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REVIEW OF INDUSTRY PLANS TO 

STABILIZE 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 

DECEMBER 5, 2008 

Printed for the use of the Committee on Financial Services 

Serial No. 110–147 

( 

(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: 

December 5, 2008 ............................................................................................. 1 

Appendix: 

December 5, 2008 ............................................................................................. 97 

WITNESSES 

FRIDAY, DECEMBER 5, 2008 

Altman, Edward, Max L. Heine Professor of Finance, Leonard N. Stern School 

of Business, New York University ...................................................................... 60 

Dodaro, Hon. Gene, Acting Comptroller General, U.S. Government Accountability Office ......................................................................................................... 59 

Friedman, David, Research Director, Clean Vehicles Program, Union of Concerned Scientists .................................................................................................. 63 

Gettelfinger, Ron, President, United Auto Workers (UAW) ................................ 15 

Lester, Damon, President, National Association of Minority Automobile Dealers (NAMAD) ........................................................................................................ 65 

Mulally, Alan R., President and Chief Executive Officer, Ford Motor Company ....................................................................................................................... 16 

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

Rohatyn, Hon. Felix G., FGR Associates, LLC ...................................................... 62 

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

Sustainable Development and Professor of Health Policy and Management, 

Columbia University ............................................................................................ 68 

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

Motors Corporation .............................................................................................. 20 

APPENDIX 

Prepared statements: 

Barrett, Hon. J. Gresham ................................................................................ 98 

Kaptur, Hon. Marcy ......................................................................................... 100 

Klein, Hon. Ron ................................................................................................ 104 

Lynch, Hon. Stephen ........................................................................................ 106 

Moore, Hon. Dennis .......................................................................................... 107 

Perlmutter, Hon. Ed ......................................................................................... 108 

Roskam, Hon. Peter J. ..................................................................................... 109 

Altman, Edward ............................................................................................... 111 

Dodaro, Hon. Gene ........................................................................................... 136 

Friedman, David ............................................................................................... 150 

Gettelfinger, Ron .............................................................................................. 154 

Lester, Damon .................................................................................................. 165 

Mulally, Alan R. ............................................................................................... 169 

Nardelli, Robert ................................................................................................ 210 

Rohatyn, Hon. Felix G. .................................................................................... 220 

Wagoner, G. Richard, Jr. ................................................................................. 225 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Frank, Hon. Barney: 

Letter to Hon. Nancy Pelosi and Hon. Harry Reid from Attorneys General 

of the States of Vermont, California, Connecticut, Maryland, 

Massachuestts, Oregon, and Rhode Island, dated November 17, 2008 .... 262 

Statement from Ford Motor Company entitled, ‘‘Systemic Risk’’ ................. 264 

Page

IV 

Frank, Hon. Barney—Continued 

Statement from General Motors Corporation entitled, ‘‘Collateral Damage’’ ................................................................................................................. 266 

Capuano, Hon. Michael E.: 

Written statement from the University of Oregon, dated December 3, 

2008 ................................................................................................................ 268 

Waters, Hon. Maxine: 

Letter to G. Richard Wagoner, Jr., dated December 5, 2008 ........................ 271 

Letter to Robert Nardelli, dated December 5, 2008 ....................................... 272 

Letter to Alan R. Mulally, dated December 5, 2008 ...................................... 273 

Letter to G. Richard Wagoner, Jr., from Hon. John Lewis, dated December 1, 2008 ..................................................................................................... 274 

Article from The New York Times entitled, ‘‘Auto Dealerships Teeter 

as Big Three Decline,’’ dated November 30, 2008 ...................................... 279 

(1) 

REVIEW OF INDUSTRY PLANS TO 

STABILIZE THE FINANCIAL CONDITION 

OF THE AMERICAN AUTOMOBILE INDUSTRY 

Friday, December 5, 2008 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 9:30 a.m., in room 

2128, Rayburn House Office Building, Hon. Barney Frank [chairman of the committee] presiding. 

Members present: Representatives Frank, Kanjorski, Waters, 

Maloney, Watt, Ackerman, Sherman, Moore of Kansas, Capuano, 

McCarthy of New York, Lynch, Miller of North Carolina, Scott, 

Green, Cleaver, Bean, Moore of Wisconsin, Hodes, Klein, Wilson, 

Perlmutter, Donnelly, Foster, Speier; Bachus, Castle, King, Royce, 

Lucas, Manzullo, Biggert, Capito, Hensarling, Garrett, BrownWaite, Barrett, Gerlach, Price, and McCotter. 

Also present: Representatives Kaptur and Levin. 

Also present: Senator Stabenow. 

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

be very strict with time today. Because this is an important issue, 

there is a lot to be done. Members will be held strictly to 5 minutes, which means if you ask a question that takes 4 minutes and 

47 seconds to ask, you will get a 13 second answer. And we cannot 

accommodate, frankly, sloppiness in asking questions, and then let 

that be an excuse for extending the time. Under our rules, the minimum amount of time we can do for opening statements is 40 minutes. The Minority has requested the full allocation, so we will proceed immediately to our 40 minutes of opening statements. We 

started a half hour early, so we will get started at 10:00. 

We are going to dismiss this panel at 12:30. Because we did not 

want it to be simply the auto industry itself, we have a second 

panel as well, so we will move as quickly as we can under the 5- 

minute rule. 

I will begin with my opening statement, and the clock starts 

now. Context is especially important this morning. A failure to 

some extent of three of our major domestic manufacturing entities 

would be a very serious problem in any case, but in the midst of 

the worst economic situation since the Great Depression, it would 

be an unmitigated disaster. The Labor Department reported this 

morning that during the month of November, there was an increase in unemployment that was quite substantial; 533,000 jobs 

were lost. On a year-to-year basis from December of last year to 

2 

December of this year, we are down 1.9 million jobs. We are on 

track now to lose well over 2 million jobs obviously in that period. 

We will lose close to 2 million jobs in this year alone. Given that, 

any effort to denigrate the negative impact of substantial job loss 

and economic cutbacks in this industry has to fall. We operate, as 

we said, in this very difficult context. 

It is important to note here that—and, again, I guess the issue 

is, should we just be very hard-nosed and say let them go bankrupt? There is a consensus that substantial reorganization is needed, there is a consensus that a change in the product mix is needed, there is a consensus, and I congratulate Mr. Gettelfinger in the 

Union that economic times being what they are, everything has to 

be looked at, including further concessions which the Union had already made, and there was some very important ones that were 

put out there. All of that can be done by rational people in a sensible atmosphere. What bankruptcy adds is the ability to walk 

away from debt. The fact is that while we have this serious job 

loss, we continue to have a serious credit crisis in this country. We 

have a double whammy. And permission to these three large entities to stop paying their debts, that is called bankruptcy, would 

greatly exacerbate the credit crisis. 

I was given by my colleague from Michigan, Mr. Levin, who has 

been, along with the other Members from Michigan, both Democratic and Republican obviously, very much involved in this, as 

well as the Members from Ohio, very important numbers about 

what the impact would be if we were to have these entities stop 

paying their debts. Now, we have had a pattern of intervention 

that this Administration has led of trying to prevent people from 

not paying their debts. Not because of concern for them, but because of the impact it would have on other people, on the creditors. 

We have not, on the whole, bailed out debtors. We have gone to the 

rescue of creditors. 

In every one of those cases, there have been restrictions imposed 

on the debtors. That will clearly have to be done here, and everyone should understand that. The companies have made some proposals. I hope we will do something, because I think for us to do 

nothing, to allow bankruptcies and failures in 1, 2, or 3 of these 

companies in the midst of the worst credit crisis and the worst unemployment situation that we have had in 70 years would be a disaster. And one of the things that I do want to note, that people 

have said, well, you know, a lot of mistakes were made, the companies made mistakes, Congress made some mistakes, we didn’t increase CAFE standards, etc. Yes, a lot of mistakes were made. The 

relevance of that it is partly this. 

