is critical to 

the United States, and it is critical to Michigan. That is not up for 

debate. Critically, or also essential, if the Big Three receive taxpayer-funded infusions of cash, I believe all the rules change. And 

I will explain that as I go through my statement. But I think that 

as a committee and as a Congress, we need to consider a wide 

range of alternatives as we take a look at how to get the automobile industry healthy again. 

The first thing that I think we need to do is we need to take a 

look at the Federal and the State level to provide incentives so that 

the consumer can be the driving force behind getting a healthy industry. 

Drive demand. At the Federal level, I think we should consider 

a tax credit for new car purchases. At the State level, I think we 

should take a look at the State policies. Michigan has an illogical 

sales tax. When someone in Michigan buys a new car, they pay a 

sales tax on the full purchase price of the car. The State, Michigan, 

7 

should take the lead. We should only charge sales tax on the differential, the difference between the purchase price of a new car 

and the trade-in value. So I think the States and the Federal Government need to take a look at how we can drive demand for new 

car purchases to help get the Big Three moving again. 

The second thing that I think we need to do is we need to take 

a look at some of the Federal policies that have or will be implemented or are being considered for implementation. The first is we 

have provided this $25 billion for the industry to retool itself to 

move towards new CAFE standards. In this economic downturn, is 

it appropriate for us to consider delaying the implementation of 

CAFE standards for a period of 3 to 5 years and use those dollars 

for other things? Or recognizing that provides significant savings to 

the automobile industry, and that might be preferential to an infusion of taxpayer dollars into the auto fleet? 

The second thing that we ought to consider is there has been a 

lot of discussion about whether there will be State standards for 

CAFE or emissions. Should Congress reassure the Big Three that 

we are going to have a consistent national standard for safety 

standards, for CAFE standards, and emission standards so they 

don’t have to worry about the complexity or the confusion that they 

would be under if States started implementing various standards 

for them to meet for them to sell their cars in their States? 

A third point is if the committee and Congress finds itself moving 

down the path of providing taxpayer assistance, the rules do 

change. These companies, the workers, employees, and management are now accountable to the shareholders. We have a fiduciary 

responsibility to protect the interests of the taxpayer. Yes, these 

companies and these employees now are accountable to Joe the 

Plumber and others. You know, in my district, the average manufacturing salary or the average manufacturing salary across the 

country is $31 an hour, including fringes. For the transplant countries, it is $48 an hour. For workers in the Big Three, it is $73 per 

hour. Should manufacturing workers who are making $31 an hour, 

or $48 an hour, should their taxpayer dollars be used to provide assistance to blue collar and white collar workers who are maybe 

making significantly more than what they are? 

These are struggling industries. I have a lot of these suppliers 

in my district. There needs to be an element of fairness and sacrifice as we go through this process. Mr. Chairman, I am glad to 

see that in, I think, some of the legislation that you have brought 

forward you have strengthened the requirements on CEO pay and 

capping CEO pay. Because what we have seen in the financial bailout package, you know, when the companies set aside $40 billion 

for bonuses, we have done something wrong. 

And Mr. Chairman, of interest to yourself and myself, let me 

raise one final point: Federal Prison Industries. How does that fit 

with the automobile industry? Federal Prison Industries is an $800 

million business rapidly growing to be a billion dollar business. 

They make $150 million of automobile components, and they make 

over $100 million of office furniture. These are industries that are 

struggling. They should at least have the opportunity to compete 

for that business. 

Thank you, Mr. Chairman. 

8 

The CHAIRMAN. The gentlewoman from Michigan, Ms. Miller. 

STATEMENT OF THE HONORABLE CANDICE S. MILLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mrs. MILLER OF MICHIGAN. Thank you very much, Mr. Chairman, Ranking Member Bachus, and all the members of the committee. I can’t tell you how much we sincerely appreciate you calling this hearing and allowing all of us to come here today and 

make our case for saving millions of jobs, not just in Michigan, but 

all across our great Nation. 

You know, a number of critics have said the domestic auto industry is a dinosaur, that it is too fat to survive. But the truth is that 

over the last number of years, America’s domestic auto manufacturers have made very tough decisions to make their operations 

leaner and more competitive. In Michigan, unfortunately, we have 

seen the loss of over 400,000 manufacturing jobs as the auto companies have restructured themselves. And if those critics who think 

there is just too much fat in the industry really think that, I would 

invite them to come to Detroit, come to, for instance, Macomb 

County, which I am very proud to represent along with Sandy 

Levin and Carl as well, and to visit some of those who have been 

laid off. Or maybe they could visit with some of those whose homes 

are now in foreclosure, or visit some of those who have worked 

their entire lives and are now fearful that their jobs are going to 

go away. Or they could visit with some of the retirees who worked 

so hard to earn their pensions and now face the loss of substantial 

portions of their income if their pensions are thrown into the 

PBGC. Or perhaps they could tell those people that they are part 

of an unsustainable business model, and that they need to be sacrificed. 

The fact of the matter is that this industry, for all of its faults, 

has made very tough decisions. It has cut to the bone and it has 

dealt with crisis after crisis to return to profitability. It has been 

handed new government mandates, regulatory mandates that the 

experts say will cost this industry as much as $86 billion in order 

to comply. And of course this at a time of an economic downturn. 

It has dealt with skyrocketing health care costs, and it has worked 

with its employees to make major concessions to help the companies survive. 

But the final blow was an economy in a meltdown situation 

brought on not by the mistakes of the auto industry, but by those 

on Wall Street. Many have said that the problem with the domestic 

auto industry is that they don’t make products people want to buy 

anymore. That is simply untrue. Do you know which company actually makes the most models that get over 30 miles to a gallon? 

That is General Motors. Or how about the car company that has 

the highest mileage SUV in the entire world? That company is 

Ford. And I am proud to drive a Ford Escape Hybrid. It is General 

Motors that is working to bring the very next great innovation to 

the auto market. The Chevy Volt extended range electric vehicle 

could revolutionize the industry, and will do it with American designed and American built technology. 

9 

So the domestic auto industry’s problem is not a lack of product, 

because that product is getting better each and every day. The 

problem is a lack of customers brought on by the economic meltdown. The actions of Wall Street have stifled consumer confidence, 

and they have frozen the credit markets and made auto loans unavailable for too many consumers. 

Last year, over 16 million vehicles were sold in this country. In 

October, the annualized rate of vehicle sales was at 11 million. And 

that is not the result of the product, that is a result of consumer 

confidence in the availability of financing. So this Congress just 7 or 8 weeks ago passed a $700 billion bailout of the banking industry to help Wall Street to better times and 

to free up credit, $700 billion sent to those who caused the problem 

in the first place. And today all we are asking is that $25 billion 

of that money be targeted as a bridge loan to support the domestic 

auto industry. 

I would say this as well, Mr. Chairman, and all the members of 

the committee, I hope you think about the very rich, rich heritage 

that the domestic auto industry has had on our Nation in times of 

need, in times of national crisis. Southeastern Michigan was actually, during World War II we were known as the arsenal of democracy because we had the manufacturing capability to build the armaments that literally, literally led the world to peace. There were 

a couple of years where we didn’t even produce automobiles because we were producing tanks and Jeeps, and we were fully engaged in the war effort. And I hope we would think about that as 

we are looking at perhaps the demise of a huge segment of our 

manufacturing segment. As well after the horrific attacks of our 

Nation of 9/11, when the terrorists were trying to bring our economy to its knees, it was the domestic auto industry, led by General 

Motors, I would tell you, that started the Keep America Rolling 

Program with the zero interest financing and the rebates, etc., that 

kept the workers working and kept America buying. 

And I will also say this, and let me just close on this, the domestic auto industry literally created the middle class of this great Nation. The middle class was not created by AIG or Bear Stearns or 

Lehman Brothers or whatever. They might have created the upper 

class, but they did not create the middle class. The middle class 

was created by this great industry. We are facing some tough economic times. We are asking for a loan; not a bailout, but a loan. 

And I think it is entirely appropriate that this Congress sees to it 

that happens. 

Thank you very much. 

The CHAIRMAN. Before I turn to Mr. Levin, let me just say, and 

we don’t under our rules allude to a TV audience, but let me make 

a factual statement. I have been watching there. It may appear to 

people watching this that there is some lack of interest on the Republican side on this important issue. I want to stress again, unfortunately, there was a scheduling conflict. The Republican House 

Members have a conference that is going on now, their official organizing conference. It is important that they be there. The fact 

that there are more Democrats than Republicans is no indication 

of a disparity in interest. We unfortunately had this situation 

where people had to be in two places at one time. And I know as 

10 

soon as they can they will be coming back. I didn’t want to have 

any false impressions created by TV, God forbid that should ever 

happen. 

The gentleman from Michigan. 

STATEMENT OF THE HONORABLE SANDER M. LEVIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. SANDER LEVIN. Thank you, Mr. Chairman, Ranking Member 

Bachus, and all of my colleagues. I was in the Senate yesterday 

and heard some of the testimony, and I think the issues were 

raised and answers were given, and awfully good answers in most 

cases, if not all. I think what was missing is the sense of urgency, 

a sense of urgency. 

Lehman Brothers went under. This government did not act. A 

spark was set off that went around world. This industry now faces 

utter urgency. Yesterday, the Big Three indicated how much they 

thought they might well draw on the $25 billion. They needed it, 

and they need it as a bridge in the next few months. We can’t leave 

here this week and take a chance. President-elect Obama has said 

that the auto industry is the backbone of American manufacturing, 

and we can’t leave here and see the backbone splintered. 

This is an international credit crunch. My kid brother, I am 

older, referred to China. Europe is being asked, the Commission, 

for over $50 billion to help their auto industry. And we are thinking of leaving here and taking the risk of bankruptcy? There is a 

looming cliff, and we have to act. 

I want to spend a few minutes, if I might, talking about some 

of the issues, Mr. Bachus, that you raised. You talked about people 

sitting down and facing the problems. I worked in the auto industry when I was a kid. It is a very different industry from then to 

be sure, and from 10 years ago, and I think from 5 years ago. As 

has been mentioned by others, there has been restructuring and 

cost cutting. Look at the number of employees who have gone: GM 

has reduced its head count by 84,000; Chrysler by 32,000; and Ford 

by 51,000. They have closed plants, and they have done this in discussions with the labor movement. 

There is talk about quality, and I hear some references to dinosaurs. Ford, for example, has tied Honda and Toyota in quality, according to the Consumer Reports. And as mentioned, GM has more 

cars that get 30 miles per gallon than any other company. That is 

a dinosaur? The Chevy Volt. Chrysler warranty claims dropping. 

This is a vibrant, alive industry that now has improved and faces 

a circumstance outside of its control. And everybody else is acting 

in this world. Are we going to leave and not act? 

Let me just say, if I might, a word about bankruptcy. I saw two 

articles today in the paper, one by Mitt Romney. I won’t comment, 

because he came to Michigan and said, ‘‘I will fight for the auto industry.’’ The other went through the bankruptcy issue. Bankruptcy 

Chapter 11 will mean Chapter 7 and the liquidation of a company. 

People may get on an airline and go from Washington to Erie, 

Pennsylvania, or I forget, Wilkes-Barre, Pennsylvania, but they 

won’t buy a car if they are not sure there is service or if the warranty won’t be met. 

11 

So let me just say one last thing about an issue that has not 

been well versed, I think. My brother is modest. He, years ago, 

worked to have developed a national automotive center in the defense area. It is in Warren, in the district I represent. It has the 

responsibility—I am almost done. It has the responsibility for the 

development of vehicles for the military. There is a complete interaction between the automotive center and its development of vehicles for the military and the Big Three. Is there going to be that 

kind of synergy between the Defense Department and companies 

that are owned and run by foreign manufacturers? We can’t stand 

to lose the domestic auto industry for either economic or national 

security purposes. We need to act this week. 

The CHAIRMAN. The gentleman from Alabama would ask for 30 

seconds to make a clarification. 

Mr. BACHUS. Thank you, Senator. I appreciate your—or Congressman, I appreciate your remarks. Let me say this: I have never 

myself, and you didn’t say this, but I never said that GM or Ford 

or Chrysler was a dinosaur. 

Mr. SANDER LEVIN. I know. 

Mr. BACHUS. I would never say that. In fact, I drive two GM cars 

and they are great cars. I drive a Ford car. There are some cars 

we all know that there are a lot of models, a lot of problems. They 

have made changes. I don’t think the American people are aware 

of the changes they have made. And finally, this thing about AIG, 

they pay their employees a lot. And I realize that when you give 

to AIG and you give to Lehman Brothers, you know, a part of fairness is why not the automobile industry? And it to me is every bit 

as important as those Wall Street companies, if not more important. 

So, I think that what we are looking for is a sacrifice and assurances to make sure that it is a solution, and not just a postponement. 

Mr. SANDER LEVIN. Mr. Bachus, I fully agree, and the Big Three 

have agreed to a new wage structure. People are going to come into 

their plants earning $14 an hour and not have a defined contribution plan. And I think if people can aspire to have good health care 

and pensions like was worked out between the Big Three and the 

United Automobile Workers, that is an important part of America 

and aspiration to a solid middle class. I think you agree with me. 

The CHAIRMAN. I would just note, and I get the gentleman’s 

point, but Lehman Brothers is probably not the best example of 

people who got anything; they got stiffed. 

Mr. BACHUS. That is right. 

The CHAIRMAN. There were others, however. The gentlewoman 

from Michigan. 

STATEMENT OF THE HONORABLE CAROLYN C. KILPATRICK, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF 

MICHIGAN 

Ms. KILPATRICK. Thank you, Mr. Chairman, and members of the 

committee, for allowing us to come today before our powerhouse 

CEOs who run the most effective, outstanding manufacturing companies in our country and the world. The American auto industry 

is alive and well, employing over 13 million direct and nondirect 

12 

employees who benefit from the over $340 billion worth of payrolls 

every year. I come today to ask for your quick, honest, thorough, 

comprehensive review of what we have before us today. 

The country is in total crisis, as is our industry at the moment. 

It is the last manufacturing base that we have in America. We 

must save this industry because of that manufacturing base, as 

well as it moves to our energy independence as we move into this 

21st Century. Our car companies will build better, more efficient, 

environmentally sound cars as we move forward, and have made 

that commitment in previous energy legislation that has come before us. The jobs, the businesses, the revenue that our Federal Government, State government, local cities, and townships receive 

from this industry is paramount. It is not to be taken lightly. 

As was mentioned by a couple of our other Michigan bipartisan 

panel as you have had, Mr. Chairman, the military, our own military, is at stake here. Our car companies build the tanks, build the 

Humvees, build the armed resistant tanks that go through these 

wars, and I hope we end these wars very soon, lest we have none. 

Do we want to turn that over to our competitors? I think not. Our 

military and national security are at stake here. Since World War 

II, when our automobile companies built those same vehicles and 

helped us to win that war, the tanks, the Jeeps, the trucks that 

support the men and women in our military, often created the technology that helps us navigate in our own personal cars, brakes that 

last for thousands of miles. No other car company can say that. 

They protect our bodies in accidents. We can’t afford to lose these 

intellectual properties that the American auto industry, only they 

provide today as we move forward. Our economy and our troops 

cannot survive if in fact our American auto industry goes under. 

And we know you won’t let that happen. 

It is a loan. In the 1980’s, when Chrysler came to this Congress 

and asked for assistance, at that time, I was a member of the State 

House of Representatives. Not only did we give that loan, Chrysler 

paid the loan early, and our Federal Government made $800 million more than was given to them at that time. I predict when we 

allow these companies to do the same, we will see growth and development and energy independence move as we move throughout 

this time in our lives. 

It is a critical time. Some of our colleagues don’t understand. And 

a lot of times as leaders we have to be the ones, which is why we 

are chosen leaders, to educate, to demonstrate, and to let our constituents know that the American auto industry deserves our assistance, deserves the protection of those 13 million plus. And in 

my written testimony we have outlined from the sources of the Bureau of Labor Statistics, the Center for Automotive Research, and 

the National Automobile Dealers over 13 million job-related jobs in 

this economic automobile industry that we have before us. 

So we have to be very serious. And as my colleagues say, we 

have to be very quick. This is not something that can languish over 

to the next Administration, really over for the next month. It is 

that critical. Over 1 million pensioners who built the industry, who 

helped to build the middle class, who deserve their pensions be protected are a part of this bridge fund that we are asking you to approve for us. 

13 

As we come to you today, just know that the energy independence, the manufacturing base that is the only one left in our country, the revenue that is generated from these companies is the sustaining force of our country. It is not a bailout; it is a loan. We will 

return it—5 percent interest over the next 5 years, another 9 percent over the second 5 years. Don’t let the automobile industry die 

because of our inaction. We have a responsibility to the children, 

to the villages, to the schools. We have a responsibility to the workers to make sure that they can have a decent living. We are in a 

very precarious situation as our country moves into the next Administration and throughout this century. What we do over the 

next 24 or 48 hours will determine what America will be for the 

next 50 to 100 years. I urge you to act. 

And thank you, Mr. Chairman, for your bill, with some of the 

things that you put in your bill that will help as we monitor and 

work with the auto dealers, the auto companies. 

And let me just, as I close, say something about the dealers and 

the ethnic dealers particularly. I am told that over the next 60 

days, if something is not done, we will lose over 60 minority automobile dealers. If it is longer, over 700 will go out. And neither the 

bridge loan nor the restructuring loan addresses that. I am pleading for you, Mr. Chairman, and members of this committee that we 

take a look at that. Those are thousands of families, thousands of 

children, revenues to cities and villages that must be protected. 

Thank you for the opportunity to testify before you today. I ask 

that you move swiftly, and assist the only manufacturing base that 

we have in America, the healthiest, the best. We ask for your assistance. Thank you. 

The CHAIRMAN. I thank the gentlewoman. I thank all my colleagues for testifying quite succinctly, all on the point. We will excuse all of our colleagues now. And I did have a request, because 

there are some other meetings. The gentleman from California, Mr. 

Baca, had a unanimous consent request, I believe. 

Mr. BACA. Thank you very much, Mr. Chairman. And I appreciate you holding this very important meeting right now, especially 

on the automobile industry, because the American people and the 

taxpayers are asking us to do something about this recession. And 

this impacts the recession right now, based on the amount of jobs 

that will be lost, you know, and basically what we are asking for 

is a loan. There is a whole difference right now in reference to the 

automobile industry asking for a loan to enable GM, Ford, and 

Chrysler to continue operating and avoid liquidation in the near future. The car industry represents almost 4 percent of the U.S. gross 

domestic products; 1 of every 10 U.S. jobs are impacted in the U.S. 

auto industries. And that impacts working families, it impacts our 

cities, and our communities as well. 

But Mr. Chairman, I wanted to ask again, this is a question I 

would like to ask the panel. 

The CHAIRMAN. No, we are not going to be having questions of 

the panel. 

Mr. BACA. I basically wanted to support this legislation. I think 

it is important that we deal with it. It impacts the United States. 

The American people are asking us to do something. This is a step 

in the right direction. And I believe that we have to support it. We 

14 

bailed out everybody else. And what we are doing now is providing 

a loan, providing assistance to keep the American people working 

in our communities. 

Thank you very much. 

The CHAIRMAN. Thank you. 

Mr. SANDER LEVIN. Mr. Frank, thank you for all of your work, 

and I hope everybody will take a look at the bill that you introduced. 

The CHAIRMAN. You are welcome. And we will now call on our 

next panel. The next panel will come forward. I will make my opening statement. We will continue with opening statements, if the 

panel will sit. Please, let’s move quickly. Hey, all you people can 

say hello to each other in Michigan. Let’s clear the room and get 

the panel seated. As the panel is seated, I am going to make my 

opening statement. I ask that the panel please be seated. If you are 

helping someone be seated, be seated yourself. They seem to have 

made it to the chairs on their own pretty good. 

I have been struck, not happily, in the time that we have been 

discussing this, that there is frankly, it seems to me, an inherent 

cultural bias. There is a double standard here. Aid to blue collar 

employees is being judged by a standard different than white collar 

employees. Now I have no complaint about white collar employees. 

They are my friends and constituents, as are others. But I do not 

remember complaints, and I am not talking about CEO compensation—and let me just add one thing. We have the CEOs with us. 

People have said, well, are we bailing them out? Should we deal 

with them? I do not think any of the three CEOs before us will 

show up on the unemployment line, no matter what happens. This 

is not about them personally. And none of them are going to be in 

any distress. But when people talk about bankruptcy, and I am 

struck that bankruptcy has become to some extent the new spectator sport; people are perfectly prepared to watch other people go 

through it, without understanding the stresses and strains it imposes. 

But there has been a particular concern raised about the wages 

of the auto workers. I was here through the entire debate on the 

$700 billion plan and on other interventions into the financial markets. Yes, there was concern about CEO compensation. By the way, 

when this committee last year voted for constraints on CEO compensation, it was something of a partisan issue. And while we did 

pass it in the House, there was a great deal of opposition who said, 

oh, it is just envy and jealousy. But while there was some talk 

about CEO compensation, there was none about the compensation 

of the people who work at these financial houses. And I am sure 

that even before the concessions in the recent contract, the hourly 

wage of people at the financial houses that have received assistance through the Federal Government are a good deal higher than 

auto workers. I think the average AIG worker gets a good deal 

more than the auto workers. Probably not the clerical people, but 

the people at AIG. There is apparently a cultural conditioning that 

is more prepared to accept aid to the white collar industry than to 

the blue collar industry. And I think that has to be confronted honestly. 

15 

The $700 billion and this much smaller amount have in common 

the following: The justification for them has to be the impact on the 

broader economy. We have no right trying to help an industry for 

that industry’s sake. And by the way, for people to say where is 

it going to stop? Pick up the papers. No one intervened for Circuit 

City. No one has intervened for any of the retailers that have gone 

bankrupt. No, we haven’t declared that no one can go bankrupt. 

We have a criterion. Is this of a magnitude that it will threaten the 

entire economy? And particularly at a time of great vulnerability 

for the economy? You know, if we were at 4 percent unemployment, 

as we were in the Clinton Administration, if things were going 

well, this would be a different thing to contemplate. We have an 

economy already staggering, both because of our credit crisis and 

problems in the real economy. Adding to this enormous disruption 

at this point would be an awful idea. 

But here is the point: We aid an industry only when it is necessary to do that to avoid much greater harm to the economy as 

a whole. In doing so, however, we should acknowledge that while 

we are doing it because we want to help the whole economy, people 

in that particular industry do benefit a little more than the average. There is no question about it. That is unavoidable. Why was 

it so acceptable to do that for the financial industry, that is respond to the need to avoid macroeconomic harm by helping the financial industry, but doing it to a blue collar manufacturing industry is somehow not right and we have to look at the wage scale, 

etc.? And that is the issue that I think the country has to more 

honestly confront than we have done. 

One of the arguments I have heard as well, you know, the nice 

thing about bankruptcy is it will let them break the union contracts. I want to be very clear. The union and the management 

have already renegotiated downward to nobody’s happiness. We 

have already in this country had too successful an assault on the 

right of men and women to bargain collectively, legally and economically. We have already had too great a gap in income inequality growing and growing and growing. I do not want to see bankruptcy established here as a precedent which can be used to take 

away from working men and women what gains they have accomplished. 

Now, that doesn’t mean an endorsement of any particular level 

of wages here and there. But when you look, as I said, at the—now, 

there are people who are against this $700 billion. They have every 

right to be against this. But people who were for the $700 billion, 

who were for an $85 billion injection of capital into AIG by the Federal Reserve without a vote of Congress, and who did not raise the 

question of the average compensation of people at AIG or of the 

people who were the debtors of Bear Stearns—we didn’t bail out 

Bear Stearns, we bailed out the debtors of Bear Stearns—it is a little late in the game for people who encouraged that infusion of far, 

far more money than we are talking about today to suddenly decide 

that an auto worker makes too much money, when it was okay to 

put hundreds and hundreds of billions of dollars into helping industries, again because it was economically necessary, and I don’t dispute that, but in industries where the average wage is far beyond 

what the auto workers make. 

16 

The gentleman from Pennsylvania. 

Mr. KANJORSKI. Mr. Chairman, like many industries in America, 

the automotive sector confronts dire economic conditions. What we 

have here is a complicated mixture of ineffective management, a 

lack of innovation, exploding health care and pension costs, a 

struggling economy, increasing commodity prices, and changing 

consumer preferences. Regardless of the causes, the current plight 

demands dramatic reform. 

The Big Three must either adapt to survive or face extinction. To 

have a chance at survival, some maintain that the government 

should underwrite these needed changes to protect American jobs 

and prevent an impending economic catastrophe. Others counter 

that government assistance will merely prolong the inevitable failure of American automakers. Some also suggest that $25 billion is 

not enough to save the industry. Just like we have recently experienced at AIG, the automakers could soon be back at the government’s doorstep with a beggar’s cup demanding more money in 

short order. 

Most of us surely agree that if the Congress chooses to act, and 

that remains for me a big ‘if,’ any money must come with substantive stipulations. While the draft House bill offers some important conditions, I believe they are insufficient to prevent recipients 

of taxpayer aid from abusing it. The draft provides no guarantees 

that these companies protect American jobs. Nothing prevents 

them from purchasing foreign-made supplies over American-made 

parts. Moreover, unlike the 1979 Chrysler bailout law that required concessions by many, the proposal before us contains no 

similar substantive sacrifices by suppliers, dealers, management, 

and workers. After all, Lee Iacocca symbolically accepted just $1 in 

annual pay. Why can’t today’s CEOs at General Motors, Ford, and 

Chrysler do the same? 

Furthermore, I am not yet convinced that the Congress must act 

so rashly. If one of these companies have a specific dollar amount 

to prevent its insolvency in a matter of weeks, then we should 

know that so that we can provide a limited bridge loan. We can 

then take the time to structure a proper deal that does not sell us 

a pig in a poke to allow yet even more businesses to bathe like pigs 

at the taxpayers’ trough. 

The American people expect and deserve careful deliberation 

from this body rather than a blessing of last minute, expedient 

deals. Only after the Congress carefully and thoughtfully considers 

its options can it then draft a solution that not only keeps these 

companies running for months and years to come, but also helps 

them to thrive in the next generation. 

Even if we consider this bill, the onus lies with today’s witnesses 

to explain why a direct government loan is a superior option. Many 

have credibly argued that bankruptcy or a structured receivership 

remain viable alternatives. The successful Chrysler loan guarantee 

provided a similar plausible road map this Congress could pursue. 

Whatever we ultimately decide, we must proceed with caution toward a prudent, long-term solution. 

In sum, the American public expects us to take the time to get 

it right, even if we have to stay in Washington to do it. I am committed to getting it right, and look forward to the testimony. 

17 

The CHAIRMAN. The witnesses will now begin with their opening 

statements. We had no further requests for an opening statement 

on the Republican side. We will begin with Mr. Richard Wagoner, 

the CEO of General Motors. 

STATEMENT OF RICHARD G. WAGONER, JR., CHAIRMAN AND 

CHIEF EXECUTIVE OFFICER, GENERAL MOTORS CORPORATION 

Mr. WAGONER. Thank you very much, Mr. Chairman. I appreciate the opportunity to speak with you today about this important 

topic. I would like to acknowledge for the committee the audiences 

that I represent, General Motors employees directly, almost 96,000 

people in the United States. We have 6,500 dealers who employ another 340,000 people. Last year, we purchased more than $30 billion of goods and services from more than 2,000 suppliers in 46 

States. Our pension program covers nearly 475,000 retirees and 

spouses. And our health benefits extend to about 1 million Americans. We have more than a million registered stockholders. And 70 

million of our vehicles are registered to U.S. citizens, 22 million of 

them purchased in the last 5 years. 

As the recent news coverage has made abundantly clear, many 

people have a picture of GM that hasn’t kept pace with the hard 

work that our people have been doing. Since 2005, we have reduced 

our annual structural costs or fixed costs in North America by 23 

percent, or $9 billion, and expect to reduce them by about 35 percent, or $14- to $15 billion by 2011. We negotiated a landmark 

labor agreement with the UAW last year that will enable us to virtually erase our competitive gap. We have addressed pension and 

retiree health care costs in the United States, on which we spent 

$103 billion over the last 15 years. As a result of these and other 

actions, we are now matching or besting foreign competitors in 

terms of productivity, quality, and fuel economy, and by 2010 will 

match them on labor costs as well. 

On the product side, we are building vehicles that consumers 

want to buy, like the Cadillac CTS, Motor Trend magazine’s 2008 

Car of the Year, and the Chevy Malibu, the 2008 North American 

Car of the Year. We have made huge progress in developing advanced propulsion technologies, like 20 models in the United States 

next year that will get at least 30 miles per gallon on the highway; 

6 hybrids on the road now, and 3 more next year; more than 3 million flex fuel vehicles; the world’s largest hydrogen fuel cell test 

fleet; and the upcoming Chevy Volt extended range electric vehicle. 

In short, we moved aggressively in recent years to position GM 

for long-term success, and we are well on the road to turning our 

North American business around. Last October, following the negotiation of a new labor agreement with the UAW, our stock price 

climbed to almost $43 per share based on analysts’ views that we 

had finally overcome the cost competitiveness gap with foreign 

manufacturers. Since then, our industry has been hit very hard by 

the global financial market crisis. And the recent plunge in vehicle 

sales threatens not only General Motors’ ongoing turnaround, but 

our very survival. 

In response, we moved quickly to keep our company on track. 

Since June, we further reduced North American manufacturing caVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
18 

pacity, put parts of our company up for sale, suspended dividend 

payments, reduced head count, and eliminated raises, bonuses, 

401(k) matches, and health care coverage for many of our employees, all designed to improve GM’s liquidity by $20 billion by the 

end of 2009. These actions affect every employee, retiree, dealer, 

supplier, and investor in our company. 

Mr. Chairman, I do not agree with those who say we are not 

doing enough to position GM for success. What exposes us to failure now is not our product lineup nor our business plan nor our 

long-term strategy. What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and 

reduced industry sales to the lowest per capita level since World 

War II. 

Our industry needs a bridge to span the financial chasm that has 

opened before us. We will use this bridge to pay for essential operations, new vehicles and power trains, parts from our suppliers, 

wages and benefits for our workers and retirees, and taxes for 

State and local government. But if the domestic industry were allowed to fail, the societal costs would be catastrophic: 3 million jobs 

lost within the first year; personal income reduced by $150 billion; 

government tax loss of more than $156 billion over 3 years; not to 

mention the huge blow to consumer and business confidence. Such 

a level of economic devastation would far exceed the government 

support that our industry needs to weather the current crisis. In 

short, helping the auto industry bridge the current financial crisis 

will not only prevent massive economic dislocation now, it will 

produce enormous benefits for our country later. 

Thank you very much. I look forward to your questions. 

[The prepared statement of Mr. Wagoner can be found on page 

221 of the appendix.] 

The CHAIRMAN. Next, Mr. Robert Nardelli from Chrysler. 

STATEMENT OF ROBERT NARDELLI, CHIEF EXECUTIVE 

OFFICER, CHRYSLER LLC 

Mr. NARDELLI. Thank you, Mr. Chairman, and members of this 

committee. I certainly appreciate the opportunity to be here today. 

We are asking for assistance for one reason: To address the devastating automotive industry recession caused by our Nation’s financial meltdown. 

With credit markets frozen, the average working American can’t 

get competitive financing to purchase or lease vehicles. Our dealers, many of whom are in the room with me today, don’t have access to market competitive funding to place wholesale orders for 

new vehicles, which results in the constriction of cash inflow to all 

of us as auto manufacturers. At the same time, Chrysler has billions of dollars in cash payment obligations to pay wages, to pay 

suppliers, and to fund health care and pensions, all in the range 

of $4- to $5 billion a month. 

Therefore, without immediate bridge financing support, Chrysler’s liquidity could fall below the level necessary to sustain operations. 