It would be nice if we could line up all the people who made the 

mistakes and punish them in a way that would make no impact 

on the innocent. I think all of us remember in school the teachers 

we hated most were the teachers who said if one person misbehaved, the whole class would get extra homework. I don’t want 

to give the whole country extra homework because automobile executives in the past misbehaved. We have to separate out unhappiness and anger over things not done in the past from the consequences now, and that is what we have focused on. Yes, a lot of 

mistakes were made. The auto companies made mistakes, unions 

3 

made mistakes, politicians made mistakes. The media hasn’t always distinguished itself, although you are not supposed to say 

that. The consequence of all those mistakes is that the country is 

to some extent held hostage. We need to free the country. And that 

is the focus. 

Yes, there have to be changes that are made and sacrifices made. 

But the focal point is not to punish those who made the mistakes. 

It is to prevent further damage to the country, and it is in that context that this committee will proceed. The gentleman from Alabama is now recognized for how many minutes? 

Mr. BACHUS. Five. 

The CHAIRMAN. Five minutes. 

Mr. BACHUS. Thank you, Mr. Chairman. Mr. Chairman, I want 

to begin by noting that before the present financial crisis hit, many 

of the trends in the domestic automobile industry were positive. 

The unions had made concessions, the cost had come down, the 

quality was up. Perception, I don’t think, has caught up with reality in that regard. The reality is that Detroit is making good cars. 

Having said that, our number one obligation must be the taxpayer. 

But we must also recognize that a failure of GM or Chrysler would 

have a detrimental effect on America, particularly at a time when 

our economy is under such stress. All of us should remember that 

government has no money of its own. In order to give, it first has 

to take from the American people. As I have said since day one, 

taking from the vast majority of citizens whose wages, health benefits, and pensions plans are less generous than those of the management and labor force at the Big 3 appears neither right nor fair. 

Personally, the only course I could possibly endorse would be limited transitional assistance to allow the American domestic automobile industry to return to solvency and profitability. But then, 

only if there is a reasonable expectation of success. I am convinced 

that short of a protected restructuring of General Motors or Chrysler, the domestic automobile industry will not be successfully remade and there will be no lasting solution to the considerable challenges that it faces. 

Such a restructuring is essential, not only for GM and Chrysler, 

but for the future of Ford and the hundreds of companies which 

supply and support all automobile makers in the United States, 

foreign and domestic. That is why I have invited Professor Edward 

Altman to testify at today’s hearing. He proposes not a bailout, not 

a bridge loan, but a restructuring that promises to place the U.S. 

automobile industry on a path to long-term viability. Professor 

Altman’s solution—or ones like it—certainly appears to be preferable to the continued deterioration and ultimate failure of the domestic automobile industry with its devastating consequences for 

the country, the economy, and the workers and families whose jobs, 

pensions, and health care benefits are dependent on the industry. 

Let me close by saying it is a solution not by Congress that I am 

proposing, but by the industry itself, but with a supporting role by 

the U.S. Government, preferably through the participation of those 

financial institutions which received hundreds of billions of dollars 

of taxpayer money under TARP or various Federal Reserve credit 

facilities intended to be used for loans to the American businesses 

and manufacturers like GM Ford and Chrysler and their suppliers. 

4 

In the event—and I am very disappointed that lending has not 

been available—that taxpayer monies are still necessary to support 

the restructuring, monies already appropriated under the 136 program could be utilized. What we need is a solution, not a first installment. Mr. Chairman, I would like to reserve the balance of my 

time. 

The CHAIRMAN. The gentleman has used 4 minutes. The gentleman from Pennsylvania is recognized for 5 minutes. 

Mr. KANJORSKI. Mr. Chairman, we meet today again with familiar faces, and I hope we are truly driven to success, all of us today. 

It is not a question of whether or not we want to have an automotive industry. I have not met too many people who think America does not need one. It is a question of whether we can, and if 

we can, how do we get to that resolve. I just want to say that over 

these last troubling 2 weeks of preparing for this hearing, I have 

come to the conclusion that we are still talking at each other instead of to each other. I am a little disappointed with the plans 

submitted because although they are much better than the plans 

submitted 2 weeks ago, they are still tentative and not final. 

I listened intently to the testimony yesterday before the United 

States Senate, and several elements of that testimony struck me as 

being very important and something we should carry on here. One 

part of it was the testimony of the expert on the question of how 

much would it really cost. In his analysis, I believe it was Dr. 

Anders or Ambers, indicated his estimate was $75 billion to $125 

billion. You know, I think at least we have one realist and that is 

pretty good. Nothing wrong with that. At least we know when we 

buy into this picture, what we are buying into. As the folks left 

here 2 weeks ago, it was a $25 billion request. The new submission 

is a $35 billion request, and they are adding on the additional $25 

billion that is in the energy bill. That is already $59 billion, so we 

are not too far from the good doctor’s estimates. He is giving us another $15 billion to $55 billion. I think that is a reasonable range. 

Now, the question is whether we should. As I have concluded in 

my own mind, we should maintain an American automotive industry. There is no question about that. I hear some arguments made, 

particularly by Labor, who are friends of mine, and they said, well, 

if you could give $200 billion or $700 billion to Wall Street why 

can’t you give $34 billion to the automotive industry? If we made 

a mistake in giving $700 billion to Wall Street, and I don’t think 

we did, I think we made a mistake in how we gave it to them. I 

don’t think the conditions were sufficient to make sure we accomplish the ends that we should have had in providing that kind of 

liquidity to the market. But that is—even if we made a mistake, 

it is not a justification for this Congress to make a second mistake. 

And it is time to me that we don’t set this off. I think the automotive industry is as important as Wall Street. And I think it is 

all part of the total picture that we have to get to and correct. 

So I wish that argument was not made in terms of, well, you 

gave it to them, you now have to give it to us, and then we have 

a line out in front of the building here of 432 other industries, corporations, and others that have needs. Some of them are going 

bankrupt in my district, and I am sure they are going to ask me, 

‘‘Well, Congressman, if you gave the automotive industry all that 

5 

money why can’t you take care of me and allow me to continue to 

operate my business and take care of my family and have a reasonable existence.’’ We are not going to be able to do that. Whether 

we can take care of the automobile business really should be determined here and in a very short few days ahead. I do not think we 

have time to right the real conditions and the real provisions that 

are necessary for the total recovery of the automobile industry. 

However, I suggest we do have time to come up with the $4 billion 

necessary for General Motors and potentially $4 billion necessary 

in a very short, very small bridge loan for the next 60 or 90 days 

to give this Congress a chance to return in January, continue working now until January, but in January in the new Congress to 

enact the type of legislation necessary to accomplish this end. 

If we are being practical that is what we should be doing. This 

idea that it is late guys, and you have to pass it, you have to do 

it, or nothing; I am afraid a lot of people are overestimating the 

willingness of a goodly number of Members of Congress to play 

chicken. And I think it would be terrible to experience that game 

of chicken and see the automotive industry go down because of it. 

So I suggest that we need some very strong activity here to work 

in conjunction with the Executive Branch, both the existing Administration and the future Administration, and the Congress to come 

up with the conditions necessary to accomplish an end and finance 

long-term, for viability, the automotive industry of America. 

The CHAIRMAN. Next, the gentleman from Delaware is recognized 

for 2 minutes. 

Mr. CASTLE. Thank you, Mr. Chairman. I have no doubt the extended immediacy of the problem. You don’t have to spend a lot of 

time, as far as I am concerned, trying to convince us of that. I 

think we all know it is there. I also have little doubt that we as 

Republicans and Democrats in the House and Senate would be 

willing to save the automobile industry in America if we can, but 

we need some sort of assurance it will work, not just your words, 

but plans, and we are trying to work through all that now. Then 

the question becomes, how do we make this work? Do we go to the 

bailout situation numbers, some $25 billion to $35 billion? Mr. 

Kanjorski has just talked about doing something less on an immediate basis. Do we use the Financial Services’ bailout dollars which 

have been discussed? Could the Federal Reserve get involved in 

that? 

Personally, I don’t think that you are going to be able to borrow 

from the large financial institutions. In spite of the fact they have 

gotten advances on money, they don’t want to get into dubious situations themselves at this point, so I think that is probably not correct. And I tend to agree with the statements about bankruptcy 

being probably more negative than positive in the long-term. So we 

have to come to closure as far as all of this is concerned. 

I am also concerned, as I think we all are, about the other jobs 

out there, the suppliers and the auto dealers. As I look at it, just 

based on your numbers, that is more than half of the jobs involved 

with the automobile industry before you get into the related things, 

such as those who supply those people and those kinds of issues. 

So one question I am going to have for you is the financial stability 

of those entities, and are they totally dependent upon you or are 

6 

there other ways in which they are going to need help as well? I 

think that is an important measure in terms of what we have to 

worry about here. 

And finally, I think we have to worry about oversight and accountability. If we go back and look at the Financial Services bailout, that is an area where perhaps we did not distinguish ourselves, and that is probably not something you really want to hear. 

But we may need to be more involved in sitting down with your 

people and determining are these plans which are working, are the 

steps which are being taken pursuant to those loans actually working, are we turning this around? That is a significant part of it. 

And I hope you would not be dismissive of that, but embracing of 

it in a way that we can all work together. This is taxpayers’ money 

we are dealing with. We want to protect jobs. We want to make 

darn sure we protect those dollars as well with some repayment as 

far as the future is concerned. I yield back the balance of my time. 

The CHAIRMAN. The gentlewoman from California is recognized 

for 2 minutes. 

Ms. WATERS. Thank you, Mr. Chairman, for arranging this second hearing on America’s automobile industry. Several weeks ago, 

the automakers came before this committee and spoke in generalities on why they need assistance from the Federal Government. At 

that time, there was no plan for long-term viability. Now that the 

automakers have submitted a plan, I am concerned—they have 

submitted a plan, but I am concerned about the plans that will be 

discussed today and how they will impact those, such as small car 

dealers, who are dependent on the auto industry to earn a living. 

Several weeks ago, we were told that a collapse of the Big 3 

would lead to the loss of 3 million jobs. Yet it seems that these 

plans still involve some paying for workers employed by the Big 3. 

GM, for example, states in their plan that they plan to cut at least 

30,000 jobs by 2012. In bailing out the Big 3, we can’t forget the 

needs of Main Street and the impact these plans will have on every 

day working Americans and the communities in which they live. 

This is true especially in light of the fact that we are still in the 

midst of a foreclosure crisis and America’s struggling homeowners 

are in need of assistance. This brings me to the Nation’s small car 

dealers. In their plans, each auto maker states that they have too 

many dealers and need to downsize. Ford says that it plans to work 

collaboratively with its dealers to reduce its dealer network. GM 

says that it plans to slash its dealer network by 35 percent. Chrysler simply says that it plans to rationalize its dealer network without providing any specifics. What none of them say is what the impact this rationalization, consolidation, or reduction in the number 

of dealers will have on those dealers and the local communities and 

local economies they support. On November 30th, The New York 

Times published an article entitled, ‘‘Auto Dealerships Teeter as 

Big 3 Decline.’’ I am interested, Mr. Chairman, in trying to understand how this bailout will help the small dealers. I yield back. 

The CHAIRMAN. The gentleman from New York, Mr. King, is recognized for 2 minutes. 

Mr. KING. Thank you, Mr. Chairman. I want to thank you and 

the ranking member for conducting this hearing. I want to thank 

the gentlemen for appearing today. And I associate myself very 

7 

much with the remarks of Mr. Castle. There is no doubt that this 

has a severe impact on the economy. The concern I have is not 

whether we should do something, but do we know what we are 

doing, do we know exactly what it is going to achieve? There is no 

doubt that with the $700 billion, we thought we were doing one 

thing, and it ends up the Treasury Secretary is doing something 

else. And so my concern is, even though we are talking about taxpayers’ dollars, if I thought that the money—if I was reasonably 

convinced that the money was going to work, then I would support 

it. And I am not saying I won’t. 

But really that is what I am looking for, is that we will have 

some reasonable expectation that whatever we do has a reasonable 

chance of working, because no one wants to lose 3 million jobs with 

the impact it would have throughout the economy. As the chairman 

pointed out, I believe it is another half a million this month are unemployed, and hundreds of thousands more over the course of the 

next year, if not more. So what I am going to be listening to carefully today is, what are the chances of this working, can we do it 

in the amount of time we have available? Mr. Kanjorski is right, 

we should do something transitional. But the fact is that the time 

for posturing is gone, the time for partisanship is gone. We have 

to address this very, very seriously. I think this hearing is a very 

sound step in that direction, and I yield back the balance of my 

time. 

The CHAIRMAN. The gentleman from North Carolina is recognized for 11⁄2 minutes. 

Mr. WATT. Thank you, Mr. Chairman, and thank you for convening the hearing. I have been conducting my own market research for the last 2 weeks, actually, in dealerships, talking to people like Ernel Simpson and George Duran and Reggie Hubbard and 

Anthony Wilder, who are salespeople and owners of local dealerships. And there is a serious problem exemplified most prominently 

by Ernel’s statement to me that he didn’t sell a single car in October of this year. We know there is a crisis. People are not buying. 

And if people are not buying, there is not going to be any working 

capital or turnover of money. 

I also went this morning and looked at the next generation of 

cars that are out in front of the Botanical Gardens. And I want to 

encourage my colleagues, if they have an opportunity today, to do 

that. All of them are in the development stage. But if these manufacturers go into bankruptcy, they will never get out of the development stage and into the implementation stage, which is what is 

necessary to maintain the manufacturing base here in the United 

States. 

So this is important. I am trying to keep an open mind, learning 

as much as I can about the crisis and what we can reasonably do 

to bridge this gap. I think we need to do something, and I am hopeful that we will come up with a solution. I appreciate the witnesses 

being here, and I yield back the balance of my time. 

The CHAIRMAN. The gentleman from Illinois, Mr. Manzullo, is 

recognized for 11⁄2 minutes. 

Mr. MANZULLO. Mr. Chairman, thank you for holding this hearing to give us an opportunity to discuss the restructuring plans. 

The main flaw I see in these plans is the assumption that the deVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
8 

mand for cars will naturally rise during tough economic times. If 

Congress just gives the Big 3 a bridge loan to pay their normal operating expenses but does nothing to increase the demand for the 

vehicles, we have not solved any of the long-term problems, and not 

helped the tens of thousands of people in my congressional district 

who are impacted by this crisis, including the great workers at the 

Chrysler plant in Belvedere, which makes the world’s finest compact autos, the Caliber, Patriot, and Compass. 

We need to encourage Americans to start buying cars again, and 

that is not in any of the plans. We should give Americans tax incentives, tax credits, to encourage them to buy cars. None of your 

plans has any statement, aside from one sentence on page 26 of 

GM’s, about how we get sales moving again. On top of this, GM 

wants to become a commercial bank with the ability to handle consumer checking accounts and compete with local banks, credit 

unions, and local facilities of national banks that the Big 3 shoved 

out of the auto credit market years ago, and which, in fact, have 

plenty of money to lend to consumers who want to buy your cars, 

but which you say there is no money for American consumers to 

buy your automobiles. 

I look forward to your testimony. I want to make sure that the 

people I represent are helped out. But the plans that you have 

given and the new plans are woefully insufficient because they do 

not address demand. 

The CHAIRMAN. The gentleman from New York, Mr. Ackerman, 

is recognized for 2 minutes 

Mr. ACKERMAN. We don’t always have a second chance to make 

a first impression. Welcome back. The situation in which we all 

find ourselves, certainly with this economy, is not one of your making. But the condition of the auto industry is one of your making. 

We are faced with a reality that we have given away almost $1 trillion in taxpayer money with what we thought was some strings attached to a bunch of financial industry people. You faced the fury 

around here with the American public of having really no accountability for any of that money. We are faced with dealing with that 

anger and that frustration, and you are the people who are in front 

of us right now. 

We want to be sure that if we are going to lend you this money, 

that you are going to be able to do the right thing and be able to 

run your companies. It seems to me that the last time you were 

here, maybe you didn’t get it. And I think that coming up with a 

plan I think maybe you now do, indicated by the fact that by the 

seat of your pants, you thought you needed $25 billion, but when 

you really figured it out you need about $34 billion. I don’t want 

to send you home again because it is just going to get more expensive in another 2 weeks, I am sure. 