Independent research firms have quantified the fallout of a domestic automaker bankruptcy to the overall economy; and the impact would be devastating, as Rick mentioned. This is not a good 

19 

option for Chrysler and, more importantly, for the auto industry or 

the broader economy for the following reasons: 

One, we believe that retail sales would plummet. The fact is, in 

February of 2007, when Daimler announced the sale of Chrysler, 

our sales fell off 37 percent. Our existing inventories would need 

to be heavily discounted. We have over 400,000 units in the field 

worth about $1 billion. 

Given our common supplier base, the bankruptcy of any one 

automaker could threaten the viability of all automakers. 

Our factories would likely be idled for a significant period of time 

while we renegotiate contracts with literally thousands of suppliers 

and our primary lenders. 

The overall amount and cost of financing the restructuring would 

be significantly higher in a Chapter 11 than the working capital 

bridge that we are requesting here today. 

And, finally, we cannot be confident that we will be able to successfully emerge from bankruptcy. 

That is why, as an industry, we are requesting a $25 billion 

working capital bridge to survive this liquidity crisis. 

We are willing to provide full financial transparency and welcome the government as stakeholders, including as an equity holder. We are fully prepared to comply with the current conditions and 

policies under the recently enacted Emergency Economic Stabilization Act. 

Furthermore, our private equity owner, Cerberus Capital Management, L.P., has made it clear that it will forego any benefits 

from the upside that would, in part, be created from any government assistance that Chrysler LLC may obtain. 

Mr. Chairman, being new to the auto industry, I recognize the 

need to challenge the status quo and to seek significant change. 

Change is the only constant we know at Chrysler today and 

throughout our businesses. Chrysler is making those changes. 

Since 2007, we have reduced 1.2 million units of capacity, or 30 

percent of our installed base. We have identified over $1 billion in 

non-earning assets to sell, and we are more than 75 percent towards achieving that goal. 

This year, we reduced our fixed cost $2.2 billion; and, unfortunately, by the end of the year, we will have furloughed over 32,000 

employees. 

It is equally important that the lack of liquidity to provide loans 

and leases to customers and financing to dealers is addressed immediately. It is imperative that our affiliated financial companies 

receive access to competitive liquidity and financing capacity. 

At Chrysler, 75 percent of our dealers rely on Chrysler Financial 

to support their business, and 50 percent of our customers finance 

their vehicles through purchases through Chrysler Financial. Normally, these loans and leases are securitized and sold in the secondary market to generate fresh liquidity and finance capacity. 

Today, there is virtually no secondary market and, therefore, no 

way to raise capital. 

With immediate financial assistance, the lifeblood of the U.S. 

economy will continue to flow and Chrysler will be able to continue 

to pay at its current levels. 

20 

Mr. Chairman, Chrysler really is the quintessential American car 

company: 73 percent of our sales are in the United States; 61 percent of our vehicles are produced in the United States; 74 percent 

of our materials are purchased in the United States; and 62 percent of our dealers are based in the United States. 

Chrysler has a strong pipeline, with a product renaissance coming in 2010. In September, we reveal three electric drive vehicles, 

one for each brand; and one of those will be produced in 2010. 

Thank you very much. 

[The prepared statement of Mr. Nardelli can be found on page 

198 of the appendix.] 

The CHAIRMAN. Next, Mr. Alan Mulally of Ford. 

STATEMENT OF ALAN MULALLY, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, FORD MOTOR COMPANY 

Mr. MULALLY. Thank you, Chairman Frank, and members of the 

committee. I appreciate the opportunity to be here representing the 

Ford Motor Company. 

As you know, the auto industry has been heavily affected by the 

turmoil in the financial markets. Much of the recent commentary 

has suggested our companies need a new business model. I completely agree. In fact, we at Ford are well on our way to transforming our company and building a new Ford that has a very 

bright future. 

There are two fundamental questions today: First, is there a 

competitive and sustainable future for our domestic automobile industry; and, second, is a government bridge loan through these difficult economic times better for our country than inaction? 

I believe the answer to both of these questions is yes. 

As a relatively newcomer to this industry, I have the benefit of 

seeing the auto industry and its transformation clearly. I see parallels of what I have witnessed at Boeing after the 9/11 tragedy 

and the steps we took to transform the commercial airplane business. I can tell you that the transformation at Ford is even more 

aggressive and the progress we are making is even more remarkable. 

Our plan for the past 2 years has been focused and consistent: 

Aggressively restructure to operate profitably at the current 

lower demand and also the changing model mix; 

Accelerate the development of safe, fuel-efficient, high-quality 

products that our customers want and they value; and 

Finance our plan and improve our balance sheet and work together as one team leveraging our global assets worldwide. 

Our goal is to create a viable Ford Motor Company and a lean 

global enterprise delivering profitable growth for all. Few companies have restructured more aggressively. We have taken out excess capacity, closing 17 plants and reducing our workforce by 

51,000 vehicles. We negotiated a new contract with the UAW to improve our competitiveness. We shifted to a balanced product lineup 

offering high quality, proven safety and good value. We are delivering the best or among the best fuel economy with every new vehicle we are launching today. 

The speed and the breadth of our transformation is evident by 

our actions this week alone. Yesterday, we submitted our applicaVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
21 

tion for direct loans authorized by Congress last year to help us 

speed advanced technologies and vehicles to market. 

Today, at the Los Angeles Auto Show, we will introduce two allnew hybrids. Our new Ford Fusion hybrid beats the Toyota Camry 

hybrid by at least 6 miles per gallon. It is just a friendly competition. 

On Friday, we will enlarge SUV production at our Michigan 

truck plant and begin converting to fuel-efficient small car production at that same facility. 

To fund our new products and restructuring, we went to the capital markets early and we divested all of our noncore assets. 

Our Ford Credit business has consolidated abroad to preserve 

capital in support of our U.S. customers and our U.S. dealers. 

We appreciate the recently induced asset-backed commercial 

paper funding facility, and we anxiously await the Administration’s 

term securitization facility in work. 

In addition, the FDIC’s approval of Ford Credit’s pending industrial loan bank application will enable us to meet the financial 

needs of our dealers and our retail customers. 

As a result of all of these actions, we were profitable in the first 

quarter of this year, 2008, and well on our way to sustainable profitability before the current economic and credit crisis stopped us 

cold. We have taken decisive action to deal with the current new 

crisis. We have reduced production to match the dramatically lower 

demand. We have further reduced employment, and we have eliminated all raises and bonuses for 2009. We took these measures 

while protecting the new vehicles that will secure our future. 

Now, we believe we must join our competitors in asking for your 

support to gain access to an industry bridge loan to help us navigate our way through this difficult economic crisis. We suggest the 

loans be structured in a revolving format so the exposure to the 

taxpayer would be limited and, if used, would, of course, be repaid 

with interest. 

We at Ford are hopeful we have enough liquidity, but we also 

must prepare ourselves for the prospect of further deteriorating 

economic conditions in 2009. In addition, the collapse of one of our 

competitors would have a severe impact on Ford and our transformation plan because the domestic auto industry is highly interdependent. It would also have a devastating ripple effect across the 

entire U.S. economy. 

I am more convinced than ever that we have the right plan to 

transform Ford. We at Ford will continue to deliver our plan to create a thriving auto business for the benefit of all of us. With your 

help, we will create a safeguard to deal with the growing economic 

uncertainty. This is a really important industry. It is a pillar of our 

economy, and we look forward to working with you to be a part of 

the solution on the road to economic recovery. 

Thank you very much. 

[The prepared statement of Mr. Mulally can be found on page 

178 of the appendix.] 

The CHAIRMAN. Mr. Ron Gettelfinger, from the United Auto 

Workers. 

22 

STATEMENT OF RON GETTELFINGER, PRESIDENT, UNITED 

AUTO WORKERS 

Mr. GETTELFINGER. Mr. Chairman, on behalf of the men and 

women of the UAW, thank you for the opportunity to testify today 

on the state of the domestic automobile industry. 

The UAW strongly supports legislation to amend and clarify that 

the Treasury Department should use the existing financial rescue 

program to quickly provide a $25 billion emergency bridge loan to 

General Motors, Ford, and Chrysler to enable these companies to 

continue operations. 

The situation now facing GM, Ford, and Chrysler is extremely 

dire. Because of the credit and financial crisis, overall vehicle sales 

have plummeted to the lowest level in 25 years. As a result, GM, 

Ford, and Chrysler are burning through their cash reserves at an 

unprecedented rate. The stark reality is that these companies could 

be forced into a Chapter 7 liquidation, with their operations ceasing entirely. 

If this happens, as we all know, the consequences would be truly 

devastating. In addition to the hundreds of thousands of workers 

who would directly lose their jobs at the Detroit-based auto companies, a total of almost 3 million workers would see their jobs eliminated. This includes people who work for auto dealers, suppliers of 

components and materials, and thousands of other businesses that 

depend on the auto industry. 

Furthermore, retirees from the Detroit-based auto companies and 

their spouses and dependents, about 1 million people, could suffer 

sharp reductions in their pension benefits and the loss of their 

health insurance coverage, an especially devastating blow to the 

roughly 40 percent who are younger than 65 and thus not yet eligible for Medicare. 

If the automakers’ pension plans are terminated, the PBGC 

would be saddled with unprecedented liabilities and the Federal 

Government would be liable for a 65 percent tax credit for the 

health care costs of pre-Medicare auto retirees. 

The liquidation of the Detroit-based auto companies would severely aggravate the current economic downturn. Government revenues would shrink even further, forcing harmful cuts in a wide 

range of social services. 

The UAW submits that it would be far better for the Federal 

Government to take prompt action now to prevent the imminent 

collapse of the Detroit-based auto companies. The human toll will 

be far less and the ultimate cost to the government will be far 

cheaper. 

The crisis facing the Detroit-based auto companies is not attributable to overly rich contracts negotiated by the UAW. 

In 2005, the UAW agreed to reopen the contracts midterm and 

accept significant cuts in workers’ wages and health care benefits 

for retirees. 

Then, in the 2007 collective bargaining negotiations, the UAW 

agreed to slash wages for new hires by 50 percent. New hires will 

not be covered by the traditional retiree health care and defined 

pension benefit plans. 

23 

In addition, beginning January 1, 2010, the liability for health 

care benefits for existing retirees will be transferred from the companies to an independent VEBA fund. 

The changes in our 2005 and 2007 contracts cut the companies’ 

liabilities for retiree health care by 50 percent. As a result of all 

of these painful concessions, the gap in labor costs between the Detroit-based auto companies and the foreign transplant operations 

will be largely or completely eliminated by the end of the contract. 

Thus, the UAW active and retired members have stepped up to 

the plate and made the hard changes that were necessary to make 

our companies competitive in terms of their labor costs. GM, Ford, 

and Chrysler are now facing a crisis not because of their labor costs 

but because of the larger credit and economic crises that have engulfed our Nation and, with it, the unprecedented drop in auto 

sales that has affected all automakers. 

For all of these reasons, the UAW strongly urges Congress to 

provide immediate assistance to GM, Ford, and Chrysler to enable 

them to continue in business and to avoid the devastating consequences that a collapse of these companies would have for millions of workers and retirees across our country. 

Thank you. 

[The prepared statement of Mr. Gettelfinger can be found on 

page 131 of the appendix.] 

The CHAIRMAN. Thank you, Mr. Gettelfinger. 

Let me at this point ask unanimous consent to insert into the 

record a column by the economist Ben Stein. We are in an economic tailspin. We cannot allow roughly 3 million workers connected to the Big Three auto industry to fall into the ranks of the 

unemployed. It is possible that this nightmare could push the oncoming recession into being a depression. This economy is in 

enough trouble already. And it is an endorsement of this legislation. I ask that it be put in the record. 

I am now going to forego my 5 minutes in the interest of time, 

and I will recognize the gentleman from Pennsylvania. 

I will hold everybody to 5 minutes. So let me advise my colleagues, if you have a really good question that will take 5 minutes, you are entitled to ask it. Do not expect an answer. You can 

look at the clock and know when—if you want answers, leave time 

for them. 

The gentleman from Pennsylvania. 

Mr. KANJORSKI. Thank you, Mr. Chairman. 

Gentlemen, first of all, let me compliment the UAW. The first 

time over the last several weeks that I have had the opportunity 

to hear an adequate defense that this fault is not the fault of the 

labor contract, this is an economic fault. But I am not actually sure 

that it is only an economic fault. That is what I would like to ask 

Mr. Wagoner. None of this would have happened if the credit 

crunch had not occurred in Wall Street or do you anticipate that 

it would have happened or possibly would have happened anyway? 

Mr. WAGONER. No, sir. I think it is completely due to the credit 

crisis. And I just give you as an example, sir, that all of us were 

well on the way with our turnaround which was reflected by stock 

price improvement and earnings; and, frankly, what happened is 

the lack of availability of credit at a time when our balance sheets 

24 

are weakened. This has really hurt not only our ability to fund ourselves but also our consumers’ ability to buy cars. 

Mr. KANJORSKI. In the way of analogy, the committee or the Congress is sitting as a loan officer in a bank; and I propose that we 

have three rather substantial individuals requesting a loan. I am 

amazed with how little depthful sales analysis has been made of 

what you need this money for, when will it be spent, how will it 

be spent, and what kind of protections are involved for both the 

workers and for the American public. 

For instance, I see nothing in this program that says the day we 

grant the power for you to make that $25 billion loan, you cannot 

strike a deal of General Motors in China and build plants in China 

or contract out most or all of the parts from China. Why do you 

think we should not take the time to make requirements and conditions in this loan, bridge loan, that would protect the American 

taxpayer, the American worker, and perhaps even some of your equity holders? 

Mr. WAGONER. Congressman, in our various submissions we suggested restrictions and have commented on the kind of restrictions 

that others have suggested. Your point about the money being used 

to support our operations in the United States, we would fully endorse that. So we are wide open— 

Mr. KANJORSKI. Then, Mr. Wagoner, you would be agreeable that 

we find some methodology to buy some time here. So can you tell 

me when will General Motors run out of money relatively in the 

near future and what amount of money would you need now to be 

prevent that insolvency so that we can take the 3 months necessary to really go into depth of what conditions and how this 

agreement or bridge loan should be made? 

Mr. WAGONER. I don’t believe, Congressman, that we have the 

luxury of a lot of time. And if I could— 

Mr. KANJORSKI. Why? Tell me, when are you going to run out of 

money? 

Mr. WAGONER. I can’t tell you that for certain because a lot depends on the people—whether our suppliers will continue to ship 

us with that— 

Mr. KANJORSKI. You have to—accounting-wise, you have to be— 

if everybody acted against your best interest, there is a time you 

cannot meet your condition—somebody has briefed you on that, Mr. 

Wagoner. 

Mr. WAGONER. The needs are urgent. If everybody who lent 

money to the industry suppliers asked it to be paid off tomorrow, 

it would be a tremendous run on the financial position for all of us. 

So the need for funding actually is— 

Mr. KANJORSKI. What amount of money would you need to take 

you to March 30th? 

Mr. WAGONER. We have talked about this $25 billion bridge loan. 

Mr. KANJORSKI. The $25 billion bridge loan is for three auto companies. I am asking about General Motors, and I am asking how 

much money you need today to keep you viable and alive so we can 

structure a reasonable loan contract by March 30th. 

Mr. WAGONER. We have talked about an allocation of the $25 billion that would be approximately based on our U.S. market share, 

25 

which suggests—relative market share, which suggests a total 

availability against that facility to GM to $10 to $12 billion. 

Mr. KANJORSKI. Maybe I am dense or something, Mr. Wagoner, 

but I do not quite understand what you just told me. Can you just 

tell me in absolute terms, how much money do you need to survive 

at General Motors from today until March 30th? 

Mr. WAGONER. Congressman, it is going to depend on what happens with suppliers and markets. 

Mr. KANJORSKI. I understand that. Give me your worst-case scenario. 

Mr. WAGONER. The worst-case scenario, the amount of money 

would be significant. I mean, we have supplier— 

Mr. KANJORSKI. What is significant? 

Mr. WAGONER. $4- or $5 billion every month. 

Mr. KANJORSKI. So what you are telling us is, since you anticipate borrowing $15- to $18 billion under this authorization, if the 

market does not turn around and the economy does not recover by 

that time—and I think you have to be a wishful thinker to think 

it will—by March 30th, you are out of money; is that correct? 

Mr. WAGONER. The analysis that we have done is based on an 

assumption that the U.S. market continues at about the current 

rate, which is a weak level. We don’t assume a lot of recovery. We 

hope it won’t get worse. On that basis, we would—with the amount 

of funding that proportionately would presumably be allocated to 

us, we think we have a good shot to make it through next year. 

And our effort is to do that. 

The CHAIRMAN. The gentleman’s time has expired. 

In light of what the gentleman raised, I am now going to recognize myself for my 5 minutes, only to take 1 or 2 minutes. 

The gentleman raised an important question about the possibility of additional fund investments elsewhere. We did specifically 

anticipate that in the legislation. 

The bill would create an oversight board, including the Secretary 

of Energy, the Secretary of Labor, the Secretary of Transportation, 

the Administrator of the EPA, and the Secretary of the Treasury; 

and it specifically says later on in the bill that any of the recipients 

must report to this oversight board, ‘‘any asset sale, investment, 

contract or commitment posed to be entered into by such recipient 

that has a value in excess of $25 million.’’ 

And it then says, the board may, ‘‘prohibit the recipient of the 

loan from consummating any such proposed sale, investment, contract or commitment.’’ That is, the members of the Cabinet of the 

incoming President will have the unchallenged authority to veto 

any investment, and we would expect that to be used to prevent 

any foreign investment. Trying to get more specific than that, you 

get too specific, and they come up with a new way. 

What we have here in this bill is the Obama Cabinet appointees, 

by the time this gets implemented, able to veto any investment 

over $25 million. So if they want to give China $24 million, they 

are okay. But I think—and we did that specifically because of the 

point the gentleman raised. 

I yield back the balance of my time and recognize the gentleman 

from California. 

Mr. CAMPBELL. Thank you, Mr. Chairman. 

26 

Gentlemen, before I lost my mind and went into politics, I spent 

25 years in the retail car business, most of that time as a dealer 

principal and dealer owner. Amongst the franchises I held General 

Motors, Saturn, Buick, GMC trucks, and Saab, Ford, Lincoln, Mercury, and Mazdas, quasi Fords. Sorry, no Chrysler, Mr. Nardelli. 

I learned a few things about the car business in that 25 years, but 

today I just have a few questions for you, and I will just listen. 

You are asking for a bridge loan, and I think a lot of people want 

to know what does the other side of the bridge look like. With the 

exception—let me go back. 

You know, in my 25 years, I lived through gas price spikes, I 

lived through credit shortage, and I lived through recessions in my 

dealerships. We have all three of those at once today, which is certainly the first time in my memory that has happened and I believe 

the first time in my lifetime; and I would argue that that is why 

the industry has been so hard hit, because there have been three 

different factors all convening all at the same time. 

With that being said, with the exception of the one quarter that 

Mr. Mulally referenced and, obviously, Mr. Nardelli, we don’t know 

entirely what your earnings were, that the three companies were 

not making money before those three problems hit. So what are 

you going to do differently than what you perhaps were planning 

to do 6 months ago? 

As you mentioned, Mr. Mulally, you had a plan to come out of 

this. But these things have hit. They have happened. Conditions 

are worse. We will recover at some point. The economy will. But 

you go through a much more difficult time. What are you going to 

do differently than was your plan to change the other side of that 

bridge? 

All three of you, in whichever order you would like to respond. 

Mr. WAGONER. I will start. Thank you, Congressman Campbell. 

The things that are being done differently in response to the current crisis are, obviously, we are all slashing back every expense 

that is noncritical to the business. We are looking to take from our 

own expenditures over about an 18-month period about $15 billion 

out. So that means things like a 30 percent reduction in salaried 

employment costs, including, frankly, a substantial curtailment of 

benefits and compensation. We have moved already to take out a 

number of additional manufacturing lines and facilities. 

So I think the way we will come out of it from a cost perspective 

is we expect to be quite a bit leaner already. We are going to be 

dramatically leaner. So we have pushed back or even taken out 

spending on things like some of the larger engines and truck-based 

products; and we have accelerated spending on cars like the Chevy 

Cruze, which is our new subcompact car that will be built in 

Lordstown, Ohio. We have maintained on-schedule advanced technology spending for products like the Chevy Volt. 

We have to keep those all on track, because, obviously, we expect 

energy prices to go back up; and we expect a lot of pressure to be 

applied by our consumers to continue to improve fuel economy. So, 

from that perspective, I think we will have a much leaner business 

and one focused on fuel economy and advanced technology. 

The weight of our products, 18 out of our next 19 product 

launches, are cars and crossovers; 13 of our last 15 have been cars 

27 

and crossovers. So I think you are going to see quite a different 

sales mix as well. 

Maybe I will stop there to give my colleagues a chance to respond. 

Mr. NARDELLI. Yes, sir. 

For us, you mentioned, relative to the private equity, we did publicly disclose that through the first half of this year we had generated over a billion dollars in positive EBITDA, and we had continued to improve our cash position. 

Unfortunately, this unprecedented drop from an industry of 16 

million units down to 10.8 did catch us off guard. We have been 

dramatically restructuring and downsizing, it has cost us a few billion dollars in restructuring, but we are 1.2 billion units less in our 

capacity. We furloughed 32,000 employees. We have taken $2.2 billion in costs out. We are going to continue to make sure that we 

are lean and agile, assuming there is no sales recovery from our 

annual exit rate in this industry. 

We also will spend the money to pay suppliers. We will use the 

money to pay ongoing wages. We will use the money to develop a 

part of our product portfolio that was void based upon the separation that took place in August of 2007. We introduced three new 

electric vehicles, one of which we will have in production in 2010. 

So we have lowered the overall capacity. We have lowered our 

break-even point. We have paid for that one-time cost impact. It returns in one year. We hope to emerge leaner, stronger, and more 

formidable on the other side. 

The CHAIRMAN. Mr. Mulally, quickly if you can. Thank you. 

Mr. MULALLY. I think your question, Congressman, is very, very 

important. 

As you well know, having a clear vision of what that future looks 

like, everything starts there. And in the automobile business, it is 

just so important that we are making the vehicles that people really do want and they really do value. That is the most important 

thing. 

The second thing is that you size your production to the real demand. Because the worst thing you can do is make more vehicles 

than the customers really do want and then force that into the distribution chain, discount them, ruin the residual values, and delay 

the recovery. 

So back on the first point—and we have seen the future. As I 

pointed out in my prepared remarks, we have been on this transformation plan for a number of years, and we have accelerated over 

the last 2 years, and we know it works. Because we got back to 

profitability in the first quarter of this year, and we did that by focusing on the product first. And the most important thing the consumer is looking for today is absolutely competitive and great quality. And in Ford’s case, we have moved up to the place now where 

all the third-party people will tell you that, from a quality point of 

view, we are equal to or better than Honda and Toyota. 

The second thing is that, on sustainability and with the fuel 

prices moving up and the awareness about energy security, energy 

independence, and sustainability, the consumer has moved up fuel 

economy right up next to the top on their purchase decision; and 

28 

it is so important that we bring the enabling technology to bear to 

satisfy that customer requirement. 

Right now, every new vehicle we make, whether it is small, medium, or large, is best in fuel efficiency. The given is safety. And 

we have more at Ford, more 5-star quality and safety ratings than 

any other automobile company. 

The CHAIRMAN. Thank you. 

Mr. MULALLY. And the best value. 

The CHAIRMAN. Commercials can go later. We are in a time 

crunch. 

The gentlelady from California. 

Ms. WATERS. 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 is going on in these industries and these companies 

that are coming before this Congress asking for government assistance. 

I am 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 that they are 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 are 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 kinds of automobiles; and we are going to hear a lot about 

the refusal to comply with some of our concerns about CAFE standards, on and on and on ad nauseam. 

But, in the final analysis, you know, people are going to roll. 

They are going to roll, and you are going to get what you are asking for. If I had my druthers, the $25 billion that we have already 

given you, I would say take it and run and we will 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. 

Here is 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 dealership. I have here correspondence from the 

National Association of Minority Car Dealers, and I am going to 

read you something. 

‘‘As you consider the request for financial assistance to the automobile industry, I urge you do also consider provisions to provide 

financial assistance to automobile dealers, especially ethnic minority dealers. These dealers are being negatively affected by financial 

and captive institutions with their increase in floor plan interest 

rates, the curtailing of lines of credit, the canceling and/or nonrenewal of floor plan loans and the overall lack of lending to automobile dealers. 

29 

‘‘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 of 

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 these floor plans that 

would provide the capital that is needed, I guess, for inventory to 

these car dealers. 

Having said that, I am about small businesses as well as about 

big businesses; and I have had enough experience here to know 

that oftentimes when we help the big businesses, they say that 

they are 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 a billion dollars of the $25 billion, 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 are 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 have offered 

to all of our dealers; and we have been working with the captive 

finance companies, either fully owned or in our case partially 

owned, to work with the Fed to get better credit availability. 

Ms. WATERS. 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 fund rates, 

GMAC is making a change to its wholesale floor plan finance program. The following change is effective. And it goes on to talk 

about what it can no longer do. 

So what I am asking you, in addition to the work that you do 

with your captives, will you also commit to the floor plans that you 

are involved with to at least dedicate a billion dollars of this money 

to assist these dealerships? 

May I get those answers, Mr. Chairman? 

Mr. WAGONER. I think we really need the amount of money that 

we are 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 the credit to our dealers and customers. 

Ms. WATERS. Mr. Nardelli, would you be willing to dedicate a billion dollars of this money to help the dealerships? 

Mr. NARDELLI. Ma’am, 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 affiliate 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— 

The CHAIRMAN. You have to be more specific. We don’t have 

time— 

30 

Ms. WATERS. So he basically agrees. 

Mr. Alan Mulally, what do you think—from Ford Motor Company—would you be willing to dedicate a billion dollars, whether 

it was a $25 billion— 

The CHAIRMAN. I think the question has been put. Let us have 

the— 

Ms. WATERS. Or $26 billion? 

Mr. MULALLY. I think that the actions we have taken with the 

Fed to free up the credit is absolutely the right thing to do which 

will help all of the dealers. 

Ms. WATERS. So your answer is yes? 

Mr. MULALLY. Pardon me? 

Ms. 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. 

The CHAIRMAN. The gentlewoman from West Virginia. 

Mrs. CAPITO. Thank you, Mr. Chairman. 

I want to thank the panelists, too. 

I have a question on the sum that we are talking about here. 

First of all, I would like to talk about the first $25 billion that is 

for retooling and reworking to modernize. I mean, that was my assumption when I voted for that. What is the status of that right 

now, just quickly? 

Mr. WAGONER. Regulations were promulgated recently, and I 

think all of us now have filed our first applications. It is very helpful funding, but, as passed, the legislation basically allows you to 

draw down against credit facilities once you have already spent the 

money, and the draws are spread out over a fairly long period of 

time. So it is helpful, but as currently structured, it doesn’t address 

the near-term cash flow issues facing our companies. 

Mrs. CAPITO. I think there has been some suggestion that if we 

took the first $25 billion and freed that from the restrictions that 

might have been placed on it to begin with to help you with your 

liquidity issues, that might be a more immediate way to be of assistance. What is your feeling on that? 

Mr. WAGONER. Well, from my side, to be honest, we have been 

clear that we think urgent funding support is required; and we are 

not overly prescriptive as to how it would be done. We leave that 

to the Congress. 

Mr. MULALLY. Yes, I would like to make a comment on that. 

When we did that last year during the 2007 Energy Independence 

and Security Act, that recognized that all of us were making a commitment to improve the fuel mileage on every vehicle going forward 

as we move out the CAFE standards, and we all recognized the 

amount of money and investment it would take to do that, and that 

is why we put the $25 billion in and gave the Department of Energy the responsibility to implement that. We have been very 

pleased with their implementation of that. 

As Rick mentioned, we have all of our requests in to use that, 

to accelerate the fuel-efficient vehicles. I think it is absolutely critical that be used to continue to get that done, because it is critical 

to that improving the fuel efficient commitment that we made. As 

Rick said, I think the reason we are here today is that the industry 

31 

has a critical need right now for liquidity. So I think it is really 

important that we keep that fuel efficiency investment going. 

Mrs. CAPITO. So basically you are both saying that a double track 

is what is needed here. 

So let me go to the figures—$25 billion for the first—this is sort 

of the little cynic in me—$25 billion for the first, and all of a sudden it is $25 billion again. How did you reach the $25 billion figure 

for this particular request? 

Mr. NARDELLI. Well, for Chrysler, we did—we looked at an assumption of what the balance of the year will be; and, as I said in 

my testimony, we could be dangerously close by the end of this 

quarter. We assume that next year’s industry rate would match our 

exit rate. We looked at the continuation of what we will have to 

do, and basically our request is for $7 billion. 

Mrs. CAPITO. And then GM was— 

Mr. WAGONER. We performed a similar sort of analysis and came 

up with an estimate of $10- to $12 billion. 

Mrs. CAPITO. And then— 

Mr. MULALLY. At Ford, we are in a little different position, because we believe that the actions we have taken over the last 2 

years, that we have sufficient liquidity in the near term to make 

it through in economic recession if it doesn’t get worse. And the 

reason we are here together is if any one of us go under, it has 

such a ripple, a tremendous effect on the whole industry and we 

are going to watch it very carefully. But if the economy starts to 

go down, we would have to access that money, too, and how much 

we would access would be dependent on how far the economy and 

the industry degrades. 

Mrs. CAPITO. The reason I am keying in on this is because, on 

the $700 billion bailout figure, there was a quote around—and I 

don’t know exactly who it was from—why did you pick $700 billion; 

and a quote from an official supposedly at the Treasury Department, ‘‘We just picked a really big figure.’’ Well, to the American 

taxpayer, that is pretty much a smack in the face. 

When you see two figures come up with such large numbers that 

are exactly the same, it makes you—I am curious to know if there 

is a rounding-off effect here; and I want to make sure that whatever is being asked for is accounted for and has the oversight for 

but is also exactly what is estimated to be able to help the problem. 

Because I am certain that the last thing you want to do is to return 

here in another 6 months or 8 months and possibly be in the same 

position. 

Now, I did a little mini survey as I was coming here from the 

TSA agent to just the guy sitting next to me on the plane. And you 

can imagine the American public is really all over the board on 

this. Because I represent a State, West Virginia, that has been gutted by the chemical industry. We have had difficulties with our 

steel industry, lost thousands of jobs. And, you know, nobody—the 

government didn’t come in and save these jobs in the State of West 

Virginia. So you have that kind of feeling. 

But I think people are empathetic enough to know that job loss 

across the board, whether it is in your industry or your supplying 

industry or your ancillary industries or any of these industries, has 

32 

a devastating effect on everybody, including those who don’t work 

in the industry. 

So I thank you all for your testimony, and I look forward to hearing the rest. 

Mr. KANJORSKI. [presiding] Mrs. Maloney. 

Mrs. MALONEY. Thank you, Mr. Chairman, for holding this important hearing. 

It is unacceptable for America not to make its own cars, and it 

is unacceptable for America to continue outsourcing manufacturing 

and jobs. We have lost well over 22 million manufacturing jobs in 

recent years. No other country would let the major manufacturer, 

the major industry, fail in their country. 

Other countries are reporting that they are moving to help their 

automobile industry. We have reports that China is helping their 

industry, that Germany is helping their industry; and I believe 

that we need to help American jobs and American industry. And 

I believe in the American workers, that you are going to retool, you 

are going to move into the 21st Century and be more competitive 

than the world economy, because that is what we need to do. You 

need to be fuel efficient. You know what you need to do, and we 

are counting on you to make those changes and to regain the 

prominent position of leadership on manufacturing of automobiles 

that we have held in the past. 