So you arrive here with this problem in the midst of a perfect 

storm that occurred while the creek was already rising and caught 

you doing the same rain dance that you were always doing. And 

I think we seem to have gotten your attention last week. Your testimony is going to be very important to us because we are going 

to have to make an evaluation— 

The CHAIRMAN. The gentleman’s time has expired. The gentlewoman from Illinois is recognized for a 11⁄2 minutes. 

9 

Mrs. BIGGERT. Thank you, Mr. Chairman. Like my colleagues 

here today, I am deeply concerned about the state of the U.S. economy. Rather than looking forward to a cheerful holiday season, 

most Americans are facing uncertainty about the economic times 

due to unemployment or losses in their savings and investments. 

Other Americans are cutting back because of fear about their future. They have a job and they have savings but they are worried 

about how bad the economy might get. They are not buying, they 

are holding back to see what happens. What we all want to know 

is this. Are the Big 3 auto companies not selling cars because 

Americans don’t want their cars, they want better fuel efficiency 

from their cars, or they can’t afford their cars. 

Is it because they can’t get financing to purchase a new car, believe that bankruptcy will make the warranties on their cars 

worthless, or think we in Congress will enact some legislation down 

the road that makes it more attractive to buy their cars? Perhaps 

most importantly, is it just plain fear of making any large purchase 

at a time of uncertainty in an economy like this? We don’t know. 

We don’t know whether granting your request today will mean you 

won’t be back here in 2 or 3 or 4 months asking for more. 

I think to start with, I would like the witnesses to address how 

they will help dealers move inventory and encourage American consumers to buy more American cars. Second, I would like to hear 

thoughts on how Federal approval of GMAC’s holding company application, and Ford and Chrysler’s ILC applications may help to facilitate auto financing. And third, I would like to hear how manufacturers plan to ensure that their operations will become self-sustainable in the long term and guarantee that taxpayers will not 

simply be asked to foot the bill. With those questions in mind, I 

look forward to hearing from today’s witnesses. Thank you, Mr. 

Chairman. I yield back. 

The CHAIRMAN. The gentleman from California is recognized for 

3 minutes. 

Mr. SHERMAN. Thank you, Mr. Chairman. There are those who 

are concerned that this proposal is a departure from pristine capitalism. We don’t live in a world of pristine capitalism. When we 

look at the heavy subsidies provided by Japan, Germany, Korea, 

France, and China to their auto industries, we realize how insane 

it would be for us to go forward without a U.S.-based auto industry. The worst type of job for America to lose is a manufacturing 

job, and the worst time to lose a job is right now. But when we 

craft the bill, we need to put tough standards in the bill for three 

reasons: First, it will maximize the likelihood that the bill will pass 

on the Floor; second, it will minimize the number of executives 

from other industries who drive their cars to Washington making 

that plea, well, if you did it for the banks and the auto companies, 

you need to do it for us; and finally, it is important that we put 

tough provisions in these bills, because a careful reading of the 

written pronouncements of the automobile companies indicates 

that they themselves are not going to adhere to the kind of tough 

conditions that the American people expect and that the auto industry needs. 

At the last hearing, I asked a number of questions. For the 

record, I have gotten responses. My first was whether the compaVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
10 

nies would seek to keep open American plants and close down 

plants in other countries. They simply said, no, they could not provide that assurance. The bill needs to provide that you can’t close 

a plant without the approval of the Administration, and hopefully 

they will use reasonable efforts to preserve American jobs. I asked 

whether there would be a warranty fund so that people buying cars 

today can be sure that their warranty will be serviced even if, God 

forbid, one of these companies goes bankrupt. 

There is no assurance in the plans of that. If we want to protect 

consumers and to protect their warranty rights, we are going to 

have to put that in the bill. I asked about executive compensation 

and whether there would be a $1 million, I didn’t go for this $1 a 

year thing gentlemen, just $1 million a year limit on the salary, bonuses, stock options, and pension plan contributions, the whole executive compensation plan for any executive. The response was 

that, no, that assurance could not be given. If we want that limit 

to apply to the automobile industry, we are going to have to put 

it in the bill. 

Finally, and I know it has become symbolic and it can be regarded as a red herring, but I do think it is something the American people are now insisting on, and that is the use of private 

planes. I know that the executives drove here today, and that creates this image to the American people that the days of private luxury aircraft are over. Yet, I am told by the companies that is 

misreading the symbol, and so if we want the limit we have to put 

it in the bill. 

The CHAIRMAN. The gentleman from Texas, I believe, is next for 

11⁄2 minutes. 

Mr. HENSARLING. Thank you, Mr. Chairman. We were last here 

a couple of weeks ago. What has changed is clearly some of the 

panelists found an alternative means of transportation to the Nation’s Capitol. The request has gone from $25 billion to $34 billion, 

so I will be interested to figure out what has changed there. Here 

is what hasn’t changed. Nobody in this room wants to see the Big 

3 fail. Now, it is a catastrophic consequence for our Nation. But 

what hasn’t changed also is that every industry, every industry in 

America is hurting today. Show me one that isn’t. Show me one 

that couldn’t be assisted and made more viable and more profitable 

with an additional $34 billion. 

So why the folks before us and not other folks back home. Something else that hasn’t changed is that this year, over half a million 

small businesses, the job engine of America, half a million small 

businesses will go under, a number of them in my district, the 

Fifth District of Texas. They could be saved by $34 billion. New 

small businesses could be launched with $34 billion. Here is something else that hasn’t changed. Unless consumers demand more of 

these vehicles, and unless the labor cost of the Big 3 become more 

competitive, $34 billion, $44 billion, $54 billion, name your number, 

will not solve the problem. There is a concept of throwing good 

money after bad. I am anxious to hear about the plans. 

Last but not least, what hasn’t changed is the taxpayer is already $25 billion light on sending money to the Big 3. Now, you 

gentlemen haven’t received it because it is tied to fuel efficiency 

metrics. But there is bipartisan legislation that I would be happy 

11 

to support to release those funds to you now, but seemingly the 

Speaker of the House doesn’t want to move in that direction for 

fear of a political battle between the UAW and the environmental 

movement. But if it is truly an emergency, that money should be 

reprogrammed. I yield back. 

The CHAIRMAN. The gentleman from Georgia is recognized for 2 

minutes. 

Mr. SCOTT. Thank you very much, Mr. Chairman. Welcome back, 

gentleman. When you were last here, we talked specifically about 

helping the small businesses, the small auto dealers. In my district 

in Metro Atlanta, I represent about 31 towns and cities, and dealers are an integral part of that economy. And I asked each of you, 

and each of you agreed, that we would have this end, this plan. 

One, that we would make direct capital accessible for these dealers 

through the Treasury Department. That we would also have what 

we call disaster emergency loans that are right there available in 

SBA. Nothing off of your plate. All it would have to be would be 

the President or SBA Director be able to target these. This would 

help African-American dealers whom I represent quite a bit in the 

Metropolitan Atlanta area. And secondly, to set that $1 billion 

aside to be able to give low-interest loans. The problem with the 

dealers is they can’t get access to capital. And I think a major part 

of this would be for you to make sure that is in there. You agreed 

to do it at the last meeting. We want to make sure that is in there 

if this moves forward. The other part is the energy efficiency of 

automobiles. That is why the public is not buying the automobiles. 

They are not going to buy these gas guzzler SUVs. They want 

smaller cars, energy efficient cars. A part of the plan should be to 

make sure you got a marketing program in there to market these 

products over the next 90 days, to hurry up and then appeal to the 

patriotism of America. 

America will rise to that and buy American cars if they are fuel 

efficient. The other thing I think we really carefully need to take 

a look at, and I talk to you Mr. Wagoner, and you Mr. Nardelli, 

about this, to really look at merging your two operations. 

The CHAIRMAN. The gentleman’s time has expired. The gentleman from New Jersey is recognized for 11⁄2 minutes. 

Mr. GARRETT. Thank you. Mr. Chairman, obviously the panel sitting before you has a lot of experts on how to run an auto industry. 