Now, I will say there are a number of my colleagues who believe 

that we should let the automobile makers file for bankruptcy. But 

as Nobel laureate and economist Paul Krugman recently reported, 

‘‘If the economy as a whole were in reasonably good shape and the 

credit markets were functioning, Chapter 11 would be a way to go. 

But, because of the current economic crisis, a wide-ranging default 

in Detroit would probably mean loss of ability to pay suppliers, 

which would mean liquidation; and that, in turn, would mean wiping out probably well over a million jobs at the worst possible moment.’’ 

So I am supportive of your efforts because I believe it is necessary, and all other available alternatives are far worse. 

So my first question is, if you went to the private sector for your 

loan, would you not be able—you would not be able to get it or 

could you elaborate? Or, as I understand, the loan starts out at 5 

percent and then climbs to 9 percent. 

I would also like to ask the panelists, do you agree with the assessment of economist Paul Krugman on what the impact of what 

a bankruptcy would mean in your Big Three and our industry and 

what would be the overall effect not just for you but the overall effect for our Nation’s economy as we are struggling to stabilize our 

financial markets and to stabilize our economy and move forward? 

I ask anyone to respond. 

Mr. NARDELLI. I think, as we said in our testimony, bankruptcy 

would be devastating. I know from Chrysler’s standpoint and working with my colleagues, we have looked at all of the various options 

of prenegotiation, prepack, etc. There seems to be some major misunderstandings of what a bankruptcy allows a company to do. 

We don’t have to look much further than Delphi, for example, 

who went into bankruptcy, and I think it was in 2006. They then 

in—2005. And, in 2006, they filed with the courts to basically break 

33 

their contract. The courts sent them back to the table. And I am 

sure Mr. Gettelfinger can talk about that. 

So the—Mr. Chairman, as you mentioned, this has become such 

a spectator sport talking about bankruptcy. And I would submit to 

you that while it might freeze out all of our payables, most of our 

suppliers would go to cash in advance, which means there would 

be a significant increase in cash flow prior to our ability to manufacture a vehicle to get reimbursed from the dealer. I think it 

would turn us upside down faster and deeper than where we are 

today. 

Mr. WAGONER. I just also would like to add the point that there 

would be a massive loss of revenue under any scenario. The independent research that has been done fairly recently concludes that 

80 percent of consumers said they would not buy a car from a company in bankruptcy. If any auto company lost 80 percent of their 

volume or 40 percent of their volume, they would simply be in a 

massive liquidation. This would spread then to our common suppliers, and to other major manufacturers and dealers around the 

country. This would result in massive economic devastation. 

The CHAIRMAN. The gentleman from Alabama. 

Mr. BACHUS. Thank you. 

From what I can understand—and you correct me if I am 

wrong—you have—there are two problems with the Big Three; and 

one of them is inefficiencies and the model that you are changing. 

I mean, last year, and what it was—is it VEBA?—you made some 

changes, but they don’t go into effect until 2010. So you are not getting any benefit from those. 

You have had the new hire with the wage scale, and that is going 

to help, you know, and the longer we go on that is going to help. 

So I agree that you are moving in the direction of addressing that. 

But I think your short-term problem is a different problem, and 

that is a problem that everyone is facing, and that is not being able 

to get loans to buy cars. That is consumers. And isn’t that your 

short-term problem? Or is it? 

Mr. NARDELLI. It certainly is one of the major problems that we 

are facing today, as I have stated. Our consumers cannot get loans. 

FICA scores of 700 are not common to the average American worker. Therefore, the—and the lack of liquidity for our dealers to get 

competitive wholesale rates are contributing equally to the fact 

that, as we are resizing our businesses 30 to 35 percent and, in 

fact, as we do that, the reduction in cash inflow while we continue 

to have liabilities and payables to suppliers, etc., sir, is what is 

causing—there is a dual effect— 

Mr. BACHUS. Let me ask you this. I am assuming the other two 

gentlemen agree that—you know, the TARP funds are intended for 

financial institutions, but aren’t GMAC and Ford Credit and 

Chrysler Financial they financial institutions? If you receive funding through those— 

Mr. WAGONER. GMAC has been able to use the commercial paper 

backup facility at the Fed recently. That has helped some. But I 

think all of our finance companies are talking to the Fed about 

being categorized into different structures. 

Mr. BACHUS. And that would help, wouldn’t it? 

Mr. WAGONER. That would help tremendously. 

34 

Mr. BACHUS. That is something we could do without legislation. 

I am not suggesting there won’t be legislation, but that would be 

an immediate help, wouldn’t it? 

Mr. WAGONER. Yes, sir. And I understand those are at various 

stages of review at the Fed. 

The CHAIRMAN. If the gentleman would yield. I had a colloquy 

specifically on that point with the gentleman from Michigan, Mr. 

Dingell, to emphasize that those were fully included in the TARP. 

Mr. BACHUS. I would be disappointed if that wasn’t a top priority 

of the Fed today. 

Let me ask you this: You negotiated a new agreement, labor and 

union, in 2007; and I commend you on it. I think it was a step in 

the right direction, and it required sacrifice on the part of the 

workers. Things have gotten worse since then. We all agree. And 

I don’t know whether some of these other things will help. But let 

me just ask you this: Are there any plans now that we have really 

hit a storm to at least sit back down and open up those discussions, 

at least to explore them, Mr. Gettelfinger? 

Mr. GETTELFINGER. Thank you for the question, sir. 

What we have been doing is we have continually in negotiations—I know most people believe that negotiations only happen at 

the expiration of the contract. But, right now, we are in discussions 

with the companies. 

General Motors, for example, the Janesville, Wisconsin, facility. 

The sacrifices that we made last time were based on product commitment to our plants here for product to be made in America. We 

are going to lose that plant. 

St. Louis South assembly plant, another plant that we were 

hopeful that we would have product in. So we are working with the 

companies on that. 

We have—Ford Wixom’s plant, since the negotiations, has closed 

down. 

And a lot of people have the perception that the union and the 

company only negotiate part of the time. Well, maybe it used to be 

that way, but today when we negotiate a contract, it is not just the 

implementation of the contract, it is the ongoing daily negotiations. 

The current operating agreements that have been negotiated at 

all of the facilities to make these plants more productive and the 

Harper report proves that that is effective. So we have those negotiations ongoing all the time. 

And I might add also that the UAW can’t be the low hanging 

fruit, the men and women, the only ones at the table. And so, while 

we are at the table, we would respectfully request that others come 

into the party and sacrifice as well. Because we certainly believe 

that the men and women, both active and retired, have sacrificed, 

sir. 

Mr. BACHUS. I agree with you. 

Let me say this: I think it would be helpful as you sell the public, 

as maybe some of these agreements or some of these changes are 

made for more efficiency, that you announce those, that the company and the union announce those. And I think it shows good 

faith on your part. 

Mr. GETTELFINGER. Thank you for that. And we do try to get that 

out to the public, but, unfortunately, oftentimes if we have a conVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
35 

flict, they are willing to talk about that, but the positive things, it 

is much more difficult. 

The CHAIRMAN. Mr. Gettelfinger, there is a lot of that going 

around. 

The gentleman from New York. 

Mr. ACKERMAN. Thank you, Mr. Chairman. 

There is a delicious irony in seeing private luxury jets flying in 

to Washington, D.C., and people coming off of them with tin cups 

in their hand saying that they are going to be trimming down and 

streamlining their businesses. It is almost like seeing a guy show 

up at the soup kitchen in high hat and tuxedo. It kind of makes 

you a little bit suspicious as to whether or not, as Mr. Mulally said, 

we have seen the future and causes at least some of us to think 

have we seen the future. I mean, there is a message there. Couldn’t 

you all have downgraded to first class or jetpooled or something to 

get here? That would have at least sent a message that you do get 

it. 

If you are going to streamline your company, where does it start? 

And it would seem to me if, as the chief executive officer of those 

companies, you can’t set the standard of what that future is going 

to look like, that you are really going to be competitive, that you 

are going to trim the fat, that you don’t need all the luxuries and 

bells and whistles, it causes us to wonder. 

You know, I don’t have a dealership. I have driven a car for a 

long time. Around here, as my colleagues know, I drive the same 

1966 Plymouth Valiant that I have always had. I can’t seem to kill 

it. 

I strut my stuff in New York a little bit, and I drive a Cadillac. 

And I just bought a new one. I bought it because of the finance 

companies that are in the financing of the car business. I bought 

this car a couple of weeks ago, and I had some problems with it, 

and I couldn’t get in touch with anybody. Because the dealership— 

which is a great dealership, by the way—couldn’t tell me that they 

had the phone number of somebody at Cadillac to call to fix this 

GPS system that I had trouble with in the previous car. That is 

systemically built in with a software problem that I can describe, 

but nobody can listen. And if you are going to sell cars that customers want, you have to find out what the problems are; and you 

are not doing that. 

I wanted a loaded car in blue. I had to reach out to five States 

to find one in blue. I said, ‘‘Can’t you tell them they should be making more blue cars this year?’’ He said, ‘‘We have no mechanism to 

get back to the company to tell them that.’’ Well, lucky for me, you 

guys are in a crisis, and they reached out and called me because 

you all said to your dealers, call your Congressman if you know 

who they are. 

And I got a call, and I actually had somebody call me. And in 

this discussion, I said, ‘‘Hey, part of the problem is you are not listening to your customers. You have a problem with this, that and 

the other thing and this GPS system, etc., and I have nobody to 

talk to.’’ And the answer was, ‘‘Well, I think there is an 800-number in the manual somewhere.’’ 

Now when my wife has a problem with the foreign car that she 

drives, they bend over backwards to try to listen to her and figure 

36 

out what is going on, what the colors are, what the bells and whistles customers like. And you all are not listening. If you are going 

to sell cars that customers want, you have to find a way to talk 

to your customers or better listen to your customers. You have no 

mechanism. There is an arrogance in that. We will all be out of 

business in 2 years. We have a time limit also. 

So maybe you can tell us what you are actually going to do to 

sell cars people want and how are you going to do that in real short 

order because otherwise, you know, there is triage. Somebody 

heard that we were giving out free money in Washington, and they 

are showing up from all over the place. And we have to figure out 

where to put it. 

And you know, you don’t want to put your last tourniquet on a 

dead guy. So tell us, what is going to be different 3 months from 

now? Anybody? 

Mr. NARDELLI. Well, sir, I can tell you what we have done at 

Chrysler in the last 18 months. We have installed the first ever 

chief customer officer. We have methodically gone through 400 line 

items, enhancing, improving the reliability, the durability. As a result of that, our warranty costs have gone down 29 percent. We established the first ever customer council online. Our chief marketing officer is listening. 

God knows we have a long way to go. But I think we have recognized the first and biggest hurdle, that of denial. And we are committed to improve our overall product quality and the service with 

which we provide our valuable customers. 

The CHAIRMAN. The gentleman from North Carolina. 

Mr. JONES. Mr. Chairman, thank you very much. 

Gentlemen, thank you for being here. 

To your left—I am on the right. Politically I am on the Republican side. I want to read to you— 

The CHAIRMAN. Sometimes. 

Mr. JONES. Well, I am somewhat independent. 

Thank you, Mr. Chairman. 

The budget should be balanced. The Treasury should be refilled. 

Public debt should be reduced. The arrogance of officialdom should 

be tempered and controlled. And the assistance to foreign lands 

should be curtailed, lest America becomes bankrupt. People must 

again learn to work instead of living on public assistance. 

Let me explain. I took advantage of a quote by Cicero in 55 B.C., 

but instead of ‘‘less Rome becomes bankrupt,’’ I inserted ‘‘America.’’ 

The people of this country, as well as the Third District of North 

Carolina, which I represent, where the average income of a family 

of 3 or 4 is about $36,000. And after the bailout of Wall Street, 

they want to know why we need to be bailing out the automobile 

corporations of America and if it is justified. 

Now when I look at these cars—I am not going to go through 

them—but this is the General Motors Chevrolet Avalanche, assembled in Mexico. This is the Fusion, assembled in Mexico. This is the 

Crown Victoria, assembled in Canada. This is the PT Cruiser, assembled in Mexico. And this is the Crossfire, assembled in Germany. 

Then I have articles from the latest news from China Car Times, 

‘‘Chrysler and the Great Wall to Work on Small Car.’’ Okay. ChiVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
37 

nese cars will soon be sold in the United States. This, again, is a 

relationship with some of your corporations, and then Chrysler 

signs a pack. This again is with the Chinese. The problem with— 

you being here is not the problem. We care about those workers 

who are American workers. In fact, Mr. Obama carried my State 

of North Carolina. One of the ads that helped him win was: ‘‘We 

are not going to any longer give tax credits to companies who move 

jobs overseas. We are going to give tax credits to those companies 

that stay in this country.’’ 

And what my question to you is, when you are getting this 

money from the American taxpayer and you keep having these cars 

assembled overseas in different countries, what is the purpose of 

this loan? Is it to keep you viable so that you can continue to move 

jobs overseas? I speak for the frustrated people of the Third District of North Carolina because Cicero was right. We are in the last 

days of this country surviving. And how in the world can we find 

the billions of dollars that we are borrowing from China and Japan 

to help you stay in business when you are sending jobs overseas 

to pay those workers less than you are paying the workers in Detroit? What can you do to keep the jobs here? Anyone who wants 

to answer it, fine. If you don’t, fine. But I just wanted to tell you, 

people are frustrated. You have been helped before. Maybe not with 

billions but with millions. And I have those figures, too. But you 

have to reassure the American people that you are going to stop 

sending these jobs overseas and work with these unions and work 

with this country and find ways to keep these jobs here because 

this country is falling apart. If anybody wants to— 

Mr. NARDELLI. If I can just take 30 seconds and share the time. 

Your point is well taken on the Crossfire. One of the things I did 

in the first 60 days was discontinue that car that was made in Germany, point number one. 

Point number two, sir, the articles you referred to about China 

is part of our attempt to compete in China. As you know, you have 

to have, based on local restrictions, a joint venture to be able to 

compete there competitively in that market. So that article you are 

referring to is more about, how do we expand our business globally 

to try to get more volume to compete in that market as they are 

trying to compete in our market? 

Mr. WAGONER. I would say the auto business has become somewhat more global over the years. And you know, of our foreign competitors here, in many cases, they import and sell more cars in the 

United States than they build here. And I think if you look at the 

labor intensity of the three of our cars sold in the United States 

versus our transplant competitors, it is vastly greater. 

I can tell you, from GM’s side, we certainly do want to grow in 

China and Brazil and the places that are growing around the 

world. That is good for our business here. But the United States 

is by far our biggest manufacturing site. And this is the most important market for us. So we are treating it that way. 

We do export some to Mexico. We import some from Mexico. On 

balance, we have a huge amount of U.S. content in most of what 

we sell here from Mexico. 

Mr. MULALLY. I would just like to add that the Ford Motor Company plan, we operate, as you know, around the world. Our fundaVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
38 

mental plan is to make the vehicles in the markets that we serve. 

And the United States is by far our biggest market. We want to 

make our U.S. vehicles in the United States. And I really, I think 

that the actions we have taken over the last few years, especially 

starting with the transformational agreement that we made with 

the UAW, allows us to make vehicles of all sizes, small, medium, 

and large, cars, utilities and trucks and make them right here in 

the United States. That is our main objective. 

The CHAIRMAN. If the gentleman would yield? I think one of the 

answers did highlight, however, a real problem in our trade policy, 

which, as I understand it, if they want to sell cars in China, it has 

to be a joint venture with a Chinese partner. No such restriction 

applies to people here. That is a defect in our trade policy in failing 

to insist on reciprocity for our own people. 

Mr. Gettelfinger. 

Mr. GETTELFINGER. I wanted to thank the Representative for his 

comments because these gentlemen to my right have all heard that 

from all three of our vice presidents and myself. 

But it does go back to us being the most open market in the 

world. We do nothing to assist or to protect our industry. Our free 

trade agreements should be fair trade agreements, and they all 

well know our position on that. So you did an eloquent job of stating what we have said to them. 

Mr. JONES. Mr. Chairman, may I make one statement in closing, 

sir? 

The CHAIRMAN. Certainly, because I took some of your time. 

Mr. JONES. The Thursday after the Tuesday election at East 

Carolina University in Greenville, North Carolina, David Walker, 

former Comptroller General of the GAO who is now with the Pete 

Peterson Foundation, spoke to over 400 people at the Hilton in 

Greenville. 

At the end of his speaking, he was willing to take questions. But 

in his speech or presentation, he used the word ‘‘abyss.’’ One of the 

questions from the audience was this: ‘‘Explain abyss and how you 

meant it in your presentation.’’ And he said, ‘‘I would rather not 

answer because the press is here,’’ but he was saying that jokingly. 

And then he said, ‘‘If this country does not become smarter and 

wiser with how it spends its money, then I see, in 4 or 5 years, a 

collapse and a depression.’’ 

I yield back. 

The CHAIRMAN. The other gentleman from North Carolina. 

Mr. WATT. 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 is 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 am not 

being repetitive of questions that were already asked. 

39 

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 are either going out of business, have gone out of business, or are on the 

verge of going out of business. 

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. MULALLY. You bet. I think it is 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, and their productivity. 

Mr. 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 have come to the table more recently. What particularly 

are you doing to address that issue? 

Mr. MULALLY. Our data says that it isn’t associated with how 

long they have been in business. It is their fundamental business 

acumen for all the dealers, all of them, not necessarily dependent 

on how long they have been in business. And it is really an important thing that we keep working together because we have to get 

their profitability up per dealership because it is the only way for 

them, just like us, to be competitive by going forward. But it is an 

ongoing thing that we are working on. We have made great 

progress, and we are going to continue to work it very closely. 

Mr. WATT. A number of them are experiencing challenges with 

the financial services sector because the financial services sector 

has withdrawn from this industry, making any kinds of loans—you 

are a lot more likely to be able 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 that money take 

up that slack? Or is this just operating money that you are requesting? 

Mr. NARDELLI. Sir, this is specifically operating money. And as 

we discussed, possibly when you were out of the room, our affiliate 

financial companies, in parallel to what we are asking for here 

today, must gain access to the TARP funds. They currently have 

submitted requests for, in one case, a bank holding company. We 

have a request 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 that we 

have about 3,500 across the country to get vitality back into their 

businesses. 

40 

Mr. WATT. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman from Illinois, Mr. Manzullo. 

Mr. MANZULLO. Thank you very much. I appreciate the opportunity that we have this afternoon. I especially welcome Mr. 

Nardelli from Rockford, Illinois, a graduate of Auburn High School. 

The district I represent is the proud home of one of the great 

Chrysler facilities. 

I have two questions. The first one is, you are claiming that no 

one can buy new cars because the financial crisis has negatively affected the captive financing arms of the Big Three automakers. 

However, yesterday we heard from the bankers, and we have also 

heard from the credit unions, that they have tons of money to lend 

to car customers. What steps are you taking to get the word out 

to auto dealers and the general public that they shouldn’t just use 

your financing companies to facilitate car and truck sales? 

Mr. WAGONER. If I could start with that, we have recently actually begun a national advertising campaign to do just that and basically offer, through our dealers, that the customers can directly 

go to Web sites of all potential financing sources, because we welcome banks and credit unions. We have actually have some specific 

work going on with the credit unions to try to get them back in the 

auto finance business. So we are very enthusiastic. 

Mr. MANZULLO. Those are local credit unions and local banks? 

Mr. WAGONER. Yes. 

Mr. NARDELLI. Sir, we have gone to two major banks. We have 

given one of them half our country, four of our business centers. 

And to date, through this new pilot, they have basically have had 

access to about 1,500 opportunities, 1,500 loans. We have approached Ron Gettelfinger and asked him to help us approach credit unions across the country to see if they are willing to help consumers get access to auto loans to help create some infusion of cash 

back into the system. 

Mr. MULALLY. We also have a loan in to the FDIC, an application 

in for an industrial bank, which will help on that also. Plus, we 

have come to an agreement with the Fed on asset-backed paper for 

the short term, and also they are now working it for the longer 

term, which will also free up credit. So our Ford Motor Credit Company, as you mentioned, can offer the loans to the customers. 

Mr. MANZULLO. The reason I ask that is you are asking for taxpayer funds for people to buy cars when in fact the private sector 

already has the money available. The second question is, if you were given the $25 billion today, the additional $25 billion, exactly what would you do with it? 

Where would the money go? 

Mr. WAGONER. The money will basically be used as bridge financing because, actually, private capital is not available to us at this 

time. 

Mr. MANZULLO. Where would the money go? 

Mr. WAGONER. For us to continue our capital expenditures, to 

continue our product development and research development, and 

to be able to pay our suppliers, employees, and retirees. 

Mr. MANZULLO. All right. 

I presume that it would be the same answer. It is going for general operating expenses. 

41 

Mr. NARDELLI. Yes. 

Mr. MANZULLO. If you don’t have new sales, won’t you be back 

here again in 2 months? 

Mr. WAGONER. We have built, as we explained earlier, our estimates of the amount of funding we need on an assumed level of 

auto market sales next year. And in our case, about 11.7 million 

units, which we have viewed to be quite conservative given that 

that would be the lowest level the United States has seen in— 

Mr. MANZULLO. The reason I ask the question is, isn’t it better to give a $3,000 or $4,000 tax credit to any person who buys a new 

automobile so the money is directly infused into the automobile industry, no bureaucrats to screw it up, no testimony such as we had 

yesterday that there is no game plan on how to spend the TARP 

money, no need for testimony. The money would go directly to all 

the automobile manufacturers in the country. Isn’t that the best 

way to spend $25 billion? 

Mr. NARDELLI. Well, sir, there is no question, you know, given 

where we are, we are open to any suggestions, and certainly a consumer tax credit would be great. The reality of that is, the industry 

has fallen from 16 million last month to 10.8. So before that is a 

benefit, the consumer has to have access to a loan to be able to get 

credit— 

Mr. MANZULLO. The consumer has access to a loan, Mr. Nardelli. 

It is the local credit union and the local bank. The money is there. 

It is there. 

Mr. NARDELLI. Well, then, sir, certainly the increase in the balance sheet, the reduction in the debt to equity ration for these 

banks, they need to let it start flowing. 

Mr. MANZULLO. Well, I thank you. 

The CHAIRMAN. Did you have a last comment you wanted to 

make at this time? 

Mr. MANZULLO. No, I just, the comment—Mr. Chairman, thank 

you, you are very generous. 

Well, the comment is the fact that if car sales don’t pick up, you 

are just throwing money at a problem. That is what my union guys 

are saying back home. They are saying, unless there is a plan—all 

you guys advertise on television are the big trucks. Why not the 

little cars that are made in my district, the Caliper and the Patriot, 

the finest and the smallest car in the world? 

The CHAIRMAN. I think the statement has been made. 

The gentleman from California. 

Mr. SHERMAN. It would be insane if this country stopped designing and building automobiles and trucks. It would also be insane 

if the top executives from the three automakers came here on private jets. I am going to ask the three executives here to raise their 

hand if they flew here commercial. Let the record show no hands 

went up. 

Second, I am going to ask you to raise your hand if you are planning to sell your jet in place now and fly back commercial. Let the 

record show no hands went up. 

I don’t know how I go back to my constituents and say, the auto 

industry has changed if they own private jets, which are not only 

expensive to own but expensive to operate and expensive to fly here 

rather than to have flown commercial. 

42 

I also, though, must recognize that you are in trouble mostly because of the economic downturn. The proof of that is that all three 

of your companies were worth roughly 5 times what they are worth 

today at the beginning of this year based on Wall Street and, in 

one of your cases, of course, a private transaction. I don’t think 

Wall Street wasn’t aware at the beginning of this year of all the 

problems that we have all talked about. It is the additional problem of this unanticipated downturn that has driven the value of 

your company down. 

I have three questions for the record. First, is the idea of building and buying in America. We have talked about new investments 

in China. I am not worried about your new investments. I am worried about your dis-investments. Chrysler, in particular, shuts 

down in Missouri a shift that its building the Dodge Ram while 

continuing to build the same vehicle in Mexico and then shuts 

down a plant in Missouri building the Dodge Caravan while running three shifts at their plant in Windsor, Ontario. I would hope 

that you would respond for the record whether you expect to get 

any bailout money from Ottawa or Mexico City? And if not, whether you will commit yourselves as you disinvest, as you close down 

plants, to close down the foreign plants and not those in the United 

States? 

Second, I am concerned about the consumers. People in my district are buying your cars. They expect that 5-year warranty to be 

there. You go bankrupt, they have no warranty. They are going to 

figure that out. But even before they do, are any of you willing to 

establish trust funds with a few hundred dollars per vehicle sold, 

so that if your company ceases to exist, there is at least something 

there to provide warranty service? 

Third, executive compensation. We have already talked about bonuses, which are covered in the bill. But your total compensation 

package includes your salary, your bonus, the stock options as valued by the new accounting rules, and ancillary compensation as 

well. I would hope that you would be able to respond for the record 

that no one at your companies is going to get more than $1 million 

per year in total compensation package including bonuses, including stock options, including contributions to pension plans. 

Now, I have a question that I would like you to respond to orally, 

and that relates to the number of warrants that the taxpayers are 

going to get if we make this investment, because God knows we 

may lose it all. When Warren Buffett made investments, he demanded—and he was making much less risky investments than 

what you guys are asking for here—a number of warrants equal to 

100 percent of the number of shares that could be purchased for 

the amount invested; a strike price equal to the amount—equal to 

the current fair market value of the stock; any term on the warrants at least as long as the investment remained in place. 

Now I know that you would like to give less warrants. And you 

are going to tell me how unfair it is that we don’t just give you all 

the money that you want and not dilute your shareholders’ equity. 

But are you willing to accept a Federal infusion of capital where 

we get the kind of upside that Warren Buffett was able to negotiate, mainly the terms I have just outlined? 

I will start with the— 

43 

The CHAIRMAN. We won’t have time for everyone to answer, but 

can get a couple. 

Mr. SHERMAN. Let’s hear from General Motors. 

Mr. WAGONER. I think we have all been clear that we are very 

willing to do warrants. To be honest, our shareholders have been 

dramatically diluted, as you highlighted. And we certainly feel an 

obligation to be responsible to them. But the most important item 

on our agenda is this bridge funding, and we respect the government should get fair compensation and are very willing to discuss 

the kind of terms you laid out. 

Mr. SHERMAN. If I have time, Ford as well. 

Mr. MULALLY. Nothing else to add. 

Mr. SHERMAN. So we are talking roughly 5 times the number of 

warrants called for in the current draft of the bill. 

I yield back to the chairman. 

The CHAIRMAN. The gentleman from New York. 

Mr. MEEKS. Thank you, Mr. Chairman. 

I was listening to some of the questions by Mr. Watt, and I am 

trying to be clear on the utilization of the money. I am one who 

believes that, given the close to 5 million jobs, whether it is direct 

or related, that we could lose, this industry is tremendously important. But I am concerned about how the money is going to be spent, 

and I know that, for example, in some places or areas in the country where there is no manufacturing, but there are dealerships 

which employ a substantial amount of people. And in listening to 

some of the responses, it is that dealerships are going to shrink 

substantially. And I don’t know whether or not there is any plan 

with reference to the dollars that the taxpayers will be lending you 

to help stabilize dealerships and others, because that becomes part 

of the local community—and both sides, where they go buy their 

cars and also employment for them. And so I am trying to say, are 

there any plans with this taxpayer money to keep and to preserve 

dealerships or to strengthen dealerships? 

That is my first question. 

Mr. WAGONER. Maybe, I could offer some perspective on it. I 

think generally people who look at the industry say that those of 

us who have been around a long time have probably more dealers 

than we can support with current volumes because the economics 

of the dealership business now require higher scale than they did 

a few years ago, the technical training, the technical equipment 

they have to have. So what we have been doing is working with 

our dealers. 

But I highlight, each dealer makes their call, whether they want 

to stay in business or not. We do have a number of dealers who, 

with the economic downturn, with the change in generations have 

said, hey, I would like to get out of the business. And what we try 

to do in that case is have them work with another local dealer, for 

example, to try to take over their business, take over their customer responsibilities, although it has to be done in cooperation 

with individual dealers. And so we do need to try to do that in an 

orderly and constructive way. 

Mr. MEEKS. And encourage mergers. I mean, this is the day and 

age of mergers. 

44 

Mr. WAGONER. And we do provide, in some cases, support for 

that to be done. I can assure you, in virtually every significant 

community in the United States, we have and will continue to have 

dealer representation. In some cases rather than three Pontiac or 

standalone Pontiac, Buick, and GMC stores, there might be one 

store that has all three franchises, so the retailer has a chance to 

make some business profit. So as part of our normal business, we 

have some budget to facilitate those kind of things happening. 

Mr. MEEKS. Yesterday at the Senate hearing, I think I heard a 

number of Senators reference Honda made in Indiana as a benchmark for the most efficient cost to produce it and for profitability. 

How, with this taxpayer money, will our three major industries be 

able to compete with Honda made in Indiana so that—because, you 

know, part of what we haven’t discussed is the American consumer. 

Nowadays, a lot of times they are buying what they believe is the 

best vehicle, cost-wise as well as reliability-wise. And that is why 

others got into our market. How will this $25 billion help you compete so that we are not back here again with Honda made in Indiana? 

Mr. NARDELLI. Sir, if you are familiar with the Harbor report, 

and I think Mr. Gettelfinger has it, the Chrysler team, long before 

I got there, has been on a path to improve the overall efficiencies 

of our manufacturing plants as measured in hours to assemble. 

This year, I am proud to say that we are spot on Toyota relative 

to the hours required to produce a vehicle. If you look at our contract that was just negotiated, with the forward-looking rates times 

those hours, we think we can be extremely competitive. 

I would tell you, sir, to your other question, the dealer council 

that is here with me in the room would say the most important 

thing we can do for them is to have a financially sound business 

with a continuous flow of products and the kinds of investments we 

are making in the quality, reliability, durability, fit, and finish of 

our products, where some of that money, you question, would go 

into $300, $400, or $500 per vehicle to enhance the overall aspirational aspects for our consumers. 

The CHAIRMAN. Before I go to the next question, let me say, I am 

going to assume the indulgence of the witnesses, this is obviously 

very important. I intend to stay here until every Member gets a 

chance to ask questions. I assume you can accommodate us. There 

are facilities just off the hallway there if you need them. The staff 

will be available. But I do think, given the magnitude of this, other 

than the Republican Conference, which unfortunately took them 

away for some time, but they will be back, there is not much else 

going on. I think this is important enough for us to stay, and I certainly intend to. 

The gentleman from Kansas. 

Mr. MOORE. Thank you, Mr. Chairman. 

I had a conversation with an auto dealer in my district back in 

the suburbs of Kansas City in the Kansas side about 21⁄2 or 3 years 

ago, but I am not going to name the dealer because it doesn’t matter. I think it is applicable here to the auto industry here generally. 

I said to him, ‘‘You know, I am concerned that auto sales in our 

country are falling off, and the sales in foreign countries are increasing because a lot of the foreign cars are more fuel-efficient 

45 

than the cars in our country. I am not saying this because I want 

to be critical of our industry. I want us to succeed. I want us to 

win. I don’t want us to lose and fall behind the sales of other countries.’’ 

He said, ‘‘Oh, I don’t think that is a problem.’’ 

Well, that was 21⁄2 or 3 years ago, and I think things have 

changed dramatically since then. That is why we are here today. 

And I am here today because I want the U.S. auto industry to survive and succeed. I don’t want the industry to fail. The auto industry is a huge part of our job market; it provides a living to millions 

of Americans. We have to survive. We have to pull through on this. 

And that is why I am here today, and I think that is why every 

member of this committee is here today. 

The auto industry is a huge and very important part of our job 

market and our Nation’s economy. I am very concerned the United 

States’ auto industry learn something here from what may be mistakes that have been made in the past and not repeat those mistakes. 

Energy supplies are limited. Bigger and better SUVs are not 

what every American consumer wants when the price of gas increases to more than $4 a gallon as it did just a few months ago. 

The price of a gallon of gas has fallen to almost half of that very 

recently, but I think we can expect that there may be similar increases in the future. 

Our auto industry needs to be competitive with foreign automakers. I am glad that you are here. I have heard you describe 

some of the new models you have designed to be more fuel efficient. 

I hope it is not too little and too late. 

My questions I guess are these: What lessons have we learned? 

What are the auto manufacturers doing to make sure we don’t repeat mistakes made in the past? And we have heard about a couple 

of new fuel-efficient models. Is there anything else we can expect 

to see in the near future? And, again, I am asking this because I 

want us to be there together. Anybody, please. 

Mr. MULALLY. It is just such an important question. I think, from 

a lessons learned point of view, being relatively new to the industry, it really surprised me the lack of consistency, the lack of purpose on staying with the vehicles and improving them every year 

forever. 

This is well known at Ford. But when I first arrived, one of the 

things I knew about Ford was the Taurus. And when I was at Boeing and we were going getting ready to launch the 777 program, 

we happened to have a member on our board who was also the 

chairman of Ford, Don Peterson. He told me that Ford was getting 

ready to design and launch the Taurus sedan, and would I be interested in getting together and comparing notes on the technology on 

the digital product definition, the digital pre-assembly on the manufacturing plant? And I said, absolutely. 

So we hosted the Ford team, and for 3 days, we compared notes. 

They went back to Detroit and created the Taurus, which was the 

number one sedan in the United States for 9 years, 7 million Tauri. 

A fabulous vehicle. And we created the Triple Seven, which is the 

number one commercial airplane in the world. 

46 

And so when I was doing my due diligence, when I was recruited 

by Ford, I thought that I would just be going home because here 

is the Taurus. And so the day I arrived, I found out that they had 

changed the name, and they were killing it. I said, we are the ones 

who made it look like a football. Can’t we have a consistency of 

purpose? We had all that brand. We had all that equity. 

And so one thing that I think you are going to see from us going 

forward is an absolute laser focus on every vehicle that we have 

in our portfolio, small, medium, and large; a car, utility or a truck. 

And every year we are going to improve the quality. We are going 

to improve the fuel efficiency. We are going to improve the safety, 

and we are going to improving the productivity so we can offer the 

consumer the very best value. 

Mr. MOORE. And be competitive? 

Mr. MULALLY. And be competitive, absolutely. 

And like I mentioned this morning, we are now competitive in all 

of those areas, all of the areas the consumer is considering. But, 

clearly, when we lost that consistency of purpose, there was a 

brand awareness that was lost. And we are fighting every day to 

get that awareness out and that message out that we are back, and 

that Ford is worthy of consideration. We have these fabulous vehicles. 

And when we had this big void for a number of years, we are still 

hurt by that. So I think consistency of purpose and absolutely delivering on this brand promise is going to be the most important 

thing we do on our transformational plan. 

The CHAIRMAN. The gentlewoman from New York. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. Mr. Wagoner, clearly, the $25 billion assistance package the Congress passed in September was not sufficient for the auto industry. 

You are back again, and now you want more and a different type 

of assistance. 

My issue is not with providing this assistance. But since the Wall 

Street bailout, I believe we have learned our lesson. Congress is 

not just going to hand out money without significant oversight on 

requirements. Given this, how will you restructure GM so that it 

is a more valuable business and the taxpayers are not left wondering why we gave you this money in the first place? 

Mr. WAGONER. Thank you. 

I think I tried to address the business restructuring, the cost restructuring, in some detail in my opening comments. 

And Mr. Gettelfinger has also talked about what the union does. 

So I won’t repeat that side. 

But fundamental is obviously to be cost competitive. And so we 

are going to continue on that very aggressive path we have there, 

including recent additional plans. 

Ms. VELAZQUEZ. So when you mentioned the union side, will that 

mean what, pensions? 

Mr. WAGONER. No, I am talking about the fact that we have restructured labor agreements, reduced labor rates for new employees. We have spent— 

Ms. VELAZQUEZ. And besides that, what else would you do? 

Mr. WAGONER. We are going to continue our focus on new product launches and, particularly and in line with the prior question, 

47 

commitment to technology leaders like the Chevy Volt, which can 

raise the image of the company. We are going to continue to work 

on making sure that, particularly, we keep the car products on 

time in our portfolio and execute them to the highest standards. 

And we have continued work to do to make sure we have the right 

size distribution channel so our dealers can be profitable. 

Ms. VELAZQUEZ. So, sir, what about marketing and advertising? Would you have an ad at a cost of $3 million per 30 seconds during 

the Super Bowl this year? Or what about rationalizing the complex 

web of GM’s product lines and cutting bureaucracy? And what 

about cutting travel costs? I wasn’t here, but I understand you 

traveled in a private jet today. 

Mr. WAGONER. We are not going to do Super Bowl ads this year, 

frankly, because we are cutting back on everything, and we are actually shifting a huge amount of our ad budget that remains to digital marketing, which is less expensive and more efficient. 

I think it is fair to say every part of our business is cutting back 

expenses dramatically, including travel expenses. 

Ms. VELAZQUEZ. Thank you. 

Mr. Nardelli, I understand that 80.1 percent of Chrysler is owned 

by the private equity firm Cerberus Capital Management. Is that 

the case? 

Mr. NARDELLI. Yes, there is— 

Ms. VELAZQUEZ. Okay. So I understand also that current senior 

executives at that firm include Former Bush Treasury Secretary 

John Snow and former Vice President Dan Quayle. Is that the 

case? 

Mr. NARDELLI. Yes. 

Ms. VELAZQUEZ. Both gentlemen strongly support or supported 

free-market policies in their government capacities. But now they 

are asking for, and clearly will privately benefit from, a massive 

Federal bailout. How do you reconcile that these men, staunch supporters of the free market, are now asking for massive amounts of 

taxpayers’ assistance? 

Mr. NARDELLI. Well, as I said in my comments, Cerberus Capital 

Management has made it clear that they will forgo any benefits 

from the upside that would be contributed from any government 

loan in Chrysler LLC. 

Ms. VELAZQUEZ. Thank you. 

Mr. Mulally, as you know, several Wall Street firms recently announced that they will forgo giving bonuses to their top executives 

in part due to the perception that taxpayer funds should not be 

used to compensate unprofitable companies. Would you agree to restrictions up front that will prevent any of the Federal funds from 

being used for executive bonuses? 

Mr. MULALLY. Yes, we have already decided to forgo any merit 

increases on the base salary and also any bonuses, because when 

you are in a situation like this, it is just so important to conserve 

the cash. Now, having said that, it is just so important that we also 

keep a skilled and a motivated team. As you know, this is a very 

competitive marketplace. 

Ms. VELAZQUEZ. But I understand you made that commitment. 

Mr. MULALLY. We have a very motivated team. 

Ms. VELAZQUEZ. Thank you. 

48 

Mr. Nardelli, we have heard you and your peers express your 

willingness to improve the fuel efficiency of your products, and yet 

all three of you have stacked your bets on different technologies. 

As we move forward, a more unified energy policy, are you concerned that the market may favor one technology over another, 

thus placing your business model at a disadvantage? 

Mr. NARDELLI. May I answer, Mr. Chairman? 

The CHAIRMAN. Yes, you can finish. 

Mr. NARDELLI. We did select a single technology because of our 

financial situation. We could not afford to develop multiple technologies. We chose the technology that we had the most experience 

in and that we thought would have the easiest application for the 

consumer, and that is electric. 

The CHAIRMAN. The gentleman from Michigan, Mr. McCotter, is 

now recognized before the committee for a combined opening statement and questions. 

Mr. MCCOTTER. I thank the Chairman. Thank you for your indulgence. 

I will have an opening statement and some questions. I will try 

not to take up too much time, and if I cover ground that you already have, please feel free to disregard it, and put in your own 

points. 

I come from Michigan’s 11th District. My district borders Detroit, 

heavy automotive industry, with a lot of dealers, a lot of suppliers, 

a lot of white-collar, and a lot of blue-collar employees. 

One of the first things I would like to make clear is that I personally find offensive the implication that the domestic American 

auto industry has not done anything since the 1970’s to restructure. If anyone believes that the Big Three were not restructuring 

prior to the credit crisis bringing them here today, or the CAFE 

mandates that have brought them here today, I invite you to my 

district. 

I invite you to look at how the fragile fabric of people’s lives has 

been rendered asunder by a necessary restructuring process that 

has involved give and take on both sides from labor and management. I will show you the white-collar workers who are out of work. 

I will show you the blue-collar workers who are out of work. I will 

show you the pensioners who are worried about their health retirement benefits being lost, and I will show you the Wixom Assembly 

Plant that is closed. 

I bring this up not for your pity for my constituents. I bring this 

up to show you that the automotive companies and the UAW have 

been doing what they believe they possibly can to restructure and 

become globally competitive and ensure that American has a domestic manufacturing base for the generations to come. 

The second point I wish to bring up is why they are here. 

Throughout the entire process of the restructuring, we would hear 

rumors in Washington that the Big Three were coming for a Federal assistance package for one reason or another. And yet as the 

white-collar workforce and the blue-collar workforce and the pensioners suffered the restructuring, they did not come. They did not 

come to Washington with their hands out. They were not here begging, as it has been pejoratively put in the press. They wanted to 

restructure without us making it harder for them to do so. 

49 

Unfortunately, the first thing we did, this Congress, was we 

passed a $100 billion CAFE standard mandate on the auto industry, which would have been far worse had it not been for the strenuous efforts of the Dean of the United States Congress, John Dingell. 

Secondly, through no fault of their own, as they went through 

the restructuring process, the wiz kids on Wall Street with their 

computer algorithms decided to screw up the entire credit market 

of the United States. This was critical to the restructuring of the 

auto industry. 

And then this Congress, in my opinion, passed a very bad piece 

of legislation, a $700 billion bailout of the very people on Wall 

Street who caused the problem. 

And now you see hundreds of billions of dollars slated to go to 

‘‘healthy’’ banks to free up the credit system that has yet to free 

up or they would not be here today. 

So the question that the chairman puts before us, in terms of the 

legislation he is proposing, is to me not a matter of a bad policy 

that has already been imposed on the American people and has yet 

to work; it becomes a question of equity. If the $25 billion is appropriated for Wall Street, some of it probably targeted to healthy institutions, financial institutions, however nebulously defined, a no 

vote on a bridge loan to the auto industry means that that $25 billion will continue to go to Wall Street and to healthy banks. A yes 

vote means that it actually goes to Main Street, not just for the 

structure of the Big Three, the labor leaders, the auto leaders but 

for the very hard-working men and people whose taxes have gone 

into the $700 billion bailout, which has yet to free up the credit 

markets. So we are in the realm of equity here. 

And while I did not support that bad policy, we had here yesterday Secretary Paulson who explained that he believed one of the 

fundamental problems that we face in stabilizing our financial system is the problem with home foreclosures. I would agree with 

that. I would agree that the biggest problem we have is real working peoples’ abilities to pay to stay in the homes that they have. 

If we turn our backs on Main Street, if we continue to send all the 

money to Wall Street, who caused the problem, and the auto industry does have to go into bankruptcy, you will see foreclosure rates 

in this country skyrocket from people who have played by the rules 

and are currently paying their mortgage and are not part of the 

problem Mr. Paulson says is already big enough to be worthy of addressing. 

Finally, I want to address the issue of labor costs. I have long 

said that one of the problems Michigan suffers is the fact that we 

are currently still operating under the industrial welfare’s model of 

governance. And this is where the Big Three and the UAW get a 

very bad rap. They talk about, ‘‘shedding labor costs that have been 

duly negotiated because it makes them uncompetitive.’’ My response to that is, where do those labor costs go? The traditional 

model of governance throughout the 20th Century of the United 

States, as we were an industrial power, was that business would 

pick up some of the benefits of employees and government would 

pick up some of the social needs of employees and there was always 

50 

the tension as to which would do what. But you had two pillars to 

help undergird American prosperity. 

As we move into what people call the new global economy, the 

post-industrial economy, my question is this: If the business entities in negotiation with labor entities decide that they can no 

longer be competitive with these labor costs, quote-unquote, where 

do those go? They are going to go to the Federal Government. And 

so we have another instance where we can be pennywise and 

pound foolish, and we can say we are not sending a $25 billion 

bridge loan to allow the auto industry to survive, and we can let 

real human beings about into the process of bankruptcy and watch 

the stresses and strains on their families as they endure that pain, 

and you will not have saved the American taxpayers anything because the pension costs will be picked up somewhere from the retirees who were cheated out of a lifetime of hard work. You will see 

the health care costs that hard-working people have enjoyed because of the fruit of their labor put into the Federal system. And 

you will see prosperity throughout the Midwest and the rest of the 

country crash, and you won’t have enough worker retraining money 

to take care of their needs. 

And finally, for some of my more conservative friends, I point 

this out: If America does not have a manufacturing base, a manufacturing base which some may think is not necessary in this new 

global world, the United States will cease to be able to defend 

itself. We will be reliant on other nations for the innovative technologies, not only their creation but their provision, from friendly 

nations such as communist China and others and the arsenal of democracy in our lifetime will have been dismantled in a time of war. 

In the end, this issue is larger than the Big Three. It is in many 

ways larger than the economy. It is, what type of nation do we become? Do we become a nation that no longer produces wealth, that 

no longer has a path to middle class prosperity? Do we remain the 

America we inherited? Or do we just let it go and watch real people 

suffer in the process? 

And my answer is, no. Now if you can find a question in there, 

my hat is off to you. Thank you. 

The CHAIRMAN. No. It will be long enough without that stuff. 

The gentleman from Missouri. 

Mr. CLAY. Thank you, Mr. Chairman. 

My comments are not as passionate as my friend from Michigan, 

but I represent Missouri, which houses all three factories from your 

companies. And the First Congressional District, which I represent, 

also supports this bailout. We are also big supporters of organized 

labor, too. 

Welcome to all of you. 

I do support the direction that Chairman Frank is going in in addressing this crisis. We cannot let the industry collapse. 

Having said that, I do have some reservations about this endeavor and want to be assured that we are not just dropping money 

into a bottomless pit. Throughout the year, the numbers of automobile workers have been declining at an alarming rate. If the 

bailout is approved, what will be the short-term effect of addressing 

the rapidly declining job numbers? Are you going to stop farming 

out jobs overseas? And if so, when? What assurances or guarantees 

51 

do we have that you are not going to go back to past practices once 

you are again on your feet? You know, these are U.S. taxpayer dollars. You would think we would target our efforts to keep those 

jobs here and to create additional jobs with those tax dollars. So 

what assurances do we have that the $25 billion is not just an installment on your request? And do you absolutely know that this 

request is the amount that is needed to do the job of helping you 

to retool and reorganize and get this industry back on its feet? 

I will start with you, Mr. Wagoner. 

Mr. WAGONER. Sure. Thank you. 

I want to be candid to your comment about, can we tell you with 

absolute certainty that this is the total amount, that this is the 

exact amount needed. Could it be more? Could it be less? The honest response is, I don’t think anybody knows that today because we 

have to assume when the U.S. economy is going to stabilize, when 

automotive sales will stop going down and when they will stabilize 

and hopefully begin to go up. We have to assume that eventually 

the credit markets and capital markets begin to function, which 

they don’t today. We are here very simply because our revenue has 

been devastated because people can’t afford to buy cars or can’t get 

credit and the traditional sources of credit that we have relied upon 

are simply not available. 

Mr. CLAY. Excuse me for interrupting. But on the point of the 

credit market and in freeing up credit, will any of this money go 

towards that effort as far as people getting auto loans? 

Mr. WAGONER. Based on what we think are conservative estimates, we feel this amount of money would likely provide for the 

industry through a difficult 2009, and this is what we think we 

need, more or less, for the industry itself to be able to pay its bills, 

keep the capital spending going, our products, etc. A simultaneous 

effort that we are working just as hard at is to work with the Fed 

to enable our captive finance companies to have more access to 

credit and be able to make more money available to dealers and 

customers, too, to work on the retail demand side. So we are trying 

to work both sides of that. 

Mr. CLAY. Okay. 

Mr. Nardelli, how do we stop the bleeding of jobs in the industry? 

How do we save some jobs or even put people back to work? 

Mr. NARDELLI. Well, sir, the first way we need to do that is to 

get this economy turned around and to try and avoid a further dip 

in the recession we are in and the downward spiraling that we are 

seeing in the auto industry. So I think, as Mr. Wagoner said, certainly through our affiliated—our finance companies, we have to 

make readily available competitive money available to our consumers to get loans, more competitive rates for our dealers who can 

then wholesale and floor plan, which then would put orders back 

into our factories, which would then generate cash. And to your 

other point, our request here today is based on a set of assumptions of what the industry will be, what the unemployment rate 

will be, and it is our best business judgment of the request. If we 

continue to see the downward spiral, if the trough gets deeper and 

longer, sir, I think not only this industry but our entire economy 

will continue to suffer. 

52 

The CHAIRMAN. The gentleman from Delaware is now recognized 

for a combined 7 minutes for an opening statement and questions. 

Mr. CASTLE. Thank you, Mr. Chairman. 

I will try just to summarize a bit of an opening statement. I, like 

many of the members here, have some frustration with all this. I 

spoke, not to you all, you weren’t coming to Washington then, but 

perhaps 7 or 8 years ago to a number of your lobbyists. And I spoke 

about the hybrid products which were starting to be developed in 

Japan. Safety had pretty well been addressed, and I think you have 

done a good job with that. And we talked about other issues, including developing models that the people would want to buy in the 

United States. My impression was that they were hearing what I 

was saying, but they weren’t being responsive to it. I thought that 

the hybrid development was slow in the United States. The understanding that fuel consumption was going to be a problem was not 

there. And that was a tremendous issue. 

We, in Delaware, were the first State, I believe, to help any of 

you, helping Chrysler and later General Motors in the two plants 

there. Chrysler is now closing in Delaware. That is about 1,100 

jobs. GM has a plant in Delaware. It is not closing but reducing 

the employment there by 400. There is an auto parts maker which 

is closing, which is 136 more jobs. So we are very much on the line. 

There are also a lot of auto dealers who are on the line as well. 

So I am very concerned about what we are doing here. 

I will not at this point judge whether I would or would not support whatever a bailout may be or where it would come from. Those 

are issues we have to resolve here in Congress. 

But I am concerned even beyond that. The question was raised, what happens after the $25 billion? Is this a down payment? Or 

is this a final number? I don’t know if anybody can really answer 

that question or not. But I have seen the amount of money that 

is being consumed each month by each of the companies. 

Obviously, Mr. Gettelfinger, the union has been involved in this, 

too. And you are all concerned about that. My concern is that we 

are going to give you money in some way or another, and it is going 

to last for a period of perhaps less than a year, and all of a sudden 

you are still going to be in trouble. 

I still don’t know if we have the fundamental questions of, do we 

have desirable products? Some of your products are getting better 

reviews. They are, I think, being rated higher by the public. But 

do we have desirable products that the public is going to buy? Or 

are they going to continue to buy Toyotas? And are you addressing 

all the issues of the fuel consumption, and I know about the Volt 

and that kind of thing, but are those being really addressed in 

terms of where we are going? Do your future plans include real details with respect to how we are going to work our way through 

this from an economic point of view? And that involves every one 

of you at this table as well as the actual selling of product. 

I will tell you another issue that is not raised much, Jane my 

wife, drives a 1999 Jeep, which we talk about getting rid of from 

time to time, but the thing runs pretty well. It is our major car. 

It probably has about 150,000 miles on it, and it is still running 

well. Congratulations. But we are not buying a new car at this 

point. I am not sure we can afford it either, but that is all right. 

53 

That is an issue, as you develop these cars that are running better 

and better, obviously we don’t go back every 3 years and buy cars. 

All of us are holding onto them longer. That is not necessarily a 

negative from a consumer point of view. But it is obviously maybe 

a negative from a corporate financial planning point of view that 

needs to be addressed as well. 

So I think there are a lot of issues out there, and I am not sure 

there is an easy recovery. I am very concerned about just giving 

you money, as we have done with the banks. A great deal of equity 

is being obtained from those banks in terms of preferred stock. And 

I would hope, as we consider it here, there would be some sort of 

security for repayment in terms of a return to profitability at some 

point in the future. That should be a concern for each and every 

one of us. I am not going to make the argument that the union has 

been a problem or not. I don’t think they necessarily have been. 

But on the other hand, there is still a differential. It may not be 

as great as some people will state, but there is still a differential 

in terms of some of the union versus nonunion plants that needs 

to be at least factored into the considerations of where we are going 

and what you are doing. 

I think you have probably done a lot more than the public realizes, and I give you credit for that, all of you. On the other hand, 

we are in a very difficult situation now, and we need to look for 

whatever those ultimate steps are to bail us out from that. So those 

are all concerns which I have in terms of where we are going. 

This planning does not end at a hearing today. It does not end 

at some point sort of a bailout plan which we are going to embrace. 

It ends when, obviously, you are able to produce cars at a price 

people are willing to pay and with a number of people working on 

them so that there is a profitability to it all, particularly when people are holding onto their cars for a longer period of time. And I 

hope together, we can work on this and make it all click. 

I happen to be a great supporter of the automobile industry. I 

think it is absolutely needed in America for a whole variety of reasons. But on the other hand, I think we have to be very cautious 

about taxpayers’ money and making sure that we have a survival 

plan that is in place. 

I watched your hearing in the Senate yesterday. I have read your 

testimony from today. And I had been reading what you have been 

saying about this. But my concern is, are we really getting ready 

as far as the future steps are concerned? 

If you have any comments from anything I just stated, I would 

be happy to hear them; anything to make me or perhaps the public 

feel better about it, I would be happy to hear those comments. 

The CHAIRMAN. We have a minute. Go ahead. 

Mr. MULALLY. I think you really hit on the key parts. And just 

two areas I would like to focus on in response is on the revenue 

side and on the product side. And then another comment about the 

competitiveness on the cost side. And, you know, clearly in the 

Ford Motor Company’s case, over the last recent history we have 

focused on the larger vehicles, the SUVs and the trucks. And the 

wonderful F-150 has been the number one vehicle in the United 

States for 34 years. It is just a tremendous vehicle that has served 

a lot of customers. 

54 

But, clearly, with the way the world is changing and especially 

with the consciousness of fuel efficiency and sustainability, the consumer, and also with the fuel prices rising in the United States, 

the consumers have really moved fuel efficiency up on the purchase 

agenda, as you have mentioned. And if we look at the decisions 

that the consumers are making and what is really important to 

them today, quality, sustainability, fuel efficiency, safety, of course, 

and the very best value. 

Over the last few years, we decided that it wasn’t good to just 

have improvements in that area. We needed every new vehicle that 

we brought out needed to be best in class in those four areas. I am 

very proud to be able to say today that over these last couple of 

years we have moved into a leadership position equal to or better 

than Toyota or Honda, the best in the world on quality. We have 

also moved into a leadership position with every new vehicle that 

we are introducing on fuel efficiency, and of course, we have been 

the leader in safety. So from a product point of view, it has to be 

led with vehicles that people want and value. May I say one more 

thing? 

The CHAIRMAN. Quickly. 

Mr. MULALLY. With the agreement that we made with the UAW 

and our other productivity improvements, we can make cars, 

trucks, and utilities in the United States, and we can do it profitably now. So those two things are the most important things. 

The CHAIRMAN. Thank you. 

The gentleman from Massachusetts. 

Mr. LYNCH. Thank you, Mr. Chairman, and Ranking Member 

Bachus. 

I have a little bit of history with the auto industry. I actually 

worked at the Detroit diesel plant in Michigan back when I was an 

iron worker. I also worked at the General Motors plant in Framingham, Massachusetts, for a while as an worker. And I appreciate the job opportunities that has provided. 

Also, Mr. Gettelfinger, I think you need to tell that story more. 

You described a lot of the cuts, the concessions, the work that you 

have been doing on your end. I know that was a surprise to a lot 

of the people who are listening to this hearing. And I think you just 

have to tell that story more about the hardship that people have 

taken on in trying to save the industry. 

I worked at that Framingham plant in Framingham, Massachusetts, with General Motors, and I was there at a time just before 

GM made their decision to close down that plant, and actually they 

opened up a few plants in Mexico right after they closed down the 

U.S. plants. And I saw that devastation, you know, just the hardship on a lot of families and on that community, not only from the 

loss of the direct jobs but also related businesses and the tax base 

for the communities there. Framingham and Natick were really impacted quite heavily. And you could see it in just funding for the 

schools and funding for public safety. But now, so you know where 

my sympathies lie having seen all of that, I would not care to see 

that happen again anywhere in the United States. 

But I also read that GM now has approximately 13,000 employees at four different plants in Mexico, and this makes GM the sinVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00058 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
55 

gle largest private employer in Mexico. In addition, GM has 20,000 

employees at 7 operations in China. 

And on May 31st of this year, Ford announced that they would 

be creating a new Ford factory in Mexico City. The operations are 

likely to create an estimated 4,500 jobs in Mexico, where car workers earn substantially less than our American counterparts, and 

where Ford has approximately 4,000 assembly plant employees 

also in Mexico. And, at the same time, you plan on making 30,000 

job cuts and 14 plant closings in North America by 2012. 

Look, I want to see what is best for the American worker here, 

and I want to see what is best for the American taxpayer. This 

question has been raised a couple of times here. Number one, given 

the global presence that you big companies have, have you gone to 

the Mexican Government to ask them for a bailout? Have you gone 

to the Chinese Government and asked them for a bailout? I want 

that question answered. 

But it is a two-part question. And number two, what commitments are you making that if you get this $25 billion, you just 

won’t turn around and lay off thousands more U.S. workers? And 

we will have no chance through the tax base and taxation from 

those jobs to recover any of this money that we are loaning out to 

you. 

A two-part question: Have you gone to Mexico? Have you gone 

to Mexico City and asked them for a bailout? Have you gone to Beijing and asked for a bailout? And what are you going to do to make 

sure that, if you get this bailout, the American worker is going to 

benefit from these jobs and we are not going to just see this continual drain of American jobs overseas? 

Mr. Wagoner, please. 

Mr. WAGONER. Thank you for the question. 

As far as asking the Chinese Government, we haven’t. To be honest, our business in China is still quite profitable. And, in fact, that 

business, I think every year for the last 9 or 10, has sent significant dividends back to the United States. So, to be honest, we appreciate the support that we can provide from our Chinese business 

to our operations here. It is a joint venture. But, at least as of this 

moment, it is still quite profitable, and so there hasn’t been an approach on our part to the Chinese Government for direct funding 

support. 

In Mexico, the business in Mexico had held up pretty well, I 

would say, until the last month or two. So, again, there, our financial position was okay, credit availability was okay, so we have not 

yet requested Mexican government support. 

We have had— 

Mr. LYNCH. Let me ask you— 

Mr. WAGONER. Yes. 

Mr. LYNCH. So—and I know, I have been to China, I have seen 

the Buick Regals selling big over there. Are all those cars being 

sold into China that are being made in China? And are all the cars 

in Mexico being sold into Mexico? 

Mr. WAGONER. In China, basically, almost everything that we 

sell in China is made there. We export almost nothing from China, 

nothing to the United States. And we actually export some vehicles 

56 

from the United States to China. Buick Enclave would be an example, that we actually export from the United States to China. 

Mr. LYNCH. How about Mexico? 

Mr. WAGONER. Mexico is integrated completely in our U.S.-Canadian production system. So we build many cars in the United 

States that we sell in Mexico and many in Mexico that we sell in 

the United States, most all with significant U.S. content. 

The CHAIRMAN. You will have to get the rest in writing, because 

we are over the time. 

Mr. LYNCH. Okay. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman from Michigan, by unanimous 

consent, wasn’t able to be here for an opening statement, and he 

will be recognized for 2 minutes. 

Mr. EHLERS. Thank you, Mr. Chairman. I appreciate that. 

And, to save time, I will associate my remarks with the remarks 

of Mr. McCotter, who eloquently stated his position, which I agree 

with. But I also want to add a few other things. 

Many of you who know me well, and also the gentlemen at the 

witness table who know me well, will be surprised that I am in 

support of this initiative, because I have been chastising them for 

over a decade about not producing fuel-efficient automobiles, not 

developing hybrids, to the point where I think they were refusing 

to talk to me for a while. 

But the point is, that is not the issue. The issue is that a major 

American corporation is in deep trouble, and it has tremendous 

ramifications for the country and especially for my State of Michigan, which is already facing bankruptcy as a State. If any of these 

companies go belly up, bankrupt, whatever term you use, the State 

of Michigan will be in incredibly dire straits. The unemployment 

rate, which has been the highest in the country for several years 

now, will actually be much, much higher than anywhere else in the 

country. 

If you have a neighbor whose house is on fire, no matter how 

many disagreements you have had with that neighbor, you will call 

the fire department, you will get the family out and try to help 

them put out the fire. We have an industry here that is suffering 

that type of calamity, and we have to throw them the life raft. We 

have to offer them help, not just for their salvation or the saving 

of their company, but rather because of the thousands and thousands of workers who will be devastated. The State of Michigan 

and several other States will be devastated. 

This is an emergency situation. We should treat it as an emergency and recognize that, although I disagree with many of their 

business decisions, that is not the total cause of what is happening. 

The entire credit crunch, which was beyond their control, has really brought this to a head. And they simply cannot get the capital 

they need to recover or even to operate unless we provide the funds 

to get them over the hump. I urge that you approve this loan. 

The CHAIRMAN. I would ask similarly for 2 minutes for the other 

gentleman from Michigan, from Flint, Mr. Kildee. 

Mr. KILDEE. Thank you, Mr. Chairman. 

I was a cosponsor, back in 1979, of the Chrysler loan guarantee, 

and the U.S. Government made money on that. I learned from 

that, really, the saying that what America drives drives America. 

57 

You know, we know it is a great buyer of steel, rubber, and computer chips. My car downstairs has more computer chips than the 

first vessel that landed on the moon. 

But I can recall Jim Broyhill from North Carolina came up to me 

around that time, and he said, ‘‘When are you guys getting back 

to work in Michigan?’’ And I gave what I thought was the right answer, and I said, ‘‘Why do you ask, Jim?’’ He said, ‘‘Well, my carpet 

industry in North Carolina is really suffering. When you guys in 

Michigan aren’t producing cars, my guys are laid off at the carpet 

fiber industry.’’ It is such a broad consumer of the other parts of 

our economy. So, really, the saying that what America drives drives 

America is very true. 

I didn’t speak before because Fred Upton is the co-chair of the 

auto caucus—I am the Democratic chair—and I felt he could do an 

excellent job, which he did. But I wanted to speak now that this 

is not just the auto industry, not just Michigan. I couldn’t find one 

district in this country that wasn’t affected by the auto industry. 

And that was my job; Jimmy Blanchard asked me to try to find districts. I found, out west, ranchers selling their hides to Ottawa Indian, another company in my district, who, in turn, sold to Chrysler—or the company that made the seats for Chrysler. Every district somehow is touched by the auto industry. 

Thank you, Mr. Chairman. 

Mr. KANJORSKI. [presiding] Mr. Neugebauer. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. 

I thank the panelists for being here today, and I apologize if any 

of my comments or questions are redundant, but we have been in 

a little leadership election here. 

You know, I think we could line up panelists from now until 

Christmas, businesses, business leaders, business CEOs, who 

would come in here and testify to this committee that their business is key and crucial to the economy of the United States of 

America. So I am really not going to debate that issue, whether 

this auto industry is important to America. 