I thank the chairman for holding this hearing. I understand also 

why the panel came before us several weeks ago asking for in essence a blank check with no strings attached. I think that was because Congress just previous to that gave away $700 billion to the 

banks likewise with no strings attached or no direction to the 

banks on operation or detailed information on how the banks will 

actually use the money. So I think that explains why you came before. I am pleased that the three companies have now submitted 

a more detailed proposal. I do still have some concerns how these 

new plans will be the saving grace for our domestic auto manufacturers. 

The purpose of the plans is to provide what is called a bridge 

loan to the Big 3 domestic auto manufacturers. My concern quite 

candidly is to make sure that this is not a bridge to nowhere. As 

I understand it, GM is essentially out of time right now. So the 

12 

question is, as we close dealerships in 2012, or restructure the 

union obligations in 2011, none of that is going to help us right 

now. Things have to be done sooner. I do have concerns with regard to the preemption of States’ rights and how that impacts upon 

the dealerships, and I would like to hear some information on that 

with regard to what their actual cost savings are in there and how 

the implications of implicating the States’ rights issues will play 

out. I also have concerns that the actual future sales numbers will 

be considerably lower than the projected ones in these reports. 

So in conclusion, if the Federal Government provides these temporary loans without the proper restructuring, I think all we are 

really doing is kicking the can down the road and delaying the day 

of reckoning at the expense of the taxpayer. And so for the reasons 

I said before, in addition to the ones on the demand side that have 

been raised by several others, I look forward to your testimony. 

The CHAIRMAN. The gentlewoman from Florida for 11⁄2 minutes. 

Ms. BROWN-WAITE. Thank you, Mr. Chairman. Several weeks 

ago when you were here, we were thinking of Christmas and the 

three wise men. Your method of transportation proved that you 

were the three wise guys. I am glad to see that you have turned 

into the three wise men in choosing your own products as a method 

of transportation here. You are here to tell us that after a decade 

of declining sales volume, if it weren’t for the financial crisis, consumers would be buying the cars from Detroit over the competition. 

However, the current crisis facing Detroit is not one created from 

short-term problems beyond your control, rather the crisis facing 

you all comes from long-term problems of overcapacity, poor corporate governance, and a lack of foresight. 

To be fair, Ford did have the foresight to make preparations for 

the future. General Motors and Chrysler, though, ignored their liquidity problems, probably planning to come to Congress rather 

than taking an objective look at reality. You all continue to act 

with negligent disregard toward your duty to plan for future emergencies. As a result, today we have over 3 million jobs at risk. Fortunately, the $34 billion that you are asking for today is obviously 

more than what you asked for the last time and probably less than 

what everyone feels you will be coming back for within a reasonable period of time. That is pretty sad. 

As we learned with AIG, these situations can spiral out of control, and despite the recent lessons, some of my colleagues want to 

do for Detroit what already has been done for AIG. Mr. Chairman, 

thank you for holding this hearing. I look forward to hearing from 

the witnesses. 

The CHAIRMAN. You are welcome. The gentleman from Texas for 

1 minute. 

Mr. GREEN. Thank you, Mr. Chairman. Mr. Chairman, thank you 

for not only convening the meeting, but also for your leadership. It 

has been dynamic. Mr. Chairman, this is about the Big 3, but it 

is also more importantly about the American economy. At a time 

when jobs are being lost at an unusual rate, 533,000 recently, unemployment is just up to 6.7 percent, at a time when we have a 

shrinking job market, can we afford to put more than 2 million people out of work? What will happen to them if this crisis continues 

to exacerbate to the extent that we lose the Big 3? They will have 

13 

to have some sort of unemployment compensation, they will have 

to have some sort of medical benefits, they will have to have some 

sort of pension program that is already in place to be cultivated 

and to be continued. This is about the American economy. If we 

don’t focus on the American economy, we will lose our way. Thank 

you, Mr. Chairman. 

The CHAIRMAN. We have three more statements. Let me just explain. We do this by time. On the Democratic side, we tend to use 

more time, and on the Republican side, less time and more Members. I do want to address, apparently some of my Democratic colleagues thought I had been discriminating against them in favor of 

the Republicans. I will remind people that when we had our last 

hearing, it unfortunately coincided unavoidably with a Republican 

conference, so some of the Republican members who were entitled 

to make opening statements were at the conference. When they returned, we combined the opening statement time that they were 

entitled to with their 5-minute question time. That is why some of 

them were given 7 minutes. 

Mr. BACHUS. Mr. Chairman. 

The CHAIRMAN. The gentleman from Alabama. 

Mr. BACHUS. We were told that if we came here on a horse or 

in a battery-operated car, we could get an extra minute. 

The CHAIRMAN. Well, I would say anybody who is here on a 

whole horse would get some consideration, but I am not sure everybody qualifies. The gentleman from South Carolina for 11⁄2 minutes. 

Mr. BARRETT. Thank you, Mr. Chairman. Gentlemen, I am a little unclear what we are doing here today trying to evaluate the 

competitiveness of business plans and determine whether taxpayer 

money should be used to save your business. And I don’t mean any 

disrespect, but 2 weeks ago you came here on private jets telling 

us how your businesses were failing and asking American taxpayers to bail you out. I understand your situation. I appreciate it 

and am concerned about the jobs that would be lost as a result of 

you closing your doors. None of us here want to see that happen. 

But as we sit here, thousands of people across this country who are 

watching this hearing are losing their jobs. I know these are tough 

times, but the discussions we are having here doesn’t make sense 

to me. 

We are sitting here trying to evaluate the business plans of corporations. But trust me, Congress has no authority to tell people 

how to spend money efficiently and effectively, and we certainly 

can’t prevent the direction of the marketplace. I am concerned that 

businesses are rightly going to start thinking they can just come 

to Uncle Sam and we will bail them out. And we are broke, flat 

broke. The Federal Government should be creating an environment 

where all businesses can succeed, not micromanaging the affairs of 

private businesses and industries and determining which businesses can fail and which can succeed. I would ask for my whole 

statement to be submitted for the record, Mr. Chairman. 

The CHAIRMAN. The gentleman from Georgia is recognized for 

11⁄2 minutes. 

Mr. PRICE. Thank you, Mr. Chairman. Over the past year, we 

have seen an unprecedented level of government intervention into 

14 

the market, and there seems to have been enough time and enough 

pain to pose this question, how is it working? One does not have 

to be an expert to judge the efficacy of recent government bailouts. 

Congress is appropriately in the position of asking some very difficult questions. One that must be addressed is whether or not the 

congressionally-backed taxpayer safety net that has been cast far 

and wide has only served to prolong and deepen our current financial downturn while at the same time burdening an unconceivable 

and enormous debt on our children, our grandchildren, and now, 

yes, even our great grandchildren. 

We are in real danger of politicizing our entire economy. And 

there is historic risk in that, for it has always been the absence of 

politics in the greater economy that has allowed more success for 

more people than any nation in the history of mankind. In a political economy, Washington is the judge. Washington picks the winners and losers. Washington decides what products and services we 

need. We all want the American auto industry to survive and to 

thrive. My sense is that the concessions necessary by all of the involved stakeholders to ensure a robust American automobile industry will require a legally expedited restructuring process. And I 

would ask our guests what is it specifically that prevents you from 

supporting this more tried and true, and dare I say American solution? 

The CHAIRMAN. The final statement, the gentleman from Michigan, Mr. McCotter. 

Mr. MCCOTTER. Thank you, Mr. Chairman. A preliminary point, 

I am not going to inquire about your travel arrangements because 

I am a Congressman, not a Conde Nast travel agent. And right 

now, it is a very anxious holiday for working families in Michigan 

in our entire American manufacturing sector. For that reason, later 

today, I will be putting out what I hope will be four points for a 

principled bridge loan that can be approved by this Congress, the 

most salient of which for the current proceedings is that half of the 

bridge loan come from the TARP funds for the prevention of foreclosures and that half of the funds come from the Department of 

Energy loans for the preservation of the research and development 

of green technologies in which the auto industry already engages. 

And of course, the ultimate maximum taxpayer protections, the 

best protection of which is a viable restructuring plan, which I believe you have put forward. As to why this is necessary economically, we have heard much about a ripple effect, how one manufacturing job’s loss can cause the loss of 7 to 10 more jobs. 

My friends, that is not a ripple effect, that is a tsunami effect, 

especially in these critical times. And as we debate this issue, let 

us look past the people in the room at the people who are employed 

in the manufacturing industry and remember the human cost of 

the decision that we will render. In the final analysis, I believe, I 

agree in some part with what the President said on this issue, ‘‘No 

matter how important the autos are to our economy, we don’t want 

to put good money after bad.’’ Yes, I recognize the rich irony in that 

Administration’s statement. But what I also recognize as we debate 

this issue is a simple proposition. 

In America, the only thing too important to fail is a working family. And as we address the bridge loan for the auto industry let us 

15 

not fail these working families who have entrusted us with these 

positions in Congress. Thank you. 

The CHAIRMAN. We will now begin the statements. I, at this 

point, would ask unanimous consent to enter into the record submissions from General Motors and Ford on the extent to which failures on their part would have reverberation throughout the economy. The Ford statement is headed Systemic Risk, the General Motors statement is headed Collateral Damage. And there are other 

Members who are submitting things for the record; we will get 

unanimous consent to do so. I also ask unanimous consent that colleagues who are not on the committee be allowed to join us on the 

dais. 

I see the gentleman from Ohio who has a long interest in this. 

And any other Members, particularly from those States obviously 

where there is a significant manufacturing presence, if there is no 

objection, will be invited to join us on the dais, but not of course 

be able to ask questions because of the time constraints. Is there 

any objection? I hear no objection, so that request is granted. And 

We will now start with our statements. I am going to begin with 

the head of the United Auto Workers, Mr. Gettelfinger, because at 

least for many of us in this committee, the Union is not an afterthought. Mr. Gettelfinger. 

STATEMENT OF RON GETTELFINGER, PRESIDENT, UNITED 

AUTO WORKERS (UAW) 

Mr. GETTELFINGER. Mr. Chairman, distinguished members of the 

committee, good morning. And thank you, Mr. Chairman, for giving 

the women and men of UAW a voice in this hearing. The UAW believes it is imperative that the Federal Government act this month 

to provide an emergency bridge loan to General Motors, Ford, and 

Chrysler. Without such assistance, General Motors and Chrysler 

could run out of funds in the near future and be forced to liquidate. 

The collapse of these companies would inevitably drag down numerous auto part suppliers which in turn could lead to a collapse 

of Ford. The UAW supports conditioning any emergency bridge 

loan funds both on strict accountability measures and on the companies pursuing restructuring plans that will ensure the viability 

of their operations in the coming years. 

For such restructuring plans to succeed, we recognize that all 

stakeholders, equity and bond holders, suppliers, dealers, workers, 

and management must come to the table and share in the sacrifices that will be needed. The UAW and the workers we represent 

are prepared to do our part. We are continuing to negotiate over 

ways to make the operations of General Motors, Ford, and Chrysler 

more efficient and competitive. Workers and retirees have already 

stepped forward and made enormous sacrifices. Thanks to the 

changes in the 2005 and the 2007 contracts, the labor gap with the 

foreign transplant operations will be largely or completely eliminated. 

The UAW recognizes that the current crisis may require workers 

to make further sacrifices. For example, we recognize that the contributions owed by the companies to the retirees health care VEBA 

fund may need to be spread out, and that there may need to be adjustments in other areas of the contract. But the UAW opposes any 

16 

attempt to make workers and retirees the scapegoats and to make 

them shoulder the entire burden of any restructuring. Wages and 

benefits only make up 10 percent of the cost of the domestic auto 

companies. The UAW also submits that it is not feasible for Congress to hammer out the details of a complete restructuring plan 

during the coming weeks. There is simply not enough time to work 

through the many difficult and complex issues associated with all 

of the key stakeholders, as well as changes in the business operations of the companies. What Congress can and should do is put 

in place a process that will require all of the stakeholders to participate in a restructuring of the companies outside of bankruptcy. 

This process should ensure that there is fairness in the sacrifices 

and that the companies will be able to continue as viable business 

operations. This process can begin immediately under the supervision of the next Administration. By doing this, Congress can 

make sure that the emergency assistance is indeed a bridge to a 

brighter future. Contrary to the assertions by some commentators, 

in the present environment, a so-called prepackaged Chapter 11 

bankruptcy is simply not a viable option for restructuring the Detroit based auto companies. Research has indicated that the public 

will not buy vehicles from a company in bankruptcy. 

In addition, attached to my testimony is a detailed analysis prepared with the assistance of experienced bankruptcy practitioners. 

The analysis explains that a prepackaged bankruptcy is not a feasible option for the domestic auto companies because of the size 

and complexity of the issues that would necessarily be involved in 

any restructuring, including relationships with thousands of dealers and suppliers and major changes in business operations. The 

UAW believes that the recent actions by the Federal Government 

to provide an enormous bailout to Citigroup reinforces the case for 

providing an emergency bridge loan to the Detroit-based auto companies. 

If the Federal Government can provide this type of blank check 

to Wall Street, it should also be able to provide an emergency 

bridge loan to General Motors, Ford, and Chrysler, especially since 

these companies would be subject to strict accountability and viability requirements. 

In conclusion, the UAW believes it is imperative that the Federal 

Government act this month to approve an emergency bridge loan 

to GM, Ford, and Chrysler to enable them to continue operations 

and to avoid the disastrous consequences that their liquidation 

would involve for millions of workers, retirees, and families across 

our entire Nation. Thank you, Mr. Chairman. 

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

page 154 of the appendix.] 

The CHAIRMAN. Thank you, Mr. Gettelfinger. 

Mr. Mulally. 

STATEMENT OF ALAN R. MULALLY, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, FORD MOTOR COMPANY 

Mr. MULALLY. Good morning, Chairman Frank, Congressman 

Bachus, and members of the committee. Since the last hearing, I 

have thought a great deal about the concerns that you have expressed. I want you to know I heard your message loud and clear. 

17 

On Tuesday, you received Ford’s detailed and comprehensive business plan, and I appreciate the opportunity to return here today 

and share Ford’s vision and progress in becoming a profitable growing company. You were clear that our business model needs to 

change. I absolutely agree. That is why I came to Ford 2 years ago 

to join Bill Ford in implementing his vision to transform our company and build a greener future using advanced technology. Let me 

share with you what we have done to change from how we used 

to do business to how we do business now. 

It used to be that we had too many brands. Now, we have a laser 

focus on our most important brand, the Ford Blue Oval. In the last 

2 years, we sold Aston Martin, we sold Jaguar, and we have sold 

Land Rover, and reduced our investment in Mazda. And this week, 

we announced we are considering the sale of Volvo. 

It used to be that our approach to the customers was, ‘‘If you 

build it, they will come.’’ We produced more vehicles than our customers wanted, and then slashed prices, hurting the residual values of those vehicles and hurting our customers. Now, we are aggressively matching production to meet the true customer demand. 

It used to be that we focused heavily on trucks and SUVs. Now 

we are shifting to a balanced product portfolio, with even more 

focus on small cars and the advanced technologies that will drive 

higher fuel economy in all of our vehicles, no matter what their 

size. 

It used to be that our labor costs made us uncompetitive. Now 

we have a ground-breaking agreement with the UAW to reduce 

labor costs, and we appreciate the UAW’s continued willingness to 

help close the competitive gap. It used to be that we had too many 

suppliers and dealers. Now we are putting in place the right structure to maximize the efficiency and the profitability for all of our 

partners. It used to be that we operated regionally, European cars 

for Europe, Asian cars for Asia, and American cars for the United 

States. Now, we are leveraging our global assets—innovation, technology, and our scale—to deliver world-class products to every market. 

It used to be that our goal was simply to compete. Now we are 

absolutely committed to exceeding our customers’ expectations for 

quality, fuel efficiency, safety, and affordability. This is the Ford 

story. We are more balanced; we are more efficient; we are more 

global; and we are more focused. In short, we are on the right path 

to becoming a profitable growing company for all of us. 

We have moved our business model in a completely new direction, in line with the most successful companies and competitors 

around the world. And as a result of our progress, we made a profit 

in the first quarter of this year, 2008. Unfortunately, we all are facing a severe economic downturn that has slowed our momentum. 