What I am going to say is that our Founding Fathers, 230-someodd years ago, started to move away from a plan where the king 

picked who the winner was. They said they wanted to found a nation where people could be rewarded for their own merits, for their 

own ideas, their own entrepreneurship. They wanted to get away 

from where the government or the king was picking the winners 

and losers. 

And one of the problems that this Congress faces is that we have 

injected ourselves, gone down a road of where we now have the 

government, the United States Government, picking winners and 

losers in various industries. And, quite honestly, it is not the role 

of government to pick winners and losers. Markets pick winners 

and losers. 

I have heard testimony previously that you have given, and you 

know more than anybody about competing in a very competitive 

environment. And what we do know is that markets are very efficient. When you have a good idea, and you have a good product, 

and you have a good business plan, you have been rewarded for 

that. Where you have not had a good product or a good business 

plan, you have not been rewarded for that. 

58 

And, as I talk to the people in the 19th Congressional District 

of Texas who are sitting back home and they are saying, ‘‘You 

know what, we are passing out money we don’t have’’—if we give 

a $50 billion bailout to your industry, we are going to have to go 

borrow that money. We are going to have to go put the American 

taxpayers on the hook for those funds. It is difficult for me, as a 

United States Congressman, to be able to say, ‘‘You know what, we 

are going to put the taxpayers’ money in there because the marketplace that you attract capital is unwilling to put additional capital 

in your companies.’’ 

Why is it that this body, this Congress, knows better how to invest American taxpayers’ money better than themselves? Because, 

in fact, themselves have been reluctant to invest any more money 

in the current business plan and business model that your companies currently have. 

And so, one of the questions I have for you is, what do we say 

to the people across America, the small-business people, who, quite 

honestly, while your industry creates a lot of jobs—and we are all, 

indeed, thankful and grateful for that, but, as most of us know, 95 

percent of the jobs in America are created by small businesses, all 

across America; I was a small-business man in Texas. And you 

know what, small businesses every day in America fail because 

they just didn’t make it, they didn’t have the right business plan, 

they didn’t have enough capital, they didn’t have the right model, 

they didn’t have the right product. And how do we say we are going 

to distinguish and treat you differently than those small businesses 

all across America that would like to have an opportunity to be 

bailed out themselves? 

That is really the fundamental problem with the road we have 

started down in this country, that not only are we picking winners 

and losers, but we don’t know where to cut the line off. If people 

who stood in line to participate in this hearing, they had to get in 

line and they only let a certain number of people in the room at 

the same time, and so the question is, is how many more people 

do we let in the room, and where does this stop? Where do we start 

really having to let the marketplace do what it does best, and that 

is to sort through your business plans, your products, your business 

models, and determine who to reward and who not to reward? 

So I would ask that, in the remaining few minutes I have here, 

for you to respond to those people back home that say, you know, 

where does this stop, and why should we give you money, quite 

honestly, that we don’t have? 

Mr. WAGONER. Yes, I think the way I would respond is, the auto 

business has taken painful and dramatic moves to reduce its cost 

structure, which was high, based on a history of a program where 

the U.S. Government encouraged manufacturers to provide health 

care and retirement benefits. And it has been a hard adjustment 

for us to move away from that, but, after many years of working 

on that with the union, we are at the point where we can be fully 

cost-competitive. 

We have products that are winning car and truck of the year regularly. We have demonstrated technology leadership in a lot of 

areas. And the industry as a whole has a massive footprint across 

the United States. As the Congressman said, we are the biggest 

59 

purchasers of aluminum, of steel, of computer chips, of textiles— 

I mean, you name it. So it is just a huge industry. 

Unfortunately, in the midst of massive plans and significant 

progress, we have run out of capital. And I think it is directly because—it can be traced right to the financial crisis on Wall Street. 

So these are extraordinary times. 

I can assure you, Congressman, we don’t like being here asking 

for this. And even through June of this year, we were cutting, cutting, cutting ourselves to not have to be here. But the fact is, the 

collapse of the financial markets has taken away, not just credit 

availability, but the ability to go to the equity markets, and dramatically diminished financing opportunities. And so, at this point, 

without injections of liquidity, I think it is reasonably probable that 

some portion of, if not all of, the domestic industry will not survive. 

So it is not something we like asking for. I think that is the way 

I would explain it to your constituents, that bridge financing is 

going to prevent the United States from entering into an economic 

depression, in my view. 

Mr. NARDELLI. Sir, I wonder if I could just offer one thought. 

What makes this different from the examples that you gave us is 

this isn’t about losing a company; this is about losing an industry, 

an industry that has an overarching effect on literally thousands 

of small businesses, to your point—we call them dealers—literally 

thousands of suppliers; for example, the tanning company that provides the leather for our cars. 

So I think this isn’t about just a single company and making the 

decision to let it go down. This is about an entire industry whose 

tentacles reach broadly from east to west, north to south, and will 

have unbelievable impact on the entire economy and the smallbusiness men and women in this country. 

Mr. MULALLY. I think the only thing I would like to add is that 

it is just so important that we are a part of the solution to the economic recovery. We just cannot contribute to degrading the economy further. 

Mr. KANJORSKI. Thank you. 

Mr. Miller? 

Mr. MILLER OF NORTH CAROLINA. Thank you, Mr. Chairman. 

Much of the debate today and in the country in the last few 

weeks has been about whose fault is this. Many critics of your industry have said that you have been lumbering when you needed 

to be agile, that you have fought CAFE standards when you should 

have been making more fuel-efficient cars. You all have defended 

yourselves today, members of this committee have defended you, 

said that you have been agile, you have been developing more fuelefficient cars, but have criticized other industries and other companies. 

Imagine an industry or a company about whom those criticisms 

might be valid. How do we hold them accountable? 

Americans were very unhappy with their government. And in the 

last two elections, they have changed their government. My party 

will be held accountable, too, if we do not meet the expectations of 

the American people. 

I know we praise small business, but we have to have massive 

economic undertakings to perform complex manufacturing. We 

60 

have to have companies of your size. And ownership of those companies necessarily is going to have to be very diffuse, you know, individual investors, mutual funds, retirement funds. But it seems 

that the bigger the company is and the more diffuse the ownership, 

the more impervious the leadership of that company is to any challenge. 

There have been a lot of shareholder rights groups that have 

suggested there need to be changes in the way that stocks, shares 

of street name are handled. The principal opponent of those 

changes, those reforms, have been the Business Roundtable, which 

I assume the three of you belong to. 

Do you think we have a problem with a lack of accountability by 

corporate leadership, by the lack of the ability of the Americans 

who actually own the companies? 

And you all are employees. You may own a piece of your company, too, but the reason you are sitting there is you are employees, just as Mr. Gettelfinger’s members are employees. 

How do we hold these companies accountable? Do you agree that 

there is a problem? 

Mr. WAGONER. We have, over the years, received a number of 

shareholder proposals through our annual meeting process. And 

while it is true that, I think, most of the time the recommendations 

of the board are accepted by shareholders, it is not always true. In 

the last 4 or 5 years, there have been at least 3 or 4 instances 

where the shareholders have voted for changes in bylaws or whatever. And so, when we get those kinds of directions from the shareholders, we have tried to be responsive. 

So my sense is that, at least as I have observed it operating firsthand, we get a lot of input from our major shareholders and, really, 

from all of them. They do submit—they are quite active in submitting shareholder proposals as part of our regular meeting process. 

And, you know, on occasion, a shareholder proposal will be adopted 

by a majority of shareholders, and we try to respond to it. 

So, at least in our case, I feel like we get a good voice from the 

shareholders, and we try to respond to it. 

Mr. MILLER OF NORTH CAROLINA. Mr. Nardelli? 

Mr. NARDELLI. Obviously, we are in a slightly different position, 

as being the first privately held auto company in 50 years. But I 

can tell you that our owners have been very supportive, very encouraging of change and to move quickly, to move decisively to try 

and save some of the iconic brands in the auto industry—Chrysler, 

Dodge, and Jeep. 

So we are totally open. We want to be totally transparent in this 

process. And we believe that coming forward and asking for this 

support would allow Chrysler and its brands to be able to continue 

to be a viable entity and hopefully contribute to the recovery of the 

auto industry. 

Mr. MULALLY. Clearly, as a publicly traded company, our number-one priority is to create value over the long term. And you only 

do that if you have products people want and value and you have 

a cost structure and a productivity that is competitive. 

And I think all of the actions that we have had a chance to lay 

out today and the actions we have taken over the last few years 

61 

to dramatically transform this company are a direct result of the 

principles of creating value for the long term for all of us. 

Mr. MILLER OF NORTH CAROLINA. Mr. Gettelfinger, you are making common cause with management today, but many in the labor 

movement have been among those who criticized the accountability 

of corporate management. What are your thoughts on this? 

Mr. GETTELFINGER. Well, I think what we do, if we look back at 

the conclusion of negotiations last year and, as Mr. Wagoner pointed out earlier, and look at the value of their stock then, which was 

over $42, it begs the question, why is the stock where it is at 

today? And you look at the subprime mortgages, you look at the 

stock market, you look at what has happened across the board to 

our economy, this major downturn. 

I am not one right here who is focused on reflecting where the 

problem originated in the past. I think that we have to focus on 

where we are at now, look at the improvements that have been 

made, look at the innovation that is under way, and look at the direction that we are trying to go in. 

And I am not bashful to criticize this management. Every one of 

them will tell you privately that our union tells them exactly what 

we think. And, to me, I sat here with glee at some of the comments 

that were made to them, because I am sure it echoes what they 

have already heard from us. 

So I am not here focused on that. I am focused on the bigger picture, which is what happens if this industry goes down and the spiral effect. 

And I just noticed here, on these companies, the number of parts 

that they buy compared to the foreign brands that are manufactured here, and what it would mean if it would just cut back. If 

they just cut back to the content of the manufacturers that are 

here today, it would create a loss of thousands of jobs. 

So this is an important industry to our country, and that is why 

we are here standing with them on behalf of our membership to appeal to Congress to give this the most serious consideration possible. 

Mr. KANJORSKI. The gentlelady from Illinois. 

Mrs. BIGGERT. Thank you, Mr. Chairman. 

Like Mr. Ehlers that just asked a question, for years many of us 

in Congress have been pushing for technologies in our national 

labs, like Argonne in my district, that can help you, I think, provide what the consumers want, which is energy-efficient cars. And 

I think many of us grew so weary of the lack of progress that we 

voted for CAFE standards, which is something I thought I would 

never do. 

But Americans don’t want to buy the expensive cars, pay for the 

high fuel costs, and be dependent on foreign oil. In fact, I had a 

Jeep for 11 years, which served me well. But when I wanted to buy 

a new one, I couldn’t get a hybrid. No Jeeps were made for that. 

So why should we be bailing you out now when you have really 

been dragging your feet, I think, on the kind of cars that are in 

the 21st Century and aren’t being made? So are you not selling 

cars because no one wants cars that get 12 miles to the gallon or 

because of lack of financing? 

I will start with you, Mr. Nardelli, since I talked about the Jeep. 

62 

Mr. NARDELLI. We have 6 or 7 cars that are getting over 28 miles 

per gallon. Our Caliber is getting 30 miles per gallon. We are working feverishly, will spend probably in excess of a billion dollars this 

year on technology to improve our fuel efficiency on the combustion 

engine. We spent over $350 million in our efforts to develop a hybrid. We 

will spend almost an equal amount, as we announced in September, on three electric vehicles, one for each brand—Dodge, 

Chrysler, and Jeep. And one of those vehicles will be in the marketplace in 2010. 

Mrs. BIGGERT. But that is still 2 years. 

Mr. Wagoner? 

Mr. WAGONER. Yes, we have 20 models that get more than 30 

miles per gallon highway, more than twice any other manufacturer 

today. We have six hybrid models; we will offer three more next 

year. We are the global leader in biofuel vehicles. And, obviously, 

we have a significant commitment to the electric vehicle, with cars 

like the Chevy Volt, and fuel cells. 

So I think we have a good story to tell, and we are going to keep 

trying to tell it. Many of our new cars, like the Chevy Malibu in 

the mid-size class, have better fuel economy than the Japanese 

competitors. So I think we are very much in that game now. 

Mrs. BIGGERT. Mr. Mulally? 

Mr. MULALLY. Yes, nothing else to add on the competitiveness. 

We have a terrific lineup. 

And to your question, the entire industry is down. And all the 

manufacturers, whether they are the three Detroit companies or 

the Japanese, their sales are all off, along with the credit and the 

economy. So I think we are all—the whole industry is down. 

Mrs. BIGGERT. Then would a bailout loan to your companies go 

to your finance or to the operations arm, just which one? We will 

go down the line. 

Mr. WAGONER. What we are talking about now is support for the 

operating side of the business. 

Mr. MULALLY. Same. 

Mr. NARDELLI. Same. 

Mrs. BIGGERT. Same, okay. What percentage of a loan would go 

toward financing consumer auto loans to start moving the inventory? 

Mr. NARDELLI. Right now, none of the money that we are asking 

for today would go toward loans. We are working a very aggressive 

and parallel path with our affiliate finance companies to either get 

bank holding status, to get ILC approval, to be able to gain access 

to the window so that they can reach the secondary market, increase liquidity, and gain capacity. 

Mrs. BIGGERT. Anybody else? 

Mr. WAGONER. Same. 

Mr. MULALLY. Same. 

Mrs. BIGGERT. Well, I have heard that some of the loans that are 

being made are 9 percent loans, and somebody has to have a 750 

FICO score to qualify for those loans. 

Mr. WAGONER. I think it is fair to say that the requirements for 

consumers are much tougher today to be eligible for loans. It is absolutely true. 

63 

Mrs. BIGGERT. How are you going to sell cars if— 

Mr. WAGONER. Well, that is one of the things that is contributing 

to the lower industry sales. As Mr. Nardelli said, our finance companies cannot access significant credit. And then their ability to 

take these loans, package them together, and sell them into the 

asset-backed security market has radically shrunk and is very dependent on only buying high credit paper. 

So lower sales is part of a system-wide problem. And we are 

doing everything we can to try to help people be able to afford to 

buy cars. 

Mrs. BIGGERT. Well, how would you do that, then? I mean, if you 

are going to take a bailout for the operations, and yet you are not 

going to have people who are going to be able to afford to buy the 

car even if you improved it. 

Mr. WAGONER. What we are trying to do is work with other potential sources of credit. We talked earlier about working, for example, with credit unions, which traditionally have wanted to be 

bigger players in automotive financing. We have gotten some positive input from that. 

But if we are successful, for example, in our case, of achieving 

a bank holding company status at GMAC, then GMAC will be able 

to take more deposits, reduce their cost of funds, and be significantly more aggressive in consumer financing. 

Mrs. BIGGERT. Just one other quick question. How many of your 

dealers are not getting paid? Are they all being paid, or are you 

withholding any of the money from them? 

Mr. NARDELLI. No. 

Mrs. BIGGERT. They are all being paid on time? 

Mr. WAGONER. Yes. 

Mrs. BIGGERT. Okay. Thank you. 

I yield back. 

Mr. KANJORSKI. Mr. Scott? 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

I think that we really, at this point, need to put this in perspective. This picture is much bigger than all of us, General Motors, 

Chrysler, and Ford. The issue before us is not whether or not we 

can afford to help you. The issue before us is whether we can afford 

not to help you. 

This is a big, big issue facing the survival of America. It is an 

American issue. We are at a time similar to the Titanic. If you recall, it wasn’t because the Titanic ran into the iceberg. The problem 

with the Titanic was it didn’t turn in time. And on the bleached 

bones of many past great civilizations and nations are written 

those pathetic words, ‘‘too late.’’ 

Where are we now? Here we are at a time where I hope we don’t 

move too late. What are our options? They are very few. And I 

think we should focus on them. 

One is we have a bundle of money available that the Congress 

has approved, not $700 billion, but $350 billion. Now, the Treasury 

Secretary has seen fit to already spend and allocate $290 billion of 

that, and in a way that was not the way that many of us had first 

designed to get the troubled assets. That leaves us with $60 billion. 

The two most critical needs, as I see it, are to stop the drain on 

64 

the housing foreclosures and to help the auto industry. And we 

have just enough money to do that. 

Now, ladies and gentlemen, the big picture is that we are moving 

into the most critical time in this economy, when clearly 48 percent 

of the retail sales will be made during this next 6 weeks. You think 

we have problems now, if we come out of this period in January 

without consumers spending money or having confidence enough to 

do so, we really are going to be up the creek without a paddle. 

I think the two best signals we can send—and I would hope this 

Congress would realize that the American people are watching us 

to see whether or not we will do like the Titanic and move to turn 

the ship too late to help the consumer. Now, we have thrown $290 billion at the banks—they have 

theirs; some of them didn’t even want it—to try to get them to lend 

it. And they are not even lending it to your dealers, many of whom 

are on the verge of going out of business. That is who the consumer 

deals with, the dealer. 

So I want to take just a moment here to ask each of you if you 

would agree that, if we give you this money—and, by George, I 

hope we do, because I think—not only do I think, I know, you need 

it. 

I represent a district in Georgia in which the Hapeville motor 

plant was closed, Ford—you know where that is—in my district. 

The Lakewood General Motors plant closed; that is in the middle 

of my district. And then on the north end, the Doraville General 

Motors plant closed. That is three. But something funny has happened: We have had several Kia plants open. 

And now we are sitting on a deal in Foreign Affairs that we are 

fighting tooth and nail that says we want to increase our trade. 

And nowhere is our picture more clearly defined than in this fact: 

Last year, 700,000 Korean automobiles were imported into our 

country. You know how many American-made cars were exported 

from us into Korea? Less than 5,000. We have a terrible problem 

here. 

And so I want to ask you, because we talked about the dealers, 

if you would agree to setting up, if we give you the $25 billion, to 

get assurance from the Treasury Department that we could have 

a billion dollars in a receiving or revolving loan fund that could 

range from 7 to 10 years at below-market rates—in other words, 

have a mechanism that will allow dealers to obtain access to critically needed capital directly through the Treasury Department. 

Your dealers need that. The banks are not lending the money. If 

we don’t put some mechanism in here to help you to make sure 

that some of this money—$1 billion is not that much of it—to set 

aside to help the dealers. 

And then secondly, if you would declare or help us to make 

sure—you take the lead. You are asking for the money. None of 

your dealers are suffering as are the minority dealers—the African 

American, the Hispanic, these guys who are just coming on. We 

need to make sure, if we give you this money, that you would ask 

that either the President or the SBA Director would declare ethnic 

minority disaster loans under the current SBA authority. 

If we do those things, we will be helping most directly not only 

the overall industry—but I would like to ask if each of you would 

65 

just simply—now, I know my time is out, but if you could nod your 

head or say, yes, we would support getting this capitalization and 

available capital for our dealers. 

Is that yes? 

Mr. WAGONER. Yes, sir. 

Mr. SCOTT. Good. 

Is that yes? 

Mr NARDELLI. Yes. 

Mr. SCOTT. Good. 

Is that yes? 

Mr. MULALLY. Yes. 

Mr. SCOTT. Excellent. 

Thank you very much. 

Mr. KANJORSKI. Thank you, Mr. Scott. 

Mr. Hensarling, you are allotted 7 minutes. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

My apologies to you gentlemen. I missed most of your testimony 

and earlier questioning. I think you know by now that this hearing 

was scheduled against some leadership elections. So my comments 

may be redundant, my questions may be redundant. Forgive me, 

but it is you who are asking for the money. 

You need not convince me of the tragic economic circumstances 

to our Nation should your three firms go belly up. I don’t need to 

be convinced of that. But I do need to be convinced that, if you get 

an additional $25 billion, somehow that is actually going to make 

the difference. 

What I haven’t seen come across my desk, come across my transom, or what I have not heard is a plan that convinces me that, 

with the $25 billion, that you will achieve sustainability. How do 

I know that you will not become the next AIG—$25 billion now, 

$25 billion next month, $25 billion the month after that? 

And I am sorry we are in this tragic circumstance. There are people in my district who will be affected by this. But you know what? 

It is not the fault of the taxpayer; it is not their fault. It is not the 

consumers’ fault. If there is any fault that lies here, it is with you 

gentlemen before me and your predecessors. 

Now, Mr. Nardelli, I drove a 1998 Jeep Cherokee here to work. 

I have had it for 10 years. It is a great vehicle. There is a small 

problem with the back hatch staying open; we can talk about that 

afterwards. I like the car. But clearly, a lot of Americans don’t. 

There is no doubt that your labor costs are substantially higher 

than your competitors’, and there is no doubt that on most consumer satisfaction surveys, the Big Three are scoring toward the 

bottom. Again, it is not the consumers’ fault. 

And so I wonder, when I look at the $25 billion, I ask myself several questions. Number one, this is the second $25 billion. I want 

to help you. I may not want to help you the way you want to be 

helped, but I want to help you. It wasn’t 60 days ago that you already received $25 billion. 

Now, you have environmental goalposts that you have to negotiate. I would be more than happy to stay here with my colleagues 

and try to work on legislation that would give you access to that 

money for your immediate needs. But I haven’t heard that from 

66 

you. And, again, forgive me, maybe I missed that in your earlier 

testimony. 

I would be willing to help you with your health-care costs. I 

would be willing to help you with your tort costs going forward. I 

know that we have the highest tort costs in our manufacturing of 

any of our competitors. We have the most expensive tort system in 

the world. I would be happy to introduce legislation today—frankly, 

I have already introduced it—to zero out the capital gains tax for 

2 years to invite capital off the sidelines to invest in your firms. But what you are doing is you are asking for $25 billion out of 

a pot of money that I did not support in the first place, and so I 

ask myself several other questions. $25 billion and $25 billion is a lot of money. And, right now, all 

across America, certainly in the 5th District of Texas, the major 

employer is small business. The average capitalization of a small 

business in America is $25,000. With the amount of money that 

you have either received or are receiving, I mean, we could start 

2 million small businesses in America today, or maybe we could 

save 2 million small businesses that are on the verge of going 

bankrupt. Now, we haven’t heard of their names. They don’t have 

representatives or lobbyists who are walking our hallways. But 

they are out there. This money has opportunity costs. And if we 

give you $25 billion, that is $25 billion that can’t go to small businesses. 

I hear the argument, ‘‘too big to fail.’’ Well, I come from Dallas, 

Texas. American Airlines is headquartered in Dallas-Fort Worth. 

They have gone through some tough economic times. They may go 

through future tough economic times. Are they too big to fail? If we 

give you the money, are they next in line? And who is after that? 

At what point does Starbucks get in line? Who doesn’t get in line 

for the $700 billion? These are questions that have to be answered. 

I have other concerns. Again, I understand the credit crunch, but 

what industry hasn’t been impacted by the credit crunch? And, at 

some point, when, as a Nation, do we decide we are going to quit 

borrowing money from the Chinese and send the bill to my 5-yearold son and my 6-year-old daughter and all the children and grandchildren across America? 

These are questions that I have. So you can clearly tell which 

way I am leaning, but I hope I still have an open mind. It is not 

an empty mind, but it is an open mind. I still stand ready to be 

persuaded. 

So the first question I would ask is, number one, where is the 

written plan? And if you have the written plan, are you willing to 

make a commitment to the United States Congress and the American taxpayer that, if you get this money, you will not be back? 

And I will start with whomever cares to answer the question. 

Mr. WAGONER. I, prior to your being here, commented on that 

matter. We, like all businesses, build our plans on key assumptions, the best ones we can come up with, starting with what is 

going to be the state of the economy, what is going to be the state 

of the credit market, what is going to be demand in the auto sector, 

for example. 

So what we try to do is put together what we think is a conservative plan for the next year and figure out how much funding, 

67 

based on the best guess we have today, would be required, in view 

of the absence of the availability of traditional funding sources we 

relied upon to get us through that time period. So, you know, it is 

through that process that we individually and then as a group have 

come up with this amount of $25 billion. 

Congressman, I would like to guarantee you that that is, under 

every circumstance we imagine, enough money. I can’t make that 

statement. I don’t know. I know, based on a reasonable scenario, 

that I think it is enough. 

Mr. HENSARLING. Well, Mr. Wagoner, maybe I missed it, but 

what plan have you or are you willing to put on the desk of Members of the United States Congress to convince us that at least 

there is a fighting chance that you will achieve sustainability? 

Where is that? 

Mr. WAGONER. We have developed a detailed plan. I think the 

nature of it—traditionally, those kind of things are highly competitively sensitive and SEC disclosure matters and things of that sort. 

But we would be glad, with the right kind of format, just to make 

sure we are aligned with SEC requirements and others, be glad to 

review that kind of data with the appropriate people. And we have 

detailed plans, sir. 

The CHAIRMAN. The gentleman from Texas, Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. Chairman, in a metaphorical sense, I rise to speak on behalf 

of union workers. I speak on behalf of union workers because I understand the importance of unions and what unions have done for 

the quality of life and the standard of living in this country. I understand that, but for unions, we might not have a 40-hour work 

week. But for unions, we might not have child labor laws. But for 

unions, we might not have the health-care system that we have. 

But for unions, we might not have the pension programs that we 

have. But for unions, we might have wages that we relate to in 

terms that are unpleasant—slave wages. 

Unions have made a difference in the quality of life for all of us. 

And I rise on behalf of unions because this debate has turned on 

whether or not unions have created a problem. Unions have 

worked to make life better. And in so doing, not only for their 

members, they have done it for the rest of us who may not be affiliated or associated with a union. 

I am of the opinion that unions of all kinds do us a service. This 

is why I support the Chamber of Commerce; it is a union. I support 

business people having the right to organize and do what is in the 

best interest of business. And, by the way, they don’t have to get 

the consent of workers to do it. They don’t have to have a vote of 

the workers to unionize. And I support that. I also support workers 

having the right to unionize without the consent of management. 

Freedom of assembly, freedom of association is a very basic, fundamental right. 

So I rise to speak on behalf of unions and working people. And 

I can find no fault in working people wanting to enjoy the quality 

of life that they create. Many people in this country work full-time 

and live below the poverty line. Many people in this country have 

multiple jobs and work many, many different places in the course 

of a week so that they can make ends meet. 

68 

I think unions are a blessing, and we ought to be appreciative 

that we have the standard of living that unions have helped to create. 

I will close with this. I am deeply saddened that we are now 

claiming—some of us, not all—that blue-collar workers are making 

too much. We have CEOs who make more in 1 week than some 

union workers make all year. There is a gap, a disparity between 

the wages of the top earners and those at the bottom that is continually widening. And that has to be closed. I don’t think we will 

close it without the help of unions. 

I ask that we, as we consider these issues, that we not put the 

blame on the working people who have helped to produce the quality of life that they would like to enjoy. 

And I yield back the balance of my time. 

The CHAIRMAN. I just want to announce that I think 2:30 is a 

reasonable time to release this panel, so I am going to cut this off 

at 2:30; that will cover everybody who is in the room now. 

And I would say to my colleagues who aren’t here, we will not 

miss you greatly if you don’t join us at this late date. And we won’t 

be able to accommodate you if you do, in fairness to the staff and 

the witnesses and the next panel. 

Ms. Bachmann, for 7 minutes. That is an opening statement, as 

well. 

Mrs. BACHMANN. Mr. Chairman, thank you. 

And thank you for— 

The CHAIRMAN. I am sorry, Mr. McHenry is first, for 5 minutes. 

Mr. MCHENRY. Thank you, Mr. Chairman. 

Most large corporations that would be facing similar situations 

that the three of your companies are facing, they would be at work 

on a reorganization plan before they would file for bankruptcy. And 

this is what the discussion has been on the news, and it has been 

intimated here that if you don’t get this money then you would file 

for bankruptcy. 

So what is the state of your preparations for bankruptcy? 

Mr. NARDELLI. I can speak for Chrysler. You know, obviously, as 

we are looking at this economic trough, we have looked at all aspects of whether it is a prepackaged, whether it is prenegotiated, 

whether it is bankruptcy. And every aspect of that, sir, I can tell 

you is certainly more negative and more costly than— 

Mr. MCHENRY. That is not my question. So you do have plans. 

Yes? 

Mr. NARDELLI. I would say that we have gone through and have 

outside advisors to help us think through the various aspects 

should our liquidity become an issue. 

Mr. MCHENRY. All right. 

Mr. Wagoner? 

Mr. WAGONER. Because of our studies of the ramifications of 

bankruptcies on consumers, we have concluded that we should put 

virtually all of our effort on any actions we can take to avoid bankruptcy. Because the consequences would be devastating, we think, 

for the Nation and the economy. 

Mr. MCHENRY. So you have no plans for how you would go 

through that process, either Chapter 7 or Chapter 11? You have no 

plans? 

69 

Mr. WAGONER. It is my view, based on the research that I have 

done and our experts have done, that Chapter 11 would be an unlikely outcome of a filing by one or more of the auto companies. 

Mr. MCHENRY. So, therefore, you have studied it? 

Mr. WAGONER. Our experts have knowledge in this area, yes, sir. 

Mr. MCHENRY. Okay. 

Mr. Mulally? 

Mr. MULALLY. Yes, we have studied that option. We believe it is 

not a viable option, and so we have no plans for bankruptcy. 

Mr. MCHENRY. Well, a far more positive comment from you. 

So, as a potential vote on whether or not to lend you money, I 

believe it will be a fair assessment to say that you should turn over 

those plans on how you would enter bankruptcy and what your 

state of preparation is for Chapter 7 or Chapter 11. As somebody 

that you are seeking money from, I think I need to have that information in order to make a proper assessment of whether or not you 

are creditworthy. 

Because the truth is the doom and gloom of Mr. Wagoner, he 

says, you know, this is not what—it would be devastating, it would 

go to Chapter 7. Therefore, what you are telling me and what you 

have said in your testimony is that you would go into liquidation. 

Well, that is a hell of a thing to tell somebody before you ask them 

for money. 

Therefore, you are telling me that inherently you are not creditworthy. Therefore, we should loan you money? Explain this to me. 

Mr. MULALLY. I think you are significantly misinterpreting what 

I said, sir. 

Mr. MCHENRY. Well, you said you have plans for Chapter 7. 

Mr. WAGONER. Let me be clear. I did not say that, in fact. I said 

that my expectation was, based on independent research which indicates that 80 percent of consumers would not buy a car from a 

company that was in bankruptcy, that whether one initially went 

into Chapter 11 or not, the likelihood would be you would end up 

liquidating the company, very simply because you wouldn’t have 

revenue. 

What we are doing with all of our actions, including our own $20 

billion worth of cost-cutting and restructuring actions since the beginning of this year through the end of next year, is to try to do 

everything humanly possible to stave off the risk of bankruptcy, to 

avoid that dire consequence on the Nation, because we think our 

basic business model, based upon my opening comments, would be 

quite viable under a normal circumstance— 

Mr. MCHENRY. Okay. Reclaiming my time, I would submit to you 

that there are many industries in America that are watching you 

now, and they are going to be next. We have retailers that employ 

more people than the Big Three combined. We have full-service restaurants that employ multiples of the automotive industry. We 

have gas stations, even, that employ more people than you representing your industry today. They are next. So you are encouraging them to come forward, because of the tough economic times, 

to ask for a bailout. 

I would conclude by just commenting that, in my region, we lost 

textile and furniture industry jobs, and there was no bailout. We 

employed tens of thousands, in fact, hundreds of thousands of peoVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
70 

ple in this country without a bailout. That industry is gone. There 

was no help from the government. 

I would finally say to you that many in America today are watching the fact that you flew here on your jets. And I am not an opponent of private flight, by any means, but the fact that you flew in 

on your own private jets at tens of thousands of dollars of cost just 

for you to make your way to Washington is a bit arrogant before 

you ask the taxpayers for money. 

The CHAIRMAN. The gentleman from Missouri. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

I have six questions. I think we can get through them if you cooperate with me with very concise answers. The first one is, why $25 billion? I mean, why not $26 billion? Why not $23 billion? 

Mr. NARDELLI. From our standpoint, as I said earlier, we looked 

at the balance of this year, we looked at our cash position, we assumed our exit rate of this year would be the industry rate next 

year— 

Mr. CLEAVER. Okay. Thank you. So are we going to divide 3 into 

25? 

Mr. NARDELLI. No, we are asking for $7 billion. 

Mr. CLEAVER. So we are going to do— 

Mr. NARDELLI. Chrysler. 

Mr. CLEAVER. No, Chrysler, General Motors, Ford, $7 billion apiece, that is $21 billion. 

Mr. NARDELLI. No, sir, we are asking, Chrysler is asking for $7 

billion. 

Mr. CLEAVER. Okay, what is General Motors— 

Mr. WAGONER. We had indicated against a suggested package of 

$25 billion that, proportionate to our relative market share, would 

be $10 billion to $12 billion for GM. 

Mr. CLEAVER. Ford? 

Mr. MULALLY. It would be the rest. 

Mr. CLEAVER. Sir? 

Mr. MULALLY. It would be the rest, based on the market share 

calculation. 

Mr. CLEAVER. We are just spending $25 billion loosely. I mean, 

this is loosey-goosey, ‘‘Whatever is left, I will take.’’ Okay, thank 

you. 

Now secondly, the question that is somewhat troublesome was 

what Jerry York, former GM board member, said this morning on 

one of the news talk shows. He says that Ford has more money in 

their coffers as a result of an investment in the market they made 

a few years ago than GM or Chrysler. And he goes on to say that 

GM turned down a deal with Nissan a few years ago that would 

have arguably given them a cash flow that would not have made 

it necessary for you to be here. And he said that Chrysler seems 

to be in difficulty, whether they get money in a rescue package or 

not. 

Do any of you have a short response to what Mr. York said? 

Mr. WAGONER. I speak in the case of GM. It is a completely inaccurate conclusion. 

Mr. NARDELLI. I can say relative to his comments, Chrysler I 

think has made pretty public that we are looking for alliances, 

71 

partnerships, opportunities to get further synergies across the auto 

industry, certainly here in the United States or on a global basis. 

So we are totally open to any recommendations or thoughts that 

would result in a more efficient, more viable, and more productive 

auto industry, whether it is consolidation in technology or in manufacturing or in purchasing, etc. 

Mr. MULALLY. His summary was very accurate. We went to the 

markets very early and aggressively to be able to fund our transformation plan. The progress we made on the product and the productivity has gotten us in the position today that I think we can 

make it through this recession if it doesn’t get worse. Or absolutely 

with our partners in the industry, if this gets worse, we would like 

to have this vehicle in place so that we can save and be part of the 

solution of the economy recovery going forward. 

Mr. CLEAVER. GMAC receives a part of this money although they 

are a nondepository institution. I mean, it is a lending institution. 

And I was at a dealership 2 weeks ago and it is a GM dealership. 

And the owner told me that GMAC had sent out a letter to all of 

the dealers telling them not to even send them any potential customers whose credit rating was below 700. If we are putting more 

money into the market—we are trying to thaw a frozen credit market. What in the world is going on if we are putting money into 

GMAC and they are still not making loans? 

Mr. WAGONER. Just to be clear, we own 49 percent of GMAC. So 

we don’t have control at this point. 

Mr. CLEAVER. But you ought to be really angry with them whether you control it or not. The point is they are not making loans. 

Mr. WAGONER. Yes. The issue is they have, just as we have, been 

significantly unable to raise credit. The availability of credit to 

them in the markets has been dramatically reduced. So unfortunately, in order to manage their cash flow to be able to provide 

wholesale financing at dealers and be able to finance some customers’ sales, they have had to severely tighten their credit conditions. They would like nothing better than to get broader access to 

credit, which they are working on in this case to try to perhaps become a bank holding company to expand their deposit base to enable them to provide more credit. So they would like to have access 

to more credit and to be more proactive in the marketplace. We are 

working with other lenders who have a little more availability to 

see if they could help our customers out. 

The CHAIRMAN. The gentlewoman from Minnesota is recognized 

for 7 minutes. 

Mrs. BACHMANN. Mr. Chairman, thank you. Once again our committee is convened to hear the pleas of yet one more industry to 

ask the taxpayers for a bailout. This time from our great industry 

of the automakers, the Big Three, Ford, GM, and Chrysler. My 

family and I currently own a GM and a Ford, and one of our favorite cars was the Chrysler minivan. So it is with great love for your 

vehicles that we want to see you succeed. But it is also appropriate 

that we again total the taxpayers’ current bailout tab, $29 billion 

for Bear Stearns this year, $200 billion for Freddie and Fannie, 

$300 billion to expand the Federal Housing Administration, $150 

billion for AIG. Who knows where that will end? $700 billion for 

the Paulson plan plus another $110 billion in sweeteners to pass 

72 

that plan. Then you have to add on the original bailout bill, which 

would be the stimulus package; that was $168 billion earlier this 

year. And then we had also the deficit spending of this Congress 

in the 110th of $455 billion. That is a whopping $2 trillion. And 

recognize that only 40 percent of Americans even pay taxes. 

Secretary Paulson and Chairman Bernanke chose to start this 

bailout mania over 8 months ago. But since then the American people have been told over and over that the woes of our financial 

markets will subside. They haven’t. Yet after bailing out bad decisionmakers time and again to the tune of over $2 trillion, the financial markets seem to remain in even more turmoil than before. 

What we are asking now is for the American taxpayer who was 

never part of these initial contracts to solve the spiraling problem 

that is facing the City of Detroit. 

We share in the grief that Detroit has had to deal with and in 

fact the entire State of Michigan. It is not pretty. No one would 

want the problems that you have to deal with. But we are looking 

at other problems as well. And the American people suspect that 

there are long-term management issues at these companies and 

productivity problems as well. I don’t know that we want government bureaucrats, certainly I wonder if we want to have Members 

of Congress giving you orders for how to run your companies. It 

has been reported for years that CEOs at Ford, GM, and Chrysler 

have not made the necessary changes to rein in labor costs and 

have not downsized facilities to ensure the company’s longer-term 

viability. 

Again, I don’t want to see Congress second guessing your business decisions, but these are concerns that the American people 

have. In fact the Big Three are paying out an average of $30 more 

per hour than your competitors. That is what we are told. And you 

support a large number of retirees under what are now considered 

outdated contracts. GM, for instance, we are told actually supports 

more retirees than they support current workers. The auto industry has also been criticized for failing to invest in enough competitive innovative products that American consumers want to buy. 

And what we are also told is that the Big Three has failed to look 

into the future and take steps to prepare for the rise in gas prices, 

although I don’t know how anyone could do that. 

Taxpayers are again being asked to throw their hard earned 

money behind a short-term unproductive investment which may 

perhaps only prolong your companies’ failures at a cost that could 

even be higher down the road. I have received no assurances to 

date that this money will not simply go down a rabbit hole, none 

of us have in this committee. Plus, much of the urgency that would 

force the Big Three to make tough restructuring choices would be 

reduced if the Federal money is made available to you. 

It is an interesting conundrum. Like AIG, it is easy to predict 

that you will be back at the taxpayer’s trough in no time at the 

rate that money is being burned in Detroit. Some say the bailout 

is needed under the premise that consumers just can’t get access 

to car loans due to the broader credit crunch and that this is causing your companies to suffer. But there are automakers that have 

remained profitable even through these tough times, Toyota, 

Honda, and Nissan. They are Japanese-owned, but they operate 

73 

huge manufacturing firms here in the United States, in Kentucky, 

Tennessee, and Ohio. These companies also employ thousands of 

American workers who are paying their taxes and struggling to put 

food on their families’ tables. When we take money from this group 

of taxpayers to save the three ailing companies before us, it is not 

only unproductive, it is just plain wrong. 

This Congress has already spent $2 trillion in bailouts this year, 

and if we move forward with this proposal I don’t know where or 

when this bailout bonanza will end. I think there are other alternatives that we can consider. For instance, if the Big Three would 

restructure and reorganize under bankruptcy courts, it is possible 

that you could be saved without a taxpayer bailout and that you 

could fix your long-term management and labor problems. If you 

file for Chapter 11 bankruptcy, it doesn’t mean that your company 

has to go belly up and that all jobs will be lost. It would mean that 

the company actually might have the ability to make structural 

changes to keep itself afloat without the threat of outside lawsuits, 

enter a comprehensive payment plan. The taxpayers just want to 

know. 

My question that I would have, Mr. Chairman, would be for Mr. 

Wagoner from GM, and it would be two things. One, I noticed 

today you wrote an editorial in the Wall Street Journal on why GM 

deserves support and you said that we know we can’t just slash our 

way to prosperity. And my question for you would be this: Isn’t 

that just a Draconian way of stating the realities of supply and demand in the marketplace, that your company needs to adjust in 

good times and in bad? If you are smart and looking for the future, 

shouldn’t your companies be treated the same as other separate 

companies who have to make those vagaries of life decisions? 

And also in your testimony, sir, you reference that what exposes 

us to failure now is the global financial crisis. Well, if the global 

financial crisis is the sole cause of your current troubles, then why 

aren’t we seeing the other car manufacturers in other countries 

reaching out to their respective governments with similar requests 

for cash? And similarly, why aren’t we seeing Toyota, Honda and 

Nissan here at the table today? 

The CHAIRMAN. There are 7 seconds left for the response. 

Mr. WAGONER. Many other countries are discussing whether 

automakers’ funding support would be the first answer. It is happening in countries all around the world that are being affected. 

And virtually every manufacturer in the world has slashed their 

earnings forecast and cash generation forecasts in view of the 

plummeting demand in the auto sector globally. Frankly, we came 

into this with a very weak balance sheet because we had over the 

period of 75 years accumulated a huge retiree and health care benefit commitment that was part of the policy of this country at that 

time, not the policy of most of the countries that we compete 

against by the way. Those benefits are paid publicly. So we paid 

$103 billion over the last 15 years to fund health and pension benefits. Thus, our balance sheet is weaker than it would have been. 

People say well, why didn’t you stiff the retirees? We didn’t think 

it was the right thing to do. We thought we had an obligation. 

The CHAIRMAN. The gentleman from Colorado. 

74 

Mr. PERLMUTTER. Thanks, Mr. Chairman. And, gentlemen, thank 

you for your time today. We have had a lot of questions and you 

have heard a lot of comments. And we appreciate your perseverance. First, there are a couple of places where I differ with the 

chairman. One, just as full disclosure, I am a Chapter 11 lawyer. 

So I don’t see that as the absolute end of the world, that there are 

plenty of ways through an 11, through prepackaged, as you said, 

Mr. Nardelli, kinds of approaches to deal with this. 

The second thing is I do see a difference between manufacturing 

and underwriting or supporting the manufacturing industry as opposed to trying to keep the banking industry in some kind of shape 

that would facilitate our economy. 

So I do look at this a little bit differently. These are my questions. But I did want to say and I do want to applaud all three 

companies for really having moved into this century with your 

Volts and your Escapes and all your different cars that are much 

more fuel efficient, and I know you put a lot of money into that 

R&D and that development. So thank you. 

The first question. And this goes to you, Mr. Wagoner. What 

was—in the third quarter of last year, did you make money or lose 

money, 2007, and what was it? 

Mr. WAGONER. Third quarter of 2007, I don’t remember the specific quarters but I believe that is the quarter where we had to reverse the deferred tax assets. So I think we had a significant loss 

is my recollection. 

Mr. PERLMUTTER. What about the third quarter this year? 

Mr. WAGONER. We also recorded a loss. 

Mr. PERLMUTTER. How big? 

Mr. WAGONER. The total was, as I recall, about $2.9 billion, netnet. 

Mr. PERLMUTTER. What is your forecast for this quarter? 

Mr. WAGONER. We don’t provide financial guidance in earnings. 

Mr. PERLMUTTER. This is an interesting way to negotiate a loan, 

wouldn’t you say? You are asking us to be your lender. You are 

asking the United States of America to be your lender. And I am 

just saying, do you have a forecast based on—let me ask you this: 

How do your sales in November compare to your sales in October? 

Mr. WAGONER. I would say it looks like at this point industry 

sales are running about the same level. 

Mr. PERLMUTTER. So still down steeply, 50 percent or— 

Mr. WAGONER. Ours aren’t down quite as much. We had a strong 

prior September, so we had a little weaker October. We are not 

down quite that much. But we think the industry is still going to 

be running in the 11-ish range. Maybe a little less, maybe a little 

more. So very weak by any standard. 

Mr. PERLMUTTER. Okay. Mr. Nardelli, what was your quarter 

like this past third quarter? 

Mr. NARDELLI. We lost money in the third quarter. 

Mr. PERLMUTTER. How much? 

Mr. NARDELLI. We burned about $3 billion in cash. 

Mr. PERLMUTTER. What is your break-even on a monthly basis? 

Mr. NARDELLI. On a monthly basis relative to— 

75 

Mr. PERLMUTTER. What are your operating expenses? How much 

do you have to do to pay your salaries, no bonuses, everybody gets 

paid? 

Mr. NARDELLI. We have about a $4- to $5 billion obligation. 

Mr. PERLMUTTER. So $4- to $5 billion per month. And, Mr. Wagoner, I meant to ask you that. 

Mr. WAGONER. Well, our total expenses in let us say North America maybe in a normal industry would run around $80 billion. 

So divide that by 12 would be, you know, maybe $6- or $7 billion 

a month would be a rough guess. 

Mr. PERLMUTTER. And, Mr. Mulally, how did you do last quarter? 

Mr. MULALLY. We lost $4 billion. 

Mr. PERLMUTTER. Okay. And what is your monthly nut? 

Mr. MULALLY. In the third quarter, we had a run rate of 7.7, but 

we think that going forward it will be substantially less than that 

because we brought down the production of a number of our vehicles. So it was kind of an extraordinary quarter. 

Mr. PERLMUTTER. Okay. I think somebody mentioned—and it 

may have been you, Mr. Wagoner—that taking a conservative look 

going forward you need to sell 11,700,000 units or—to—next year 

is something you are projecting? 

Mr. WAGONER. That was an industry forecast, U.S. industry forecast, light vehicles, yes. 

Mr. PERLMUTTER. Okay. 

Mr. WAGONER. I hope it is better than that, but— 

Mr. PERLMUTTER. Because what I saw or at least as of October, 

the annualized rate was 10 million or something other units. 

Mr. WAGONER. It was 10.8 in October, right, which is significantly the worst month of the year, but obviously very concerning 

to us. 

Mr. PERLMUTTER. If there were a bankruptcy—and this goes to 

you, Mr. Gettelfinger. One of the things I have been thinking, do 

we put the money in up front and allow things to go forward and 

hope that the economy improves and we don’t have to come back, 

you don’t have to come back for more money or do you take a 

Chapter 11, set the legacy benefits on the side and then we underwrite that through PBGC? 

Mr. GETTELFINGER. I think if there is a Chapter 11, first of all, 

one of the companies—it will drag at least one other with them if 

not all of them. And I do not believe Chapter 11 is where it will 

end. It will go to liquidation. I firmly believe that. I would not be 

sitting here with these executives today because again I want to 

stress we brought in Steven Girsky, who is or was the top auto analyst in this country for 17 years. He is now at Center Bridge. He 

had worked at GM at one time and we asked him to come in and 

assist us. And that is why I am here today because of the urgency 

of this crisis that we are in. 

And again, I firmly believe Chapter 11 leads to Chapter 7, which 

is liquidation. 

Mr. PERLMUTTER. Thank you. 

The CHAIRMAN. The gentleman from Illinois, for 5 minutes. 

Mr. FOSTER. Thank you, Mr. Chairman. Can you tell me, gentlemen, the three of you, what the terms of the loan are that you are 

suggesting? Is it in perpetuity? Is there a date certain and is it 

76 

with interest, without interest? Just sort of in a nutshell. Just sort 

of choose one among you. 

Mr. WAGONER. We had talked about an interest bearing loan, 5 

percent for the first 4 years, I think, and then 5 percent for the 

next 5 years, and then 9 percent after that. And, you know, warrants, things of that nature, additional compensation opportunities 

for taxpayers if we are successful. 

Mr. FOSTER. Thank you. What is it that animates the hope in 

you that sales are going to be robust enough to put you in a position to repay the loan? 

Mr. WAGONER. Well, I think, while things are difficult today, it 

is the lowest level that the industry has run in the United States 

alone on a sales per capita basis in over 50 years, in the post-World 

War II period. So I would say this is an extraordinarily difficult period. What we have tried to do is say let us assume we don’t stay 

at the bottom forever but assume after a year or so we begin to see 

some gradual improvements. And we have assumed a rather slow 

improvement from, let us say, roughly 12 million units, 13, 14. The 

industry was running about 17 million units—17 to 18 for 6 or 7 

years in a row. We think that was actually probably in retrospect 

higher than a normal trend because of the low energy cost and the 

cheap credit. So we have assumed the industry will gradually return and we believe we can generate positive cash flow and be a 

profitable business under an assumption— 

Mr. FOSTER. So you are assuming we are essentially at the bottom of that? 

Mr. WAGONER. We expect to say there for a while, yes. 

Mr. NARDELLI. We are taking within Chrysler a more conserv- ative approach. We took out $2.2 billion of fixed costs to change our 

break-even point. We are planning for a much flatter, more of a 

bathtub curve relative to the economy coming back. And as I said 

before, we are not only trying to restructure ourselves for a leaner 

period, but we are certainly open to any kind of collaboration, consolidation, sharing facilities, sharing synergies to make sure we do 

get through this economic trough. 

Mr. FOSTER. One of the things that essentially the three of you 

opened yourself up to is incredible public scrutiny of yourself when 

you are here. You get the joke, right? You are here and it is not 

a pleasant experience for you, but it is not a pleasant experience 

for a Member of Congress to contemplate authorizing a loan for 

people who are highly compensated. 

So it is my understanding, and I wasn’t here earlier, but it is my 

understanding that Mr. Nardelli has made a commitment that he 

is essentially willing to walk away from compensation for a year 

or something, and not to demagogue, but I just want to have really 

clearly what you are offering at a personal level and just as an 

aside, the symbolism of the private jets is difficult, you know. You 

are talking to people who are schlepping back and forth, going 

through all the drama in the airports every day along with the 

American public. My suggestion is that those set a tone. 

So, Mr. Wagoner, could you tell us what, if anything, you are 

personally willing to do in terms of your compensation? 

Mr. WAGONER. I am willing to continue to do what I have been 

doing. I have had no cash bonuses for 3 of the last 4 years. BasiVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00080 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
77 

cally, I have a significant amount of General Motors stock, including a lot which I bought myself, which basically is valueless. I voluntarily reduced my own salary a few years ago by 50 percent. So 

in the spirit of sacrifice, I will be glad to participate in that as well. 

Mr. FOSTER. Okay. Are you willing to go the other 50 percent, 

down to a dollar? 

Mr. WAGONER. I don’t have a position on that today. 

Mr. FOSTER. Okay. Mr. Mulally? 

Mr. MULALLY. We have eliminated all of our bonuses also and 

also any salary increases. We think that is absolutely appropriate. 

Plus on the other assets—on all of our assets we have reduced and 

consolidated all of our assets on the travel, too. 

Mr. FOSTER. Are you willing to go down to the dollar? 

Mr. MULALLY. I understand your point about the symbol and 

clearly the intent of what you are asking. But I think not just for 

me, but we are trying to fill a skilled and motivated team also. And 

it is so important that as we do this plan that we have the team 

that we need. So I understand the intent, but I think where we are 

is okay. 

Mr. FOSTER. Just so I am clear, I am not asking about the team. 

I am just asking about you. 

Mr. MULALLY. I understand. 

Mr. FOSTER. And the answer is no? 

Mr. MULALLY. I think I am okay where I am. 

The CHAIRMAN. Time is up. The gentleman from Indiana. We 

have three more gentlemen. 

Mr. DONNELLY. Thank you, Mr. Chairman. Sometimes the toughest time to see that there is headway being made is in the middle 

of a storm and we have had all sources or many of the sources of 

credit collapse for you, extraordinary difficulties from end to end. 

But I don’t want the American people to think that you haven’t 

been working on this, and that is the point I think that has been 

made, that in fact when we have heard everybody say, you know, 

why are we not cost competitive and it has been said time after 

time that was addressed in the last contract, including the retiree 

benefits which have been mentioned by many. And my question to 

the folks from Chrysler, who came to my office the other day because they are such a big employer in my district was how are you 

going to be cost competitive with Honda and Toyota and that is 

what Americans want to know and the fact is that this contract 

should do that. Additionally, what you hear so many times is why 

don’t GM and Chrysler and Ford make fuel-efficient vehicles? I 

think that has been laid out. 

So what I am hopeful and what these things have indicated is 

that we are a lot closer towards the other side of the shore, toward 

completion of this than we are from the start. And so we are in extraordinarily stormy waters right now, but I am hopeful as the volume picks up, that we are in a position to succeed because in my 

State of Indiana and in my congressional district, we have 15,000 

people just in my district who work in automotive-related products. 

It would be an extraordinary calamity for this country, not only my 

State, but this country to see our manufacturing base be destroyed. 

And when we look at the TARP funds of $700 billion, what you 

are asking for, which is hard working taxpayer funds, this is 4 perVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00081 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
78 

cent of that. And I think our manufacturing base, which has been 

the heart and soul of much of this country, is worth 4 percent of 

what we have allocated to get through difficult economic times. 

And so things have been done. Work has been made to create this progress, and I guess the question I would ask you is, $25 billion has been allocated already under section 136. If those funds 

were used by you now for these purposes, to get to January or February, if an additional $25 billion were allocated in January or February for the 136 purposes, in effect a swap, is that something that 

can help you get there and continue in operations to achieve success? 

Mr. WAGONER. I am not sure I exactly understood what you 

meant. 

Mr. DONNELLY. There is $25 billion in the section 136 funds, the 

retooling funds. If you use that now for the operational purpose, if 

we gave authority to do that, the things we wanted to do in retooling and other, could that wait until February as—in effect a swap 

of the funds? 

Mr. WAGONER. Well, you know, the legislation written for 136 

doesn’t permit that. 

Mr. DONNELLY. That is what I am saying, if an adjustment was 

made. Is that the kind of thing that could work? You mentioned before it is interchangeable to you. Is that across the board? 

Mr. WAGONER. I think it could, yes. A lot of the spending we will 

do under 136, you know, we are sort of starting right now. So it 

is not a huge amount of money that we would otherwise be spending under 136 under that relatively short timeframe. 

Mr. DONNELLY. And then the next thing is in my district, and we 

are really proud to make Chrysler transmissions in my district, 

and they have worked hard to meet the China prices, as Mr. 

Gettelfinger and Mr. Nardelli know. But we sure don’t want to see 

these funds used and then a month from now hear that there has 

been a merger, that these funds were in effect used to help merge 

two of the three companies. Can you give us an assurance that is 

not on the horizon? 

Mr. WAGONER. I can tell you what we have said when we had 

a chance to talk to the Speaker and her leadership group recently 

was that because of the urgency of the funding crisis we have sort 

of set aside any consideration of that, and as we have looked at an 

opportunity to merge without naming potentially with whom, we 

identified that there were significant potential cost savings that 

could conceivably make the business more viable. So I guess what 

I would say is, if we think in the future it makes sense to do it, 

we would be glad to come back and review the rationale with any 

super oversight board or other group and let them provide counsel 

as to whether that is acceptable or not. 

Mr. DONNELLY. Mr. Nardelli? 

Mr. NARDELLI. Yes, sir. I would say that the $25 billion we are 

asking for is to meet the immediacy of liquidity needs. I would 

hope that this committee and Congress certainly wouldn’t restrict 

us from looking at opportunities to make our companies in this industry even more competitive by sharing resources, sharing technologies, and sharing our purchasing power in a collective way. So 

I can assure you this is not funds for restructuring and mergers, 

79 

but I would not want to misrepresent that those—those are certainly opportunities we should have an open mind to strengthen 

the auto industry. 

Mr. DONNELLY. But as of right now, your plans are to move forward as individual companies and achieve success as such? 

Mr. NARDELLI. We are doing everything humanly possible to survive this current period. 

Mr. CLEAVER. [presiding] Thank you. Ms. Speier, you have 5 

minutes. 

Ms. SPEIER. Thank you, Mr. Chairman. I want to thank you all 

for being here and for weathering an almost 31⁄2 hour hearing. I 

sat through most of it and I am going to just give you what I think 

the public is seeing right now. 

The public is seeing that basically, Mr. Wagoner, GM is on the 

ropes. Mr. Nardelli, Chrysler is on the ropes. Mr. Mulally, you 

somehow have made it work. And for those of us here as Members 

of Congress now, a twisted set of circumstances have become the 

people’s bank of the United States and you are asking us as bankers to assess your viability as credit risks. 

Now, let me just share with you a couple of things that have 

been said about you. This is from Deutsche Bank, and it is about 

GM: ‘‘A government bailout is not likely to help shares. Even if GM 

succeeds in averting a bankruptcy, we believe that the company’s 

future path is likely to be bankruptcy-like. We believe that the 

United States may ultimately need to provide GM with at least $10 

billion in loans to keep the company afloat to 2010 and potentially 

as much as $25 billion to fund GM’s cash burn and restructuring.’’ 

And then J.P. Morgan says the following: ‘‘Absent liability reform, 

the GM bailout alone could easily reach $30 billion. D.C. should not 

be fooled into believing GM simply needs enough to get to 2010. Its 

2010 operating cash burn will be $5- to $7 billion by our estimates. 

All said, the GM bailout will be as much as 30 billion absent liability reform.’’ 

So my questions to you are the following. The people of this country need to get something out of this. I am not absolutely convinced 

we should give it to you. But if we do give it to you, we are a bank 

and you need to think of us as a bank and we need to have some 

level of security and knowing that this loan is going to be paid 

back. This is—you reference it as a bridge loan. If you read some 

of the investment banks and what they are saying, it is more like 

a life raft. 

So my question to you is the following: In 2007, the Congress 

passed new CAFE standards. They were watered down because of 

what was going on in Detroit for the most part. I for one want to 

see those standards met by 2015. And my question to you is, if we 

give you this loan, will you make a commitment to meet those 

standards by 2015? 

Mr. WAGONER. Just to be clear, you are talking about moving the 

2020 standards to 2015? To be honest, I would love to be able to 

tell you yes, but I have to be honest in saying our teams are working right now to meet the standards as they are laid out. And, 

frankly, they are requiring all of our technologies, massive amounts 

of retooling. And I think, at this point, we commit that we are 

80 

going to do our best to meet them as stated. It would be very difficult, in my view, to advance them a full 5 years. 

Ms. SPEIER. Mr. Nardelli? 

Mr. NARDELLI. I would say, in a similar fashion, the only thing 

that would allow us to advance those is a major breakthrough, as 

we are trying to do right now with our electric vehicles. And what 

we are trying to do is put that technology into existing platforms 

so that we aren’t spending money for new top hats but we are able 

to put our precious few dollars into the technology. If that is successful, obviously we are going to continue to go as fast as we can 

in retrofitting what we have. 

We also have the hybrid that is coming out in a truck. We have 

the new diesel coming out in a truck. 

So we are doing everything we can. We aren’t pacing ourselves 

to the 2020 guidelines. Obviously, it would be in our best interest 

to produce the most fuel-efficient, most environmentally friendly 

vehicle, assuming the consumer is going to buy that. We would be 

foolish not to do it. 

Ms. SPEIER. I understand that. What I am saying to you is, if we 

linked the 2015 date to this bailout, would you accept the money? 

Mr. NARDELLI. I really don’t know that—again, sitting here 

today, I can tell you we are open, we will look at it and we would 

be happy to come back and give you our real point of view on that, 

our technical capability of doing that. 

Ms. SPEIER. Thank you. 

Mr. Mulally? 

Mr. MULALLY. Well, as a technologist, I would like to offer you 

a thought on that. I thought that what we did together on the 2007 

Energy Independence and Security Act was phenomenal work that 

included all of the industry, not just GM and Chrysler and Ford, 

but also Toyota and Honda and the entire industry. And where we 

ended up was a very, very aggressive plan to use every bit of enabling technology to meet the standards that we committed to. I 

don’t think it is technically possible to move that ahead. 

The CHAIRMAN. The gentleman from Massachusetts will be the 

final questioner. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

Gentlemen, thank you for doing this. But I figure, for 31⁄2 hours, 

$25 billion is not a bad deal. 

Gentlemen, I am inclined to want to help. But I will tell you, I 

don’t want to help for almost any of the reasons I have heard you 

say. I am really not interested in which companies survive. I mean, 

the last car made in my town was an Edsel, so, you know, it didn’t 

go over too well that time. And I am not really worried about that. 

I am worried about one thing, and that is the gentlemen at the 

end. I am worried about jobs—American jobs. 

And up until now, I really haven’t heard any of the Big Three 

talk about jobs in America. Look, I am all for international stuff 

and all—I love all that stuff. But the truth is, if there aren’t things 

being built in America, I am not really terribly interested in helping. 

It is interesting to me that you are being criticized by the very 

people that we just gave $700 billion to; I kind of figure that is a 

little strange. You know, why don’t they open up their wallets and 

81 

help you out, if they are so smart, if they are so caring about society. 

But I want to tell you very clearly, the people on Wall Street that 

we just gave the money to—I did it, I voted for it, hesitatingly like 

most of us, because we all know we have a problem. We know we 

have a problem in the auto industry. And it is really not even the 

industry; again, it is the jobs that you represent that I am interested in. 

I understand that. I want to save those jobs. I am not interested 

in a race to the bottom by taking wages away. Anybody here who 

said today or any other day that the problem is that we pay our 

workers too much, well, then, you know, my answer is then why 

don’t they individually leave the middle class? Because, as far as 

I am concerned, the auto industry was one of the leaders in creating the middle class by negotiating good wages. I am not interested in a race to the bottom. 

I am very interested in my constituents, who basically do not 

trust you. They really don’t trust me all that much, but they really 

don’t trust you. And they don’t trust you for lots of different reasons. I have only been here 10 years, and in that 10 years all you 

did, the industry—and that includes the union, as well—you fought 

me on CAFE standards. You said, no, we can’t do it. Yet you just 

said we need more fuel-efficient vehicles, we want to sell them. 

Well, if you had listened to us, you would have had them. All you 

did was ask us for tax cuts for gas-guzzlers. For all intents and 

purposes, you were giving away vehicles that got 3 miles to a gallon because we stupidly—not this side, mostly the other side of the 

aisle—allowed tax incentives that gave away trucks for nothing. 

And you didn’t say a word. You said, thank you, shh, quiet, don’t 

talk about it. You should have been here. 

I need some assurances, my constituents need some assurances, 

that you are not going to just blow this again, that you really did 

get the message. And the truth is, all the things you talked about 

today so far of what you have cut, we are not sure we trust you. 

I am not sure it really matters all that much. My fear is that you 

are going to take this money and continue the same stupid decisions you have made for 25 years. That may not be you, it may be 

your predecessors. I don’t know who it is; I don’t care. It is the industry. 

I want to want to buy an American-made vehicle again. I want 

that. I don’t trust, necessarily, that you will provide that. I am 

afraid we are going to do this, it will be a short-term bailout, and 

you didn’t get the message. Give us the cars that we want that 

other companies have been able to give us. If you can do that, 

maybe some people in the Senate will actually listen to you. 

I think over here you will probably end up with people who want 

to help, but damn it, I don’t want to help again and get it stuffed 

back in our ear at home that you took and money and you blew 

it. How can you reassure me and, more importantly, my constituents that you won’t do it again, that you really did, honest to God, 

this time you got the message? 

Go right ahead, any one of you, just jump right in. 