Despite this downturn, Ford does not anticipate a near-term liquidity crisis. In fact, we expect our automobile business to be profitable in 2011. But we do support a government bridge loan because 

it is critically important for the United States auto industry. 

Specifically, Ford requests access to $9 billion in bridge financing, something we hope we will not need to use. Instead, as we continue to drive change in our company, this line of credit will serve 

as a critical safeguard if events require it. And if we did need acVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
18 

cess to this loan, we would use the money to continue our aggressive transformation and restructuring. 

Ford is an American company, and it is an American icon. We 

are woven into the fabric of every community that relies on our 

cars and trucks and the jobs our company supports. The entire 

Ford team, from employees to shareholders, suppliers to dealers, is 

absolutely committed to implementing our new business model and 

becoming a lean, profitable company that builds the best cars and 

trucks on the road for our customers. 

There is a lot more work to do, but we are passionate about the 

future of Ford. In fact, we invite you to visit us in Dearborn to kick 

the tires, look under the hood, and talk to our employees. We hope 

you will join us and see for yourself the progress we are making 

to develop the vehicles of the future. 

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

169 of the appendix.] 

Ms. WATERS. [presiding] Thank you very much. 

Mr. Nardelli. 

STATEMENT OF ROBERT NARDELLI, CHAIRMAN AND CHIEF 

EXECUTIVE OFFICER, CHRYSLER LLC 

Mr. NARDELLI. Thank you, Madam Chairwoman. 

I appreciate the opportunity to represent the one million people 

who depend upon Chrysler for their livelihood. Before I answer 

your questions regarding our loan request, let me state clearly why 

we are here. 

Chrysler requests a $7 billion loan to bridge the current financial 

crisis. And in exchange, Chrysler is committed to continue our restructuring, including negotiations and cost-savings concessions 

from all constituents, invest in fuel-efficient cars and trucks that 

people want to buy, and begin repayment of our government loan 

in 2012. I also want to reinforce the need for Chrysler Financial 

to receive immediate assistance from TARP, as their continued vitality is as critical an assumption as our request. 

Chrysler requires this loan to get back on the transformation 

that began 1 year ago. As a newly independent company in 2007, 

Chrysler was on track for financial profitability. We eliminated 

more than 1.2 million units, or 30 percent of our capacity. We reduced our fixed cost, $2.4 billion, and separated more than 32,000 

workers, including 5,000 on the Wednesday before Thanksgiving, or 

25 percent of our salaried workforce. And at the same time, we 

have invested more than a half a billion dollars in product improvement in our first 60 days of independence. We improved our J.D. 

Power quality scores and reduced our warranty claims by 29 percent and, as a result, through the first half of 2008, Chrysler met 

or exceeded its operating plan and ended the first half of the year 

with $9.4 billion in unrestricted cash. 

We are here because of the financial crisis that started in 2007 

and accelerated at the end of the quarter of 2008. As consumer confidence fell and the credit markets remain frozen, the lowest U.S. 

auto sales in more than 20 years put tremendous pressure on our 

cash position. U.S. industry sales fell from $17 million in a year, 

in 2007, to a monthly annualized rate of $10.5 million just last 

month, a 6.5 million unit decline. 

19 

So what does that mean for Chrysler? It is a 10 percent market 

share. It translates to the loss of 650,000 vehicles, or roughly $16 

million in lost revenue opportunity this year alone. With such a 

huge hit to our sales and revenue, Chrysler requires the loan to 

continue the restructuring and fund our product renaissance. 

Chrysler has a sound plan for financial viability that includes 

seeking shared sacrifice from all constituents. We have identified 

approximately $4 billion of potential cost savings in improvements 

that have been included in our viability plan that we have submitted. We are committed to negotiate with all constituents to 

achieve our targeted savings. 

Our plan also includes producing high-quality, fuel-efficient cars 

and trucks that people want to buy, while supporting our country’s 

energy security and environmental sustainability goals. 

For the 2009 model year, 73 percent of our products will offer improved fuel economy compared with 2008. ENVI is our breakthrough family of all-electric and our range-extended electric vehicles, similar to the one that we have parked outside. 

Chrysler’s long-range product plan is robust, realistic, and it is 

green. The plan features 24 major launches from 2009 to 2012. It 

includes a hybrid Ram truck, our first electric-drive vehicle will be 

out in 2010, with three additional models by 2013. 

A key feature of Chrysler’s future is our capability as an electric 

vehicle company. Through our GEM or neighborhood electric vehicle division, Chrysler is the largest producer of electric-driven vehicles in the United States. Combined with new products from our 

ENVI group, we expect to have 500,000 Chrysler electric-drive vehicles on the road by 2013. 

Chrysler will continue to aggressively pursue new business models that do include alliances, partnerships, and consolidation. This 

model is currently successful in helping Chrysler increase effective 

utilization of our manufacturing capacity. For example, in North 

America, Chrysler manufactures all Volkswagen minivans and, beginning in 2012, will produce all of Nissan full-size trucks. 

So let me say in conclusion that I recognize that this is a significant amount of public money. However, we believe this is the least 

costly alternative, considering the depth of the economic crisis and 

the options we face. 

Thank you, Mr. Chairman. 

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

210 of the appendix.] 

The CHAIRMAN. Before I get to Mr. Wagoner, I want to make an 

announcement for us. Managing this fairly is not always easy, but 

many of the Members got to ask questions of the auto industry and 

the Union last time, and then others asked of the second panel. I 

am going to reverse that. I am going to begin by recognizing any 

Member on the Democratic side who did not get to ask questions 

of this panel. We will then go to others. 

So I just tell you that in advance so you have a chance to formulate your questions. We will then pick up the regular rotation. 

Mr. Wagoner, please go ahead. 

20 

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

CHIEF EXECUTIVE OFFICER, GENERAL MOTORS CORPORATION 

Mr. WAGONER. Thank you very much, Mr. Chairman, and committee members. 

Let me start out by expressing our sincere appreciation for the 

chance to come back to talk to you again. We know this is a time 

when you normally are with your constituents. 

I also wanted to thank the Speaker and the Senate Majority 

Leader for the very clear direction which they have provided as to 

the expectations as to what should be included in the plan. 

General Motors this year is celebrating its 100th anniversary as 

a company. As we begin the preparation and finalization of this 

plan, we thought back over those 100 years and the many successes of the company, but we also thought about the mistakes that 

the company had made and how we have learned from those mistakes. We applied all of that knowledge, both our successes and our 

mistakes, as we put together the comprehensive plan which we 

have submitted to you. 

We thought about things we do best, such as when we are pursuing technological excellence in leadership. We thought about the 

fact that we always have to pay attention to make sure we are cost 

competitive, and that we do best when we have close alignment between our company’s goals and the goals of the country. 

The plan that we have submitted is one that I and the whole 

General Motors team believes in and believes we can accomplish. 

The plan shows why GM needs temporary government funding, 

how that funding will be used, how we intend to repay taxpayers, 

and why funding is beneficial to the U.S. economy as well. 

In some ways, the plan accelerates and expands restructuring 

that we have been undertaking for the last several years. But in 

many ways, in fact, the plan is a blueprint for a new General Motors for our second century. The key elements of the plan are based 

on much more conservative, realistic industry volumes than we 

have historically had, and also it is comprehensive in that it addresses both operating competitiveness and balance sheet restructuring. The key elements of the plan are a commitment to new 

technology, particularly in the advanced propulsion area and the 

creation of green jobs, an increased production of fuel-efficient vehicles, a reduction in focus in a number of our brands, models and 

retail outlets, further manufacturing and structural cost reductions, full labor cost competitiveness with foreign manufacturers in 

the United States, a significant restructuring of our balance sheet, 

and continued suspension of common stock dividends, as well as 

changes to executive and board compensation and closure of our 

corporate aircraft operations. 

These and other tough, but necessary actions will position the 

company for medium and long-term success. This success is achievable if we can weather the global financial crisis and lowest level 

of U.S. industry sales in the last 50 years on a per capita basis. 

To that end, our plan requests, respectfully, $12 billion in shortterm loans and a $6 billion line of credit to cover the downside scenarios. We are seeking an immediate loan of $4 billion and a second draw of up to $4 billion in January. Our intent is to begin reVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
21 

payment as soon as 2011, and full repayment by 2012 under the 

baseline industry forecast in our report, and warrants would allow 

taxpayers to benefit if GM share prices increase. 