Mr. MULALLY. Well, I, personally, I couldn’t be more aligned with 

you. I have dedicated my professional life to fuel efficiency in airVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00085 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
82 

plane design for 37 years. And the most compelling thing to me 

when I was invited by Bill Ford and the Ford Motor Company to 

join Ford to help was a vision of sustainability in fuel efficiency 

and high-quality cars based on safety, to get people where they 

wanted to go safely and efficiently. And I also was attracted by an 

American icon and a global icon. 

And it is about America; it is about jobs in America. I can remember when we sat down in the negotiations with Ron, and I can 

remember the day, and we agreed that we were going to work together to do whatever it took to increase our competitiveness so 

that we could make cars of all sizes—small, medium, and large— 

the most fuel-efficient, the highest quality, the safest vehicles, all 

sizes in the United States for Americans. 

And the agreement that we did absolutely is going to deliver on 

that promise. And, as we talked about earlier, we put that plan in 

place. We have now probably the best lineup of small- and mediumsized vehicles to match our wonderful SUVs and trucks that we 

had before. But we have a terrific, balanced portfolio. They are 

competitive with the best in the world. And we are doing it with 

the productivity to be competitive. 

So I am very, very positive about the future of the automobile industry. The fact that we are in the worst downturn that we have 

ever been in, as far as the economy and the credit, is something 

we are all dealing with. But when it comes to us having a vision 

of a viable and exciting and a sustainable automobile industry, I 

think you can look at our past performance and say we are absolutely going to continue to deliver that vision. 

The CHAIRMAN. The hearing is now ready to move on to the next 

phase. The witnesses are excused. And we will call up the next 

panel. 

Let’s move out quickly, please. Please let the witnesses move out 

quickly. You can be nice outside. I want people to—let’s move out 

quickly so the next panel can sit down. We have been here long 

enough. 

We will now move on to the next panel, with my thanks for their 

willingness to testify and for their patience in our reaching that. 

Let’s break up the conservation over there on the left side of the 

room. 

And let me begin by recognizing my colleague, the vice chair of 

the committee, Mr. Neugebauer, to make an introduction. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. 

It is my honor to introduce Annette Sykora from Slaton, Texas. 

She is the first woman to ever chair the National Automobile Association, and we are very proud of her. What an interesting year she 

picked to be chairwoman. 

Annette is a third-generation car dealer. Her family has been in 

the Slaton area for a number of years. She and her husband, Pat, 

actually operate two dealerships, which were represented at this 

table earlier. She is not only an industry leader, she is a community leader. And it is a delight to have her testify today. 

The CHAIRMAN. In addition, we have: Mr. James McElya, who is 

chairman and chief executive officer of the Cooper-Standard Automotive and a return witness to this committee, although he previously has been here on a lot of international matters; Professor 

83 

Jeffrey Sachs, who is director of The Earth Institute; and another 

individual with whom we work, Dr. Matthew Slaughter, now professor of international economics at the Tuck School, and a former 

member of the Council of Economic Advisors. 

I did want to note, I wrote a note of the presence of our colleague, Ms. Jackson-Lee from Texas. I should note that Mr. 

Pascrell of New Jersey—very interested, I believe has drawn up 

some legislation involving dealers—today is also here. 

With that, Ms. Sykora, we will begin with you, 5 minutes. 

STATEMENT OF ANNETTE SYKORA, CHAIRMAN, NATIONAL 

AUTOMOBILE DEALERS ASSOCIATION 

Ms. SYKORA. Thank you, Chairman Frank, Ranking Member 

Bachus, and Congressman Neugebauer. Members of the committee, 

on behalf of the Nation’s 20,000 franchise automobile dealers, 

thank you for this chance to put a different face on the legislation 

we are discussing today. 

Maybe it is a face familiar to you. Dealers are the public and 

local face of the industry in communities across our country. Our 

fate is directly connected to our manufacturers, and the success of 

our automakers is directly connected to the success of our dealerships. 

I am a Ford and Chrysler dealer from Slaton in Levelland, 

Texas, and the third generation of my family to carry on this small 

business. My dealership and thousands like mine are going 

through very difficult times. 

For decades, the Nation’s automobile dealerships have been a 

true indicator for the state of our economy. Typically, car sales go 

up in good times and down in bad times, but this is not a normal 

economic downturn. The meltdown on Wall Street and the real estate crisis have all but destroyed consumer confidence. Auto sales 

have fallen off a cliff, and they are at a 15-year low. 

The sales slump is not only affecting the current bottom line but 

the future of my dealership and others. I have spoken with dealerships across the country that have had to cut costs, they have reduced their advertising budgets, support for the town’s little league 

team, and, unfortunately, many of them have had to make the difficult cuts in staff. In my two dealerships, I reduced my staff by 

20 percent. 

Additionally, we are considering closing my dealerships earlier 

on Saturdays to cut costly overtime. Many of my employees count 

on this overtime to put money in their pockets to spend on their 

homes, at the grocery store, and on their children’s college education. 

Mr. Chairman, some members are considering voting against this 

legislation, suggesting that bankruptcy is a viable alternative for 

the auto industry, as it was for the airline industry several years 

ago. I would like to explain how I see the difference. 

We don’t simply take a person from point A to point B for a few 

hundred dollars. A vehicle is one of the largest purchases a family 

will make. And customers depend on our local presence for warranty work, maintenance, and repairs. 

Like Mabel—she is a customer who has done business with my 

family for more than 50 years. And although she probably only 

84 

buys a vehicle about once every 10 years, she counts on us for her 

warranty work, to keep that car running good, to perform the safety recalls and the front-end alignments that keep her safe. It 

doesn’t make sense for Mabel to have to drive 40 miles to get this 

done. 

We have also done business with four generations of another 

family. They have bought 70 vehicles from us, the same family over 

the years. And, although we have this tremendous relationship 

with this family, they are not likely to buy a vehicle from a company that has gone bankrupt. Would you? Well, neither would most 

Americans. 

Auto dealers are also feeling the pain of the credit crisis in their 

operations. We finance the inventories you see on our lots. These 

loans are usually in the millions of dollars, even for a small dealership. Many banks have already eliminated what we call ‘‘floor planning,’’ loans to any domestic dealers. And this is just because of the 

uncertainty that their manufacturers are currently facing. Imagine 

how banks would react to a dealer who has asked for millions of 

dollars to finance new and used inventories from an automaker 

going through reorganization. 

Let me give you another example. Just yesterday, one of our 

used-car dealers who buys some of the vehicles that we don’t keep 

on our lot, a wholesale dealer, had to return a vehicle to us because 

his bank had tightened his floor plan credit and he was not able 

to keep it. So now I have to keep this truck, find a way to finance 

it, and that impairs my ability to make other purchases. Furthermore, a bankrupt automaker could lose many of its dealers. 

I recently sat down with Jim Toliver, Slaton superintendent of 

schools. We started discussing what would happen if one or more 

of the dealerships in my hometown were to close. The loss of tax 

revenue would force them to cut programs and teachers. Many displaced dealership families would most likely leave town in search 

of work in other places, compounding this loss. And I found out, 

while I was sitting here in this hearing, that this is a real possibility for one of the GMC stores in my town. This same scenario 

would play out in hundreds of communities across the United 

States. Time truly is of the essence. 

Well, according to NADA, 660 dealerships have closed in 2008. 

But I want you to remember that dealerships are not company 

stores. As independent businesses, we make significant investments in land, buildings, equipment, and personnel that provide 

manufacturers a retail presence in hundreds of communities. We 

don’t take vehicles or parts on consignment. We assume the risk 

of financing this inventory. We have heard this morning no manufacturer has the resources to internalize the cost that dealers bear. 

We even pay for the company sign on our dealership lot. 

To get the economy back on track, we must restore consumer demand, and the only way to do that is restore consumer confidence. 

We need to give consumers the motivation and confidence to visit 

their local dealership and see what is possible. And consumer tax 

incentives are a great way to boost sales. 

Representative Pascrell from New Jersey introduced legislation, 

H.R. 7273, that makes interest payments on car loans and sales 

tax deductible from a family’s income tax. Senators Mikulski and 

85 

Bond introduced this measure in the Senate earlier this week. This 

will help get people in dealerships. 

We need immediate access— 

The CHAIRMAN. Ms. Sykora, we really need you to wind up. We 

don’t have jurisdiction over taxes, so there is not a lot to be said 

more about that. 

Ms. SYKORA. Well, we just urge you to move quickly. 

I thank you for your time, and I will be happy to answer questions. 

[The prepared statement of Ms. Sykora can be found on page 212 

of the appendix.] 

The CHAIRMAN. Thank you. 

Next, Mr. James McElya. I am sorry if I mispronounced the 

name, but I mispronounce a lot of things. 

STATEMENT OF JAMES S. MCELYA, CHAIRMAN AND CHIEF 

EXECUTIVE OFFICER, COOPER-STANDARD AUTOMOTIVE, INC. 

Mr. MCELYA. It is ‘‘McElya.’’ 

Good afternoon, Mr. Chairman, and members of the committee. 

I am the executive chairman of Cooper-Standard Automotive. And 

Cooper manufactures a variety of products for the auto industry 

and employs over 5,000 people across the United States. 

I am also the chairman of the Motor and Equipment Manufacturers Association, which represents almost 700 companies that manufacture motor vehicle parts for the light vehicle and heavy-duty 

original equipment and aftermarket industries. 

Today’s auto industry is interdependent, such that it is economically impossible to separate the economic success of the suppliers 

from their manufacturer or customers. A potential bankruptcy by 

a major vehicle manufacturer will cause serious disruptions and 

will directly impact the ability of the entire industry to function. 

MEMA urges Congress to immediately pass legislation providing 

direct financial assistance to the automotive industry, including 

auto manufacturers and suppliers. 

Motor vehicle suppliers are the Nation’s largest manufacturing 

employer. Our high-skilled jobs are critical to the industrial base 

of the country and are located throughout the United States. Every 

supplier job contributes an additional 5.7 jobs to the local economy, 

with a total of 4.5 million private industry jobs depending on the 

supplier industry. 

We hear sentiments from people all across the country, and 

today, that the government should just let them fail. But just exactly who are they referring to when they say ‘‘them?’’ Well, let me 

clarify. The group that comprises ‘‘them’’ is a whole lot larger than 

the Detroit Three that were just here at the table. It starts with 

the manufacturers, of course, the Big Three and others, but it also 

rolls down to the suppliers, our sub-suppliers, followed by the many 

professional services that serve the industry. After that, it hits the 

local level in the small towns across the country where all these 

manufacturing plants are located. It will affect the owner of the 

diner across the street from the plant, the barber, and even the 

schools, as school tax revenues diminish or even go away. 

Motor vehicle manufacturers and the supplier industry are leaders in the development of safety and energy technology critical to 

86 

today’s vehicles and those of the next generation. Suppliers account 

for over 40 percent of the total automotive investment in research 

and development and continue to take on a greater role in the design, the testing, the engineering of new vehicle parts and systems, 

a role that is expected to grow significantly over the next 5 years. 

Some analysts have indicated that as much as half of the supply 

base is in financial distress. The U.S. light vehicle sales dropped 

to 12.8 million units this year, far below the 16.15 million average 

over the last decade. It is critical to resolve the financial crisis and 

return credit availability to the consumers and turn the economy 

around. 

The dramatic and sudden contraction of the auto industry will directly impact the supply base, but the failure of the supply base 

will impact the wide range of car manufacturers. Vehicle manufacturers, including Toyota, Honda, and Nissan will likely have to 

close or limit production while awaiting for new sources of supply. 

It is the inability to get credit that has pushed these seemingly 

unrelated factors into a crisis. There have been recent and serious 

repercussions. On November 13, 2008, Standard & Poor’s rating 

service took an unprecedented step of placing 15 North American 

auto suppliers on CreditWatch based on their significant exposure 

to Ford, General Motors, and Chrysler. 

The bottom line is that all automakers, not just the Detroit 

Three, will be dramatically impacted if consumers cannot access 

credit to purchase new vehicles. Without sales, even the healthiest 

vehicle manufacturer cannot survive a prolonged sales slump like 

the one we are currently experiencing. 

The country is faced with two interwoven dire conditions in the 

auto industry. First, a potential bankruptcy of a major automobile 

manufacturer will cause a chain reaction of unpaid payables with 

subsequent additional bankruptcies that will severely and negatively impact the entire sector. And, secondly, on a parallel course, 

the inability of automotive suppliers to get sufficient working capital from its traditional sources will have a similar impact. 

Congress must pass the legislation that addresses both of these 

challenges. 

Thank you. 

[The prepared statement of Mr. McElya can be found on page 

146 of the appendix.] 

The CHAIRMAN. Professor Sachs? 

STATEMENT OF JEFFREY D. SACHS, DIRECTOR, THE EARTH 

INSTITUTE, AND QUETELET PROFESSOR OF SUSTAINABLE 

DEVELOPMENT AND PROFESSOR OF HEALTH POLICY AND 

MANAGEMENT, COLUMBIA UNIVERSITY 

Mr. SACHS. Thank you, Mr. Chairman. This is the 4th financial 

crisis that I have dealt with, with this committee, over the last 25 

years, starting in Latin America, Eastern Europe, East Asia, and 

now it is our turn. 

The CHAIRMAN. One of us may be a jinx. 

Mr. SACHS. No doubt we are—right. Bad luck. 

But we are facing something that we have not faced since the 

Great Depression, as this committee knows better than any other 

committee of this Congress. And so, the normal business of this 

87 

committee is not to be a bank. No one here wants to be a bank. 

No one here wants to think like a bank or grill the Big Three CEOs 

like a bank. But we have no functioning banks right now. That is 

why we are here. 

This is the most intense financial crisis we have had since the 

Great Depression. If there were capital markets, they would much 

prefer to go to the capital markets than to go to you, I am sure of 

it. It was no fun doing a loan request this morning for them. The 

only reason they are here is that we have no financial markets for 

the moment. 

All of the rhetoric we heard about ‘‘let the markets work’’ would 

be fine if we had markets right now. We have no financial markets; 

this is the essence of the moment. 

In a year, we are going to have financial markets working again. 

TARP will be working. We will have a President; they will have a 

strategy. The markets will be working again. When they need more 

money, which they will, they will go to the markets, they won’t 

come to you, because there will be financing available. So this, I 

think, is the essence of it. 

Believe me, this is not the only Congress or parliament that the 

auto industry is going to. It is all over the world right now. This 

is a global contraction the likes of which we have not seen since 

the Great Depression, and you are going to see bailouts necessary 

everywhere. 

The industry is a long-term viable industry. They would not have 

been here but for September 15th. Had Lehman Brothers been 

handled differently, not by the textbook of Chapter 11 but differently, we would not be with the $700 billion TARP and they 

would not be here today asking for 3.7 percent of that from the 

TARP. But Lehman was Lehman; panic worldwide ensued. Now 

the idea of using 3.7 percent of what you voted is absolutely the 

right thing to do. In fact, it is, to me, unthinkable not to do it. I 

can’t even imagine it not being done. 

Let me say that Chapter 11 is completely unworkable in this context. The New York Times had one of those ‘‘duh’’ stories today 

where it says, ‘‘Advantage of Corporate Bankruptcy Shrinks.’’ You 

can’t do Chapter 11 and survive when there are no financial markets. Section 364, debtor in possession financing, is a fantasy of my 

free-market ideologue colleagues in the economics profession. There 

is no financing even for non-Section 364, much less for bankrupt 

companies. 

It is a fantasy, this idea, put it through bankruptcy, let them do 

that. And when you probe just a little bit, they say, oh, no, no, no, 

under bankruptcy, the government is going to have to do it anyway. So try explaining to your constituents that you are not going 

to do it now—only when they go bankrupt—then you are going to 

give them $25 billion. I like that explanation. That is absurd, in 

my view, frankly. 

The only thing I would add is whether you want to have, in the 

board that you are setting up, some more public representation in 

addition to the Cabinet. That would be my only question. For the 

Congress to represent you, to represent the broader interests, to 

bring the National Academy of Engineering in, somehow to have a 

88 

couple more voices than only the Executive Branch when this gets 

deliberated so that you just are able to get the rounded issues. 

Other than that, I think you are on exactly the right track. I 

can’t imagine, frankly, even a little bit, why we are here, because 

you already voted on the money. This would only be using 3.7 percent of it, for what happens to be the leading industry of the 

United States. Other than that, you know, it just is a little bit hard 

to figure out. 

So, please, do this before we turn a recession into a depression. 

That is my request. You know, it is for all of us. There is nobody 

who will not be affected. And this idea of let markets work when 

there are no markets is the idea of how Lehman Brothers triggered 

the biggest worldwide crisis in generations. Don’t do it again with 

this industry. Two in a row, we are really into depression. 

Thank you very much. 

The CHAIRMAN. Professor Slaughter. 

STATEMENT OF DR. MATTHEW J. SLAUGHTER, PROFESSOR OF 

INTERNATIONAL ECONOMICS, TUCK SCHOOL OF BUSINESS, 

DARTMOUTH COLLEGE 

Mr. SLAUGHTER. Committee Chairman Frank, Ranking Member 

Bachus, and fellow members, thank you for inviting me to testify 

on these important and timely issues. Let me start by saying that 

the Big Three automobile companies have very dedicated and hardworking executives and fellow workers, and that they have a lot of 

collective talents and strengths. I base my testimony to you today 

on two deeply held convictions. 

One is that, although the dynamic forces of globalization and 

technological change have generated and has the potential to continue generating very large gains for the United States overall, 

these gains do not flow to every single worker, company and community. The other, given its first, is that one of the paramount policy challenges facing America today is how to share these gains 

more broadly across the full spectrum of American workers. 

Despite these convictions, or rather as I will explain in my testimony largely because of them, I do not believe that automobile 

companies merit any new bailout assistance from the Federal Government. Any such assistance would actually incur large costs to 

the American economy in different ways. 

Let me list three such costs. First, and perhaps most importantly 

in the long run, would be the economy-wide cost of substituting 

product market competition with resource allocation set by political 

rather than economic forces. A bailout of automobile companies 

could set a precedent to be followed for many years by many other 

companies in many other industries. 

These bailouts would displace productive investments from firms 

elsewhere in the economy and thereby impede economic growth 

and rising standards of living. I acknowledge that this is indeed a 

long-term cost. But that does not make it any less important. If 

anything, it makes the cost all the more important given the many 

long-term challenges facing our country such as a slowdown in educational attainment and the unsustainable growth of entitlement 

spending. 

89 

A second important cost of any bailout would be damage to 

America’s engagement with the global economy. Here let me highlight the cost that would fall on U.S. headquarter multinationals 

of all kind, key U.S. companies which employ over 22 million 

Americans and account for a remarkable 78 percent of all private 

sector R&D. The success of these companies depends critically on 

their ability to access foreign customers. It is unlikely that U.S. 

Government bailouts will go ignored by policymakers abroad. Instead, U.S. bailouts will likely entrench and expand the protectionist practices already underway in many countries that we have 

already been discussing here. This would erode the foreign sales 

and competitiveness of U.S. multinationals and would thereby reduce their U.S. employment and other activities. 

And a third and more important direct cost would be the likelihood that any new taxpayer assistance would go largely or entirely 

unpaid. 

So the relevant question I would like to pose in my remaining 

time for taxpayers becomes whether a different deployment of any 

public funds could support the workers and communities affected 

by the struggling Big Three. Here I would point out in response to 

Professor Sachs’ comments, I think it is fair to say there is a more 

diversity of opinion among at least academic economists and finance folks on the viability of various bankruptcy schemes that 

could go forward for one or more of these companies. 

That said, let me in my closing time comment on what are three 

important areas where I believe the Federal Government could 

offer assistance to the struggles to the American economy that are 

presented by the Big Three automakers. 

First, the Federal Government could help expedite any bankruptcy proceedings. One important role that has been discussed in 

this committee already could be ensuring warranties on new and 

or existing cars to help maintain demand for the products of the 

Big Three. 

Second, the Federal Government could extend targeted aid to 

workers in communities deemed to be adversely affected by a bankruptcy filing or other industrial restructurings. The Big Three are 

geographically concentrated in certain Midwest communities and 

States. Many of these areas already face hardships from the national economic slowdown in general and from falling home prices 

in particular. Plans could be laid now for extending supplemental 

benefits beyond standard unemployment insurance amounts. In 

light of the size of the bailout funds currently being proposed, the 

potential pro-worker supports are extremely large. This could be allocated per worker across several years of unemployment income 

benefits, of wage loss insurance upon reemployment, of retraining 

and relocation expenses, whatever combination we as a country 

might deem appropriate for these and perhaps other affected workers. 

And third and perhaps most importantly, the Federal Government could use this auto industry crisis as an impetus for meaningfully expanding the economy-wide social contract that I mentioned at the outset to better distribute the gains of our dynamic 

economy. We as a country could do this in many ways: Through a 

more progressive tax code, through a fundamental overall of our 

90 

unemployment insurance and trade adjustment assistance programs and through new insurance mechanisms that would allow 

communities to smooth out their tax revenues. There is no time 

like the present to begin deliberating and hopefully implementing 

such policies. 

Let me close by thanking you again for inviting me to testify 

today, and I look forward to answering any questions you may 

have. 

[The prepared statement of Dr. Slaughter can be found on page 

207 of the appendix.] 

The CHAIRMAN. Thank you. Professor, one side point, on putting 

other members on the board, we run into the problem of the appointments clause. You cannot give a board that has any power 

any membership other than a presidential appointee. We could add 

a presidential appointee who was not in the Cabinet but it couldn’t 

be a congressional appointee. That is why in the TARP we have 

two boards, one that is congressionally appointed that is oversight 

but no power and then one with power but it is all the Administration. So it doesn’t do as much good. 

But beyond that, part of your mandate at Columbia, in which 

you have done such a good job, is on the whole question of sustainability. And one of the criticisms we have in the auto industries 

has come understandably from people concerned about the environment because of their past record. One proposal we got—in fact it 

is the Bush Administration’s approach, which is to take away from 

the $25 billion that was already voted the conditions on that that 

were—that said it had to be used to promote energy efficiency; that 

is, their view is all right. We gave them $25 billion for the specific 

purpose of retooling credit deficiency. Let’s just take those conditions off. What would your response be to that? 

Mr. SACHS. First, before getting to the specifics of section 136, we 

should not ease the conditions. We should see this as an opportunity to enforce the conditions. I actually am more optimistic than 

the three CEOs that we heard that they could be accelerated even 

more because when you consider the Chevy Volt promises to be a 

leapfrog technology, in fact because we will go from hybrid to plugin hybrid, we are on the verge in my opinion of getting back to U.S. 

technological leadership. GM also has invested more than $1 billion 

in hydrogen fuel cells. And Chrysler, I think very impressively, is 

looking at extended range electric vehicles. Don’t ease the conditions, that is for sure. 

My only question would be, you know, section 136 could be a 

bridge. We could see the money as a bridge to the Chevy Volt, to 

the EREV, and so forth. So it doesn’t seem to me to be contradictory in that way. I think the approach this committee has taken 

is the right one though. The TARP really fits, in my opinion. This 

is a financial crisis. The money is there, adjust it in a modest way 

and get a very pragmatic result. 

Section 136, if it had to be a fallback position, seems to me to 

be a viable one but not by easing the conditions at all. Indeed, by 

seeing the money is precisely to get us to that Chevy Volt. It is to 

get us to the EREV. Please don’t ease the conditions. That would 

send every wrong message for the country. 

91 

The CHAIRMAN. On page 3 of the bill, we in fact have a section 

that says, no provision of this title shall be construed as altering, 

affecting or superseding the provisions of the environmental one. 

Professor Slaughter, I appreciated your testimony as I have admired much of your work. And I have to say, in your closing comments about the need for a safety net, you immediately qualified 

as my favorite witness that the Republicans ever suggested that we 

have. I wish they would send us more like you. But I do have one 

question, and I would like to do that. 

There is no question. I think you make a good point. Had we in 

the past done that on the social sector, this would be an easy decision to make, if people weren’t faced with the loss of their health 

care and if indeed health care had been built into the costs of the 

car. But I do want to say, there is one argument you made, with 

all due respect, it seemed to be a little bit of a make waste. That 

was, that if we do this, other countries will get indignant and be 

more protectionist. It is not my impression that they have a morally superior position to us today in the automobile industry on the 

whole with regard to openness to automobiles. That is, I think— 

no, I don’t think anyone—we have about as open an automobile 

market as you can have. A number of other countries, Korea, 

China, we have already heard have less of one. I am skeptical that 

this would be any basis for them being any tougher on our automobile industry than they already are. 

Mr. SLAUGHTER. It may not be a matter of morals. I think of it 

as a matter of first and foremost dollars and cents. 

The CHAIRMAN. But you really think this would motivate—what 

country is now open without—is better than us in access in automobiles that would suddenly tighten up? It is also the case, by the 

way, we would hardly be unique in the world in subsidizing our 

automobile industry in some way. 

Mr. SLAUGHTER. I fully agree. I think, Mr. Chairman, that many 

other countries have become more closed and inward FDI policies— 

U.S. companies to establish and expand operations there. And the 

likelihood that the response of our policies that we take will be to 

further make it more difficult for our United States— 

The CHAIRMAN. There I disagree. You might argue that it won’t 

get them to change but they haven’t been changing anyway. It 

seems to me that the argument that this would motivate them to 

get tighter, as I said—just to be honest with you, it smells like a 

make waste to me. There are better arguments to be made. 

Mr. SLAUGHTER. If I could get a two-hander on that. When you 

look at U.S. headquarter multinationals overall, for every dollar in 

exports that the parent operations send abroad in terms of servicing foreign markets, they in 2000— 

The CHAIRMAN. You are making a different point than mine. I 

am not contesting the economic value of multinationals. What I am 

suggesting is that there are very few countries that I can think of 

that can say, oh, you stopped your Big Three autos from failing. 

Therefore, we are going to stop being so open to you. I just don’t 

think that is a likely reaction. 

Mr. SLAUGHTER. If I may, CEO Wagoner earlier commented on 

the important role China plays for General Motors. They have been 

92 

the largest share of the Chinese market for several years running. 

Last year they sold over 1 million units. 

The CHAIRMAN. And he noted he has to do a joint venture in 

China, which the Chinese do not have to do here. The only point 

I am making is there is already a lack of reciprocity to our disadvantage. So I am not prepared to be told that we can’t do anything that is in our own legitimate economic interest if you think 

it is. If you don’t think it is, it is different because they will get 

mad at us. 

The gentleman from Texas. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. Annette, I want to 

go back to your testimony about the financing piece of it because 

there are so many pieces to this, and I think what our committee 

has to look at is those pieces where we probably have some jurisdiction. In the financing piece, how many—do you have a handle 

on how many people are coming to your dealership and would like 

to buy a car but you are not able to arrange financing for them? 

Is that 100 percent of the time, 90 percent of the time, 20 percent? 

Can you give me a handle on what you are facing on a retail financing contract? 

Ms. SYKORA. Well, Congressman, the first problem we have is 

getting the people to come to the showroom because there is a lack 

of consumer confidence and they begin with the feeling that there 

is no credit available. So even if they come to the showroom, they 

are already feeling that credit might not be available. 

Now, retail credit is available. You have to have a stable job and 

you have to have good credit. But because they are in many—and 

we heard that earlier today. There are many banks and credit 

unions that do have money to lend on the retail side. The problem 

is there are kind of three pieces here. You have working capital for 

the dealers, you have the inventory financing, or what we call floor 

plan, and then there is retail. And we are working with Treasury 

because of the tightening and elimination of the securitization on 

the lines, and that is what is impacting the availability of retail 

credit. 

So, you know, I think that is where we need immediate and urgent help, is access. 

Mr. NEUGEBAUER. See, my concern is that when you look at the 

burn rate of these three companies that were testifying here today, 

I mean they are losing billions per quarter. And they are asking 

for $25 billion. At the current rate they are losing money, that is 

basically maybe a quarter or two. I don’t know see how that fixes 

your problem. That may somehow prop them up. But the question—the concern I have is, if we are going into, as some economists say, into an economic slowdown where consumer spending is 

going to be down, then this request that the auto industry is making is really not a fix. It is a postponement. I think from a congressional standpoint, I am interested in, you know, fixing things and 

not necessarily, you know, postponing things. So I think we have 

to—and I think certainly I know that the financing arms of the 

three captive finance companies are trying to—and we had Chairman Bernanke and Secretary Paulson here yesterday. I think they 

have been working with the industry to be able to allow them to 

93 

come to the Fed window, which would hopefully work on the retail 

side, maybe also help some on the floor plan side as well. 

Ms. SYKORA. Can I address that? I think you are asking me, are 

we delaying the inevitable? And I wouldn’t be here. I wouldn’t be 

sitting here today if that is what I believed. And I kind of like to 

make my point that dealers are independent businesses. Because 

you can see I am sitting here by myself. The manufacturers, they 

are not here. So I am representing the dealers. And I am giving 

you the opinion that, you know, I do think it is viable and we need 

this help. 

Mr. NEUGEBAUER. Mr. Sachs. 

Mr. SACHS. Congressman, we are in a downturn for sure, and it 

is going to be a very bad one. And even with all the emergencies, 

this will be the steepest recession that we have had in decades. 

And the fight is to keep it from turning into a depression right 

now. So your question is a very good one. But as I have heard all 

three of the CEOs testifying, what they are doing is assuming a 

burn rate based on sales at about 11 million units all through 

2009. That is a collapse. We have gone from 17 million units down 

to 11 like that because this is a free fall. We have not seen this, 

Congressman, for decades. What they are assuming in their assumptions is not a further collapse but what is a collapse. And so 

I don’t think that it is a wildly optimistic assumption. 

But the main point that I would stress is the following: We will 

have a deep recession, and then the question is, are we coming out 

of something or was this just an industry in decline? Now first, I 

don’t believe it was an industry in decline. And I don’t think the 

evidence suggests that it was an industry in decline. 

Second, I think they have a bridge to actually a whole new set 

of technologies and a post-SUV era. Everybody loved their SUVs, 

but now everyone is reconsidering. And it takes a lot of retooling 

and that is what is happening right now. So I think we are—in 

terms of make and model and technology, we are actually going 

somewhere. 

But there is a third point for Congress that I think is very important. They are going to come back to banks, not to you because we 

are going to have a banking system working again in this country 

and that is going to be very important. They do not want to come 

back to you for the next round. They will go back to the bond markets. They will go back to the banks. And they will have a viable 

business. 

Mr. NEUGEBAUER. My time is up. 

Mr. WATT. [presiding] The gentleman’s time has expired. I recognize myself for 5 minutes. 

Ms. Sykora, are there any banks out there that are still providing the floor planning financing or is all of that now being done 

by the industry? 

Ms. SYKORA. Only a handful of banks were providing this type 

of inventory financing in the beginning. 

Mr. WATT. I got a call from one of the dealers actually from Florida. I am not even from Florida. And I got a call earlier this week 

saying the Bank of America had pulled out of that market, pulled 

out of loaning anything to any automobile dealer, not customers to 

buy cars. They want out of that too, he said. But they just wanted 

94 

out of the automobile industry altogether. Is that what you are experiencing? Or is it different than that? 

Ms. SYKORA. No, we have heard from dealers across the country 

that have experienced the same thing. Where one dealer who had 

been with the same bank for 40 years, they had never had a problem, weren’t having a problem. Their balance sheet is fine. No 

more. No more floor plan inventory financing with that bank. And 

yet this is a GM dealer. So he didn’t have the alternative to go to 

GM. 

Mr. WATT. Okay. Professor Sachs, I notice you nodding your head 

and I want you to weigh in on that. What I am really more interested in is having your assessment of is a world without a domestic 

U.S. automobile manufacturer where all of our product comes from 

other—from manufacturers in other countries or based in other 

countries, even though some of them may be making their automobile. I am just trying to imagine the implications of that. And 

I think you are probably—maybe Dr. Slaughter would want to comment on that, too, as the two economists on this panel. Talk about 

that world for me. It just seems like it would be so alien to everything we have experienced and have so many dramatic consequences on not only the existing manufacturing base, but our 

whole concept of who we are in the world. 

Mr. SACHS. Let me just talk first about the transition if we went 

there. If there is a major failure, if GM goes down and it is busted 

apart, the cascade effects, as Mr. McElya said, are absolutely real. 

Cascading failures will run through thousands of enterprises because this is a big business, many percent of GNP. And what is interesting about it also is because of the machining in this industry, 

if you lose a supplier, you could actually interrupt production not 

even of the failing companies but of all the companies. There are 

real risks of cascading bankruptcy and then supply-side seizures. 

If one says, well, that is a worst-case scenario, you are just frightening us, that is what they said about Lehman Brothers on September 15th. We will show how markets work. Let’s close them 

down. Then you add cascading failures that have shocked the world 

like we have not seen for 75 years. 

Now, with our economy absolutely on its back, that is one of 

those things that I would not try at home. I have spent a career 

watching financial crises. We do not want to let a major company 

go bankrupt right now like this. This would be a disaster. Just a 

disaster. We would end up with certainly double digit unemployment rates in this country. We would end up with 15 to 20 percent 

unemployment rates throughout the Midwest. I never thought I 

would live to see us approaching a depression. I was trained for 

and I have taught for 30 years at Harvard and Columbia that we 

have learned all the tricks. You know, that doesn’t have to happen. 

We are flirting with that right now. 

I thank you for voting for the TARP legislation, as painful as it 

was politically, because we are going to need that, and it is going 

to get designed better and done better over the next few months, 

that is for sure. It had to be done in a panic because of the way 

that the panic was set off on September 15th. But don’t do this one 

on top of that mistake of Lehman because we will trigger things 

we don’t even know right now. 

95 

So I know your question, Congressman, is about the long-term 

sense of the United States. But I am worried about the next year, 

2 years, 3 years, or 4 years. I don’t want to have a depression in 

this country. And I want us to take minimum responsibility to use 

3.7 percent of what you voted to avoid a depression. It is a nobrainer, in my view. This is not a hard one. It is hard for you to 

be a bank, but you already voted for the $700 billion. Get the 

Treasury to be the bank. And get on to avoid a disaster. 

This is not an industry, by the way, that is in collapse. We are 

not saving the buggy whip industry. This is an industry where 

world production rose from 60 to 70 million units per year in the 

last 8 years, 62 to 70 million units. This is an expanding global industry. 

Mr. WATT. Dr. Slaughter, briefly because I am way out of my 

time. So— 

Mr. SLAUGHTER. Very briefly, Congressman. Just to echo what 

Professor Sachs said, this industry is already becoming very global. 

It was the Big Two for a while in the sense that—if you recall, 

Daimler owned Chrysler for some number of years. The other thing 

I would emphasize comes back to what Congressman Green talked 

about, the importance of jobs. The industry is continuing to grow 

in part because of the stunning productivity growth that is realized 

in large part because of the global engagement, meaning the Big 

Three today in the United States, they directly employ a little over 

200,000 workers. That number is likely to continue to go down in 

terms of the number of the people who work for them. One of the 

big public policy challenges we all face again is thinking about 

where the good jobs and good wages are going to come from in the 

future, because one of the things productivity growth does in those 

companies is it takes it away from those firms itself. 

Mr. WATT. That is another discussion for another day of where 

they are coming from. 

The gentleman from California. 

Mr. CAMPBELL. Thank you, Mr. Chairman. I wanted to make 

first just a comment, a little bit on something you mentioned Mr. 

Sachs about the CAFE regulations and so forth. Let’s remember 

the Chevy Volt may be a great car but they are not going to make 

any money with it, at least not right away. Toyota has not made 

any money off of Prius. In fact, they have lost money on every single copy in spite of its enormous success in the marketplace. Toyota 

is having a profitability problem now because the Sequoia and the 

Tundra, the big trucks and the big SUVs where they make all their 

money, too, aren’t selling. Now eventually maybe these higher technology mileage cars will become profitable. But they are not now. 

And maybe the model of the Mini Cooper which is a small but expensive car, which is very profitable for BMW, can be adopted by 

other automakers. But that also is not going to happen in the next 

2 months or 3 months or 6 months or a year because of the lead 

times in the auto industry. 

So I just hope that as we all are looking at this thing that we 

don’t give with one hand to the auto industry and take with the 

other. And let’s remember, we can’t get out of this thing unless car 

companies make money, and right now they can’t make money on 

hybrid vehicles. They may be able to eventually but right now they 

96 

can’t do it. Let’s not—I hope we don’t make them sell something 

that they can’t make money on and not sell something that they 

can and have some transition involved in this as this whole thing 

goes forward. 

That is just a comment I wanted to make. But then I wanted to 

ask, Ms. Sykora, I remember after 9/11, remember the after effects 

here. Nobody bought cars, nobody bought houses, nobody went on 

airplanes, nobody went to restaurants. Everything was shut down. 

I still think that we don’t give enough credit to, but that General 

Motors actually pulled us out of that when in December of 2001 

they came out with their 0 percent financing on every car and 

truck they offered for 60 months and everything. That people were 

afraid at that time. They had fear. It was security fear. Different 

than the fear now. Now it is financial fear. It was a security fear. 

And people said, well, I am scared but that is a heck of a deal. I 

had better go check that out. Ford matched it, Chrysler matched 

it. And we went from there. And in my 25 years in the car business, nobody had ever offered a deal like that, anywhere close to 

that, and it got people up. 

Obviously, we wouldn’t be here today if it weren’t for the fact 

that General Motors is not strong enough to do that anymore. But 

the Federal Government may be. I think in your testimony that 

you didn’t get to, you talked about a refundable tax credit or some 

other things. What can we do or what should we be doing because 

eventually for anything to work, we do have to have consumers 

back in showrooms at least looking at cars? And then hopefully we 

can get them financed and they can buy them. 

Ms. SYKORA. I think the point you make about an economic stimulus to get consumers in the showroom is very important. And the 

legislation that was introduced today, H.R. 7273, that is making 

the interest payments on car loans and sales tax deductible, is a 

great way to start that. Senators Mikulski and Bond have that 

same measure in the Senate. 

The other thing that Congress could do would be to fund State 

programs, cash for clunker type programs like the ones in Texas 

and California that encourage vehicles to trade their older vehicles 

in for more fuel efficient models. And I think there was a Representative earlier here today who said his 1999 Jeep might qualify 

for something like that. But these types of programs, that is what 

stimulates the economy, and yet they still provide that environmental benefit as well. 

Mr. CAMPBELL. You talked about the sales tax. My concern is 

that it is not immediate enough, that it is not—as you well know, 

people, you know, cash in their pocket. When you are selling a car, 

you need to put all the numbers together, the down payment and 

the payment and make sure it works for the customer or they don’t 

buy the car. And to say that—and tax deductibility, that is great. 

But to say that you might get some money back on your tax return 

12 months from now doesn’t help somebody buy a car today. 

Ms. SYKORA. You are right. We are seeing consumer confidence 

at a record low. And failure to act to restore confidence, failure to 

do anything is going to have severe consequences. I don’t think we 

can take the chance of further eroding consumer confidence. 

97 

Mr. CAMPBELL. Okay. Thank you very much. I yield back my 

time. 

Mr. WATT. The gentleman from Texas, Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. Mr. Slaughter and everyone, welcome. I would like to visit with you for just a moment if 

I may. I have a summary of the draft of the rescue bill before me, 

and I am interested in knowing what part of it do you find deficient. 

Mr. SLAUGHTER. Congressman, I don’t have any particular comments on the bill per se. I guess it is the idea of whatever Federal 

taxpayer dollars we are going to allocate to supporting the automobile industry broadly defined, thinking about whether we want 

to use it to support the companies themselves or use it to support 

their workers in their communities in whatever eventuality is 

going to play out in the product market in terms of mergers— 

Mr. GREEN. Let me ask you this if I may, because time is of the 

essence. This is a loan, so it is not a bailout. It may be considered 

a means of helping them out. But it is a loan. The bill specifically 

indicates this, and it indicates that there are terms, 7 years, 5 percent the first 5 years, 9 percent thereafter, no prepayment penalty. 

We have a superior position with the obligations that are accorded 

us. What part of this loan creates a problem? We did lend to Chrysler before. They did repay. We did make money. What part of the 

loan is a problem? 

Mr. SLAUGHTER. I would point out, Congressman, that the operating losses of the companies this would be extended to have been 

large and accelerating in the past—recent times. So if you would 

looked at calendar year 2007 and the first 9 months of 2008, for 

Ford and General Motors, between the two of them their total operating losses were $76.1 billion over that 21-month period. 

Mr. GREEN. Did you support the loans to AIG? 

Mr. SLAUGHTER. I am sorry. Could you repeat the question? 

Mr. GREEN. AIG has received loans from the government. 

Mr. SLAUGHTER. I do support the extension of loans made— 

Mr. GREEN. You support $85 billion, September 16th, to AIG. Do 

you support $37.8 billion, October 9th, to AIG? 

Mr. SLAUGHTER. I do. 

Mr. GREEN. Do you support an additional $40 billion on November 10, 2008, all of this in 2008, to AIG? 

Mr. SLAUGHTER. I do. 

Mr. GREEN. Why would we assume that AIG is more deserving 

than the Big Three? AIG, Big Three, all in need. Why AIG and not 

the Big Three? Why an entire industry? Why would we neglect that 

entire industry? AIG is a privately held company. This was the 

largest bailout of a privately held company in U.S. history. Why 

would we bail out AIG and not the Big Three? 

Mr. SLAUGHTER. In principle, Congressman, it is because of the 

systemic risk that firms and capital markets face and present to 

the whole economy when they— 

Mr. GREEN. I think that is a fair comment. What about the systemic risk that people who are working for the Big Three face if 

they lose their jobs to a Chapter 11 that becomes a Chapter 7 by 

virtue of a lack of credit? 

98 

Mr. SLAUGHTER. I agree that the Big Three have linkages to the 

other firms in the economy, the suppliers and the dealers that we 

have talked about. However, it is my belief that the degree of systemic risk and the magnitude of that to the overall economy is less 

than what is presented by the trouble we have seen in our capital 

market companies in recent times. 

Mr. GREEN. And one final comment. We have allowed AIG to go 

to the coffer, the public trough, if you will, one, two, three times. 

If the auto industry does not succeed with this first offer of help 

as opposed to a bailout because it is a loan, and we are talking 

about saving an industry, is it abhorrent to think that there may 

be some additional help needed to save an industry? 

It was indicated earlier—and some things bear repeating. The 

Japanese are not going to allow their industry to fail. The Germans 

are not going to allow their industry to fail. And by the way, I salute them. This is not saying it in a demeaning fashion. This is just 

a matter of fact. We don’t know the consequences of allowing this 

industry to fail. It may take historians looking through the vista 

of time to properly comprehend what happened and what will happen to us as a result. If we must err, maybe it is on the side of 

trying to save an American industry that has an impact on every 

life in the United States of America. 

Thank you, Mr. Chairman. I yield back. 

Mr. WATT. Mr. Manzullo is recognized. 

Mr. MANZULLO. Thank you, Mr. Chairman. I appreciate you folks 

coming today. As I go down the list of people who want money, we 

start with the banks. And I find it interesting that Bank of America would get $25 billion and then cut off somebody’s credit. 

Mr. WATT. Just $15 billion. 

Mr. MANZULLO. Just $15 billion. And Mr. Chairman, I would like 

to see us have another hearing to bring in the chairman of the 

Bank of America and ask him what he is doing with that $15 billion. But that is the problem. Your problem is lack of sales. If you 

had sales, you wouldn’t be here. You would be back home selling 

cars and taking care of the manufacturers. But if you think that 

the Federal Government could be successful in helping you out, you 

can start first with the Bank of America on getting $15 billion and 

then, Ms. Sykora, cutting out one of your own on a line of credit. 

That is how government programs work. They stink. They don’t 

work. And then what you are proposing is that the dealers be included in that. So then some big guru in charge of dealers will 

make a decision on which ones get the money, and the ones that 

have worked all their lives and paid off most of their debt will 

probably be the least likely to get some type of a loan. And then 

if you go down the line to the folks at MEMA, you have 700 suppliers but tens of thousands of subcontractors. Where do you draw 

the line? And who determines who gets the money there? 

And sitting in the audience here, we have people from cities, States, counties, the universities are here. California wants $5 billion a year for the next 3 years. The money is not there. It is not 

there. If it were there—I mean, after a while, we are going to be 

like the old German republic and to buy a car, you are going to go 

with a wheelbarrow full of currency and the people who work at 

the dealership would get paid every hour because of inflation. That 

99 

is why I voted against the bailout because of the fact that people 

like yourselves would look to Washington to say, we want part of 

this, but it is really not going to help. If you want to get something 

to help, the easiest thing to do is for Congress to pass a law—we 

could do it today. The President would sign it—which would to say 

if you buy a new or a used car, because if you have a tax credit 

that applies to used cars, what is going to happen to your used car 

inventory? And that is where you guys make your money, is on the 

cars that are traded in. But if you have a tax credit that applies 

just to—that applies if you buy a new or used automobile, then the 

intended source is immediate. In other words, if you buy a $20,000 

automobile but you know you are going to get a $5,000 tax credit, 

that is quite a discount on the car. That infuses the money into it 

directly. 

But I have a question. Is it ‘‘Sykora?’’ 

Ms. SYKORA. Yes. 

Mr. MANZULLO. Who does your floor financing? 

Ms. SYKORA. I finance mine with Ford Motor Credit. 

Mr. MANZULLO. Did they cut you off? 

Ms. SYKORA. No. But they have taken a look at what they call 

rate of travel, how quickly you are moving their vehicles and giving 

us boundaries that we must stay within. 

Mr. MANZULLO. Could you pull the microphone a little bit closer? 

You are very soft spoken. Thank you. 

Ms. SYKORA. They have restricted what we are allowed to finance, how much money we can have on that floor plan line by our 

rate of travel, how often we are selling those vehicles. So they have 

taken us from unused from a 60-day to a 45-day, trying to get us 

to a 30-day rate of travel. So that restricts my abilities. 

Mr. MANZULLO. Has that restricted your ability to sell automobiles to prospective buyers? 

Ms. SYKORA. What is restricting our ability to sell vehicles right 

now is the consumer confidence. 

Mr. MANZULLO. Right. Right. So even if you qualified for the bailout and somehow this money found its way to—how many dealerships are there across the country? Is it 5,000? 

Ms. SYKORA. 20,000. 

Mr. MANZULLO. Even if funds made it to 20,000, you have the 

problem of who among them gets the money, how much, who determines that, who metes it out. Then you go down the line to MEMA, 

the subs, the subs’ subs, and then the cities and the villages. I 

don’t think that is going to work. 

Ms. SYKORA. Well, point of clarification, we aren’t asking for any 

of the money. Now some of the Representatives have proposed that 

as questions to the automakers if they would be opposed to having 

some of that for the dealers. But as dealers, we are not here asking 

for that. 

Mr. MANZULLO. Okay. MEMA is? 

Ms. SYKORA. MEMA. 

Mr. MANZULLO. All right, thank you. I think—I guess, Mr. Chairman, if you want to let him answer the question, but that is up 

to you. 

Mr. MCELYA. First of all, we have heard a lot from the supply— 

or from the car companies over the last 2 days. One of the big conVerDate Aug 31 2005 13:24 Mar 03, 2009 Jkt 046594 PO 00000 Frm 00103 Fmt 6633 Sfmt 6633 K:\DOCS\46594.TXT TERRIE
100 

cerns that the supplier industry had was if one of these car companies go bankrupt and all the receivables that the suppliers have, 

it would be just a huge collapse in the supplier industry. We are 

on thin edge as far as our financing and liquidity. What we 

heard—I think I heard—hopefully it is in the record—was that the 

car company said that if they get the bailout, the one thing they 

will do is pay their suppliers. That is how they are going to use 

the money. That is the main concern for the supply base. This is 

a huge, huge problem. Once one of these companies go, statistically, of the top 100 suppliers to Chrysler, 96 of those 100 are 

common to Ford and General Motors. 

Mr. MANZULLO. I understand that. But Bank of America was 

supposed to take the money and infuse it into the line of credit and 

help people out and they took the money and they went through 

the line of credit and you have no guarantee— 

The CHAIRMAN. Time has expired. 

Mr. MANZULLO. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman from Colorado. 

Mr. PERLMUTTER. Thanks, Mr. Chairman. And Ms. Sykora, listening to you and then also talking to some of my friends from Colorado, it is sort of a twofold problem that you see at your dealership. One, your demand is down and, two, people who come into 

the stores, many who may have qualified at some point in the past 

don’t really qualify now. So it is a credit and a demand, is that 

what you are seeing? 

Ms. SYKORA. Yes, especially in some certain regions where credit 

is already constrained because of other problems. In some regions, 

that is not the case. So that is why we are wanting customers to, 

you know, go to their local dealership because if they have a good 

job, good credit, we are probably going to find credit available. It 

is one of the reasons that dealers have multiple sources of financing available for customers. It is obviously a good thing we do. 

Mr. PERLMUTTER. Well, and this maybe goes more to the economists on the panel. But it is almost as if demand for just about everything has fallen off the table in the course of the last 45, 60, 

maybe 90 days. I mean, I was trying to ask a question. I don’t 

think I asked it right of the prior panel. How much are they going 

to need? What is it per month? Is $25 billion going to get us there? 

Is there some other way to approach this? 

So gentlemen, look into your crystal ball and tell me, you know, 

you heard their numbers as to what they lost last quarter. This 

quarter is probably going to be about the same I would imagine, 

or worse. I don’t know. What do you think? 

Mr. SACHS. I think there are two endpoints to this process, successful endpoints. One is that there is a recovery. 2010. Next year 

is not going to be a good year. It is going to be a very tough year. 

2010 we should, if things are not in calamitous shape—of which a 

GM bankruptcy, for example, would make a calamity—have a recovery. The second thing that should happen, and not just normatively but I expect to happen, is that the banks start working 

again. And that means that when they go for more, they will go 

back to banks and they will go back to the bond markets. We are 

having risk spreads that have never been seen in history right 

now. So they can’t borrow in—they can’t even borrow 7-day or 30- 

101 

day much less for 5-year or 10-year notes, which would be a normal 

way for them to fund through a recession. 

Recessions are not extraordinary. What is extraordinary is no banking sector. We are a $15 trillion cash and carry economy right 

now. And TARP has not yet worked really—it has done for overnights and it has brought LIBOR down a little bit and it has things 

starting to unstick. And it will work, especially with a new government, with coherent vision and so forth. But we don’t have that 

yet. And there is no bond market for them to turn to either. 

So the two ways out of this are economic recovery and financial 

market functioning again, because they will go back to financial 

markets. And I would say to the Congressman’s question, it is not 

only the consumer demand. It is actually financing the new models. 

It is financing their several programs that they have in place, 

which is quite expensive, a tremendous amount of tooling that 

needs to be done. And that is billions of dollars of spending. 

Mr. PERLMUTTER. Okay. So my question and then—what do you 

think in terms of how long is the $25 billion going to last? 

Mr. SACHS. I think you will get through 2009, and I think that 

you will start to use section 136 for some of this also. And I expect 

that they won’t come back to you. I expect that they will go back 

to the financial markets. At least, that is what I would hope. 

Mr. PERLMUTTER. Dr. Slaughter? 

Mr. SLAUGHTER. If you think of the $25 billion being applied to 

cover the operating losses the companies seem to be realizing in 

realtime and across the three companies, given what information 

they have put in the public domain and what information they 

have provided about the future, I would think something in the 

neighborhood of 3 to 6 months. As Dr. Sachs said, there are a number of other intangibles that feed into what is going to be the performance of these companies. I will come back to, for a lot of these 

companies, it is their foreign sales and profits in certain foreign 

markets that have really been balancing out the sharp decline in 

the U.S. market that they have seen in recent times. 

So part of the answer to that question depends on what happens 

with economic growth all over the planet literally. 

Mr. PERLMUTTER. Are you optimistic on the dethawing of the financial markets so that there will be a place for them to borrow 

money if necessary? 

Mr. SLAUGHTER. I am optimistic in the sense that it is thawing. 

I mean some of the spreads that Dr. Sachs referred to have been 

coming down in the past several days and a few weeks relative to 

the levels they hit in mid-September. I, like many other people, 

don’t have great visibility about when we might get back to the 

type of lending activity we had 12 to 18 months ago. 

The CHAIRMAN. I would ask indulgence from the two economists 

who just said what they said. Would it be fair for us to say that 

the passage of the $700 billion bill is some part of the reason why 

we are seeing the credit markets improve? 

Mr. SACHS. Absolutely. Without that, we would be in a disaster. 

The CHAIRMAN. Professor Slaughter? 

Mr. SLAUGHTER. Yes. Yes. I fully agree. 

The CHAIRMAN. Thank you. You have justified for me a very long 

day. 

102 

The gentleman from Illinois. 

Mr. FOSTER. Thank you. First, I was wondering if you could give 

us some estimate of what you consider the aggregate overcapacity 

of the automobile industry and just in normal economic times right 

now in terms of the—the aggregate overcapacity. I think there is 

a general consensus that even if things are maintained, you know, 

relatively normal economic conditions, there was an overcapacity 

both in terms of the number of vehicles built per year, the number 

of dealerships, the number of brands supported by the manufacturers and so on. And so you could talk about those in optimistic scenarios in which things return to normal or pessimistic ones in 

which they continue. And I was wondering if you have any numbers on that. 

Mr. SACHS. Let me say, first of all, at a global scale, this is an 

expanding industry and a pretty rapidly expanding industry, actually. Because the car penetration in places like China and India remain very low. But that is not inconsequential for American built 

automobiles because if we have open markets we can also export 

from here. So I would not discount that possibility. Of course we 

have to break through trade barriers. But in terms of capacity, as 

you ask, Congressman, it is a growing global industry. Domestically I think it is quite interesting. We have 240 million vehicles 

more or less on the road right now in the United States. And if you 

just look at the replacement rates at a 15-year cycle for those vehicles, you are already up to 15, 16 million units a year, at least, not 

even taking into account further growth. 

So I don’t view this as an industry in significant decline where 

we are trying to break the decline. I don’t view it that way. I view 

it as an industry in significant technological change because we 

can’t go on with the kinds of cars that we had before. The physical 

environment and our energy security won’t permit it anymore. So 

we are in a transformation. But I don’t think we are in a terrible 

downward consolidation. That is my own assessment. 

Mr. FOSTER. Are any of the Big Three net exporters or importers? Are they all net importers? 

Mr. SACHS. Well, some models they are exporting, other models 

they are importing. Net, I don’t know the most recent data. 

Mr. SLAUGHTER. Two things, just to build on what Professor 

Sachs said. One, it is very hard to answer that question, particularly in the North American region. We have had integration between the automobile markets in Canada, the United States, and 

Mexico dating back to the auto pact in 1965, and it was extended 

further with the North American Free Trade Agreement. That 

speaks to one of the fine points Dr. Sachs made, which is it is 

hard—another factor in trying to answer your question is the productivity gains that the Big Three, like the foreign auto producers 

in the United States, have made that the CEOs discussed earlier, 

part of what that means is how much overcapacity there is is really 

a moving target in the productivity gains that they are making and 

what seems to be happening with demand not just in the United 

States but in a lot of these foreign markets as well. 

Mr. FOSTER. And then the issue of dealerships, which you can 

see mentioned in the press, the disparity and then dealerships per 

103 

car sold for the Detroit Three versus the imports. I was wondering 

if there were any numbers worth talking about on that. 

Ms. SYKORA. Because I am from Texas, I talk a little slow, and 

I didn’t get to some of that point in my oral testimony, but in the 

1950’s, we had 50,000 dealerships and there has been an orderly 

decline in the number of dealerships through market conditions. 

But it has always come at a cost. It comes at a cost of convenience 

to the consumer and competition that keeps prices low for consumers. But I think what is really important to realize here is that 

dealers aren’t a cost problem to the manufacturer. We bear the external costs of providing the distribution network, something that 

they don’t have the resources to do, and that our dealer network 

actually does increase convenience and competition. 

Mr. FOSTER. I guess Professor Slaughter, there is the sort of floor 

workouts that people talk about. There is the direct loan to avoid 

a bankruptcy, which I take it you are not a fan of. And then there 

are workouts that are comparable to Chapter 11 but actually have 

no bankruptcy filings. It is sort of similar, I guess, to what happened to Chrysler. Then there is a Chapter 11 but with the government-backed debtor in possession financing to ensure that no liquidation takes place and then finally a full Chapter 11 with no 

guarantee of not liquidating. I was wondering if you see that the 

medium—the middle two things, the government, sort of a government supervised and guarantee of the—to make sure no liquidation 

takes place but a bankruptcy filing or some government organized—something that is a virtual Chapter 11 where you get everyone in the room and say, okay, everyone, all the concerned parties 

do the same sort of negotiation as a Chapter 11 but not actually 

having that for all the market reasons that people are talking 

about. 

Mr. SLAUGHTER. I would briefly respond by saying I think all 

those scenarios you lay out are possible. I can imagine another scenario, which is a firm being in Chapter 11 and the government 

guaranteeing some of the debt that someone might step up to provide in the same way that Treasury and to some extent the Federal 

Reserve have been putting guarantees on certain debt instruments 

in recent times. 

Mr. SACHS. Congressman, we are quite overwhelmed right now 

in our economy and management to be able to manage a very delicate operation with thousands of firms and suppliers and a catastrophic headline of a bankruptcy of one of these companies. My 

view is it would be an unbelievable gamble under normal times 

and unthinkable right now. So I just wouldn’t go that way at all 

for this under the conditions of recession verging on collapse. We 

don’t have the bandwidth right now to handle another crisis of that 

magnitude and to negotiate that. If in 6 months or 9 months the 

situation is spiraling downward, and the $25 billion was not 

enough, you are going to come to one of those. But this is not the 

time to come to it right now. 

The CHAIRMAN. The gentleman from Missouri. And I apologize 

for overlooking him. 

Mr. CLEAVER. Thank you, Mr. Chairman. I have three questions 

and I will do it quickly. I know you have been here all day. 

104 

First, Ms. Sykora, I raised this question earlier with the CEO 

from General Motors. But I am very concerned that even with an 

injection of cash, GMAC has not increased the number of loans to 

potential auto buyers. I mean, it is making me nervous because 

how much money do we have to put in to see that the credit is 

unfreezing? Will your association have some indication of when a 

thawing is taking place? And are you seeing anything right now? 

I am going to support this rescue package because I think God gave 

us a neck for a purpose and that is to stick it out. So I am going 

to do that. But I have concerns. 

Ms. SYKORA. Well, you bring up a good point. And no, we are not 

seeing that thaw for working capital financing for dealerships or 

the inventory financing for dealerships. But I think what you heard 

also the GM execs say is that the Treasury funds haven’t been 

used. The TARP funds haven’t been used for the finance companies 

yet or they are not experiencing that yet. And we are working with 

Treasury on proposals to help free that up so that it makes retail 

credit more available, which is I think what your intent was. 

Mr. CLEAVER. Yes. But they are not doing it. 

Mr. SACHS. Not yet. 

Ms. SYKORA. Not yet. We feel very encouraged. 

Mr. CLEAVER. I mean you can’t answer the question about when, 

but— 

The CHAIRMAN. If the gentleman would yield, as the Secretary 

sort of indicated to us yesterday, he doesn’t plan to use any of the 

additional money except if we were able to push him into mortgages. He is talking about doing something, the credit facility he 

has been talking about. That would ultimately be helpful there. 

But that is apparently not until the next Administration. So there 

does not appear to be anything that would be responsive to this 

need on the horizon until late January at the earliest. 

Mr. CLEAVER. Professor Sachs, this may be more philosophical 

than scientific. But you had mentioned the hydrogen car earlier, 

which was what Chevy had been experimenting with, and which 

also troubles me a little because hydrogen is the most gregarious 

animal on the planet. It likes to have a lot of other things around 

it. And so therefore, a great amount of electricity is needed if we 

are going to produce these hydrogen automobiles. And the amount 

of electricity may exceed the cost of using fossil fuel. So is this a 

worthwhile venture for Chevy? Since we are going to probably end 

up giving some money, we need to have some comfort with the first 

$25 billion. 

Mr. SACHS. Yes. Let me be clear. What GM is going to bring out 

in 2010 is a plug-in hybrid, not a hydrogen. So the Chevy Volt is 

a hybrid technology plus a lithium ion battery. And its specs are 

to get 100 miles per gallon for a daily 80-mile drive. It is quite exciting. Now, what they are also doing is investing on a time horizon 

that they think is a decade to look into so-called fuel cell technology, which is hydrogen fuel cells. That is for something maybe 

in 2020. That is not the current but they are investing a lot of 

money, and I am glad they are. 

I wish our government—well, in fact, President-elect Obama talked a lot about $150 billion research and development program 

for technology over the next 10 years. One of the things of that will 

105 

be fuel cells to look into it. Your concern is a lot of engineers’ concerns. Is this the right way to go or not? Now how would you 

produce the hydrogen in that scenario? It would be produced in the 

Mojave Desert with solar power. It would be produced in North Dakota with wind power. It would not make sense to burn coal to 

produce hydrogen to put it into a fuel cell. So the model of it is an 

effective fuel cell combined with a renewable energy source to hydrolyze water or to get hydrogen some other way. 

Mr. CLEAVER. Thank you for spending the day with us. Thank 

you. 

The CHAIRMAN. Since all Members have completed questions, we 

do have our colleague from New Jersey who is the author of the 

bill. I will recognize him for 2 minutes, if there is no objection. 

Mr. PASCRELL. Thank you, Mr. Chairman. It is refreshing to 

have a panel talking about Main Street issues. And I must say, although the two professors are coming down different paths, they 

have been absolutely nonideological. That is very refreshing. And 

I am sure it is a salute to both you and the ranking member. 

Mr. Chairman, I know that this committee does not have the authority to amend the Internal Revenue Code of 1986, but I think 

Ms. Sykora has made a very, very compelling argument that she 

feels—and I am not putting words in your mouth so you correct me 

if I am—to allow an above-the-line deduction against individual income tax for interest on indebtedness and for State and local taxes, 

sales and excise with respect to the purchase of certain automobiles. 

Myself, and Senator Mikulski, have calculated that, on a $25,000 

car, that would be a savings of around $2,300 or $2,400. Do you 

personally feel, with all the data that is surrounding us, that that 

would be an incentive enough for people—and that, by the way, the 

bill only calls for 1 year for this to happen—will that be incentive 

to get traffic back at the places that you are interested in so that 

people can stay in business and people can buy cars? 

Ms. SYKORA. First of all, let me thank you for introducing that 

legislation, because we do feel like that is very beneficial. Since I 

don’t have a crystal ball, I will just kind of take a look back in history and tell you that, you know, when that was phased out in 

1986, it was over a 5-year period of time. And in those final months 

of 1991, we did experience a significant increase in traffic in consumers who wanted to take final advantage of that deductibility. 

So it was something they were aware of. Many of the consumers 

that I have talked to remember it, and so I think it could be an 

important stimulus. 

106 

Mr. PASCRELL. Mr. Chairman, in conclusion, I hope that you will 

communicate this. I think this is good data. 

The CHAIRMAN. Excuse me, but are you no longer on the Ways 

and Means Committee? 

Mr. PASCRELL. Yes, sir. 

The CHAIRMAN. So who am I supposed to call, you? 

Mr. PASCRELL. Being here today, they might throw me off. I don’t 

know. 

The CHAIRMAN. Members will have the appropriate time to submit any further material for the record. 

The hearing is now adjourned. 

[Whereupon, at 4:03 p.m., the hearing was adjourned.] 

(107) 

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