We also propose as part of our plan the creation of a Federal 

oversight board which would facilitate the restructuring negotiations, review the plans on a regular basis, and act to protect taxpayers. 

GM has been an important part of American culture for 100 

years, most as the world’s leading automaker. We are here today 

because we have made mistakes that we have learned from, because forces beyond our control in the credit markets have pushed 

us to the brink and, most importantly, because saving General Motors and all the company represents is a job worth doing. 

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

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

225 of the appendix.] 

The CHAIRMAN. Let me have on the Democratic side the first 

Member in seniority who did not ask last time, the gentlewoman 

from New York. Remember, 5 minutes. 

Mrs. MCCARTHY OF NEW YORK. Thank you, Mr. Chairman. I appreciate the testimony that we have heard. 

Last night, I had the opportunity to look at your business plan 

models, but I think we still have the problem of the American people trying to understand why we need to help all of you. Many of 

us understand, we are going around it in many different ways. I 

certainly have heard from all my dealerships in my district. 

But the final economy, the final economy and how is it going to 

affect this whole country if we allow one or all of you to fail. And 

what about the dealerships and the reconstruction of what you are 

planning on doing? If you go into bankruptcy versus if you have a 

bridge loan, how is that going to help those dealerships across the 

country to try to keep their businesses open? 

Mr. WAGONER. As we have discussed somewhat in our report, the 

analysis that we have seen suggested if an auto manufacturer goes 

into bankruptcy, that company will lose a significant amount of its 

sales. Under that scenario, it would obviously have a huge ramification for those that sell our products, our dealers, so we would 

expect to see similar dire consequences. 

Mrs. MCCARTHY OF NEW YORK. What I am trying to get at, and 

we had this, unfortunately, with Mr. Paulson when he was trying 

to explain why we needed to do the bailout going back, the American people don’t understand the words you are using. Put it down 

to dollars and cents on basically what it is going to cost this economy if we let you go, and what is the domino effect going to be 

across the whole country. 

Mr. NARDELLI. From a Chrysler perspective, I just want to reinforce a couple of comments I made in my opening comments of the 

importance of our financial support, our financing companies. They 

are inseparably linked. As of Saturday, Chrysler had over 240 dealers that have gone bankrupt because the finance company has not 

gotten any funds from TARP to be able to improve the liquidity to 

the consumer or to our dealer with relative to capacity. We have 

another 250 dealers that are on credit hold. That represents about 

63,000 units on an annualized basis that are gone from our busiVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
22 

ness plan. Of our 3,300 dealers, there are about 140,000 employees 

that they currently have on their payroll. These are men and 

women that stretch across this entire country, metro, urban, you 

name it. So this would be a tremendous impact if Chrysler went 

down just on the dealer network alone, plus there are 30 million 

Chrysler owners in the market today whose car value would depreciate significantly on future trade-in, and they would not be able 

to get parts and service to maintain them. I know there have been 

several questions raised about the dealers. These are the men and 

women, these are the entrepreneurs, these are the small businesses 

that we have to keep alive. 

Mrs. MCCARTHY OF NEW YORK. I guess what I am trying to get 

is a dollars and cents; that is what the American people understand. And we went through this again with Secretary Paulson. I 

can go home and talk to my constituents and tell them what it is 

in dollars and cents and why we have to do what we have to do. 

It is a shame that none of you can come up—and I think, going 

through some of the paperwork, you actually had a dollar and cents 

on what it is going to cost this economy. 

All right. If the U.S. financial system, Detroit Three plus suppliers, create a $1.1 trillion gross exposure to the U.S. financial 

system, and at least a $650 billion net exposure, those are the dollars and cents that the American people understand when we are 

trying to say, if we give you this bridge loan, how much is it actually going to save the economy across this whole country? That is 

the point I am trying to get across. You have to learn how to speak 

to the American people when you are in testimony in front of this. 

We understand what you are trying to do. The American people 

have to understand what we are trying to do to help them because 

this is a political situation here. 

Mr. WAGONER. Can I just comment that you are correct, the data 

of that is the impact on the financial system of our financial obligations. And I think obviously you can add to that multiples as far 

as the impact on the real economy, the loss of jobs, the closure of 

dealerships, the impact on the supply base. So that number would 

be a huge increment on the number that you cited. 

Mr. NARDELLI. Just on the three of us up here, the financial in- stitutions would be exposed over $300 billion alone in what they 

have in financing to the three manufacturers here at the table. 

Mrs. MCCARTHY OF NEW YORK. Thank you. 

The CHAIRMAN. The gentleman from Delaware. 

Mr. CASTLE. Thank you, Mr. Chairman. 

Mr. Gettelfinger, I would just like to thank you. We often fought 

the Union and what they have done in this circumstance, and 

maybe there is some proper attribution there, but I think you have 

made some hard decisions, and you show willingness to do more 

and we appreciate that. My questions are not for you, but I did 

want to make that statement. 

I do want to ask the other gentlemen about something I mentioned in my opening statement, and that is the other aspects of 

the whole automobile business. As I look at the numbers of the 

Center for Automotive Research saying that some 3 million people 

can lose their jobs, I think about 240,000 directly relate to you, but 

a lot relate to the other aspects of the business, and the most imVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
23 

mediate ones are our suppliers, parts and whatever it may be, and 

also the auto dealers. And my question is, should we be considering 

doing anything for them? Should they be at this table, or is it your 

judgment that if we are to restore you to profitability, if we have 

more Americans buying American cars, that would suffice in terms 

of continuing what they are doing? I point out that some 80 percent 

of these suppliers have overlaps, that is, they deal with more than 

one of you, which means if any one of them fails because you fail, 

it could affect everybody else. So there is a tremendous amount of 

economic involvement and engagement as far as that is concerned. 

It is fine that you come here and say what you need. I have read 

your plans and I understand those needs are there. And we clearly, 

I think, want to do something if we can work out what it is exactly 

we are going to do. But are we missing a step in terms of not helping any of them directly with respect to all of this? Or, as I said, 

just restoring you to profitability would resolve that problem? If 

you could give brief answers to that. 

Mr. WAGONER. Yesterday, at the hearing in the Senate, we had 

a supplier, the president of Johnson Controls, speaking, and he 

spoke I think eloquently in support of our proposals and made the 

observation that it is critical, first and foremost, that the OEMs 

survive and prosper. That is the key for the suppliers’ success. But 

we certainly have been dealing with a record number of supplier 

restructuring over the last 5 years. It has affected us all significantly. So our specific plans cover the needs of General Motors, but 

I do think it is fair, your comment about that some of the supply 

base remains at risk. The best thing I think we can do is grow 

automotive demand, as you stated, and have us continue to 

produce cars and trucks. But some of them continue to be in very 

tight circumstances as well, as you indicate. 

Mr. NARDELLI. The short answer for Chrysler is I have talked 

with our National Dealer Council and I have talked with our National Supplier Council, and we have gotten tremendous support 

that the best thing that could be done is to have a strong OE to 

be able to provide the continuity of new products and have the confidence from the consumer standpoint that we are viable, and 

therefore result in solid sales. 

Mr. MULALLY. I would just add the economy and credit. 

Mr. CASTLE. Okay. Just on another subject, very quickly. If this 

does not work, I mean, we have seen your plans and we have heard 

your testimony here today in terms of what your needs are, and 

Ford having a little bit of a delayed need or whatever it may be. 

But if this does not work, have you thought about what the next 

steps would be? I don’t know how long ‘‘work’’ means, but maybe 

within 6 months to 18 months, or whatever, your sales are not 

what you would have anticipated, you have consumed the money 

that we have loaned you to, and then you are in a circumstance 

where you come back here and ask for more money, and you are 

asking in some cases for sage money as it is, or do you consider 

bankruptcy at that point? Can the large banks at that point come 

through with loans? I am sure you have explored it with your lenders previously, consolidation, issues such as that. I didn’t sense 

that in your written statements or in your oral testimony here 

today. But my concern is, what if this doesn’t work? What might 

24 

be the steps at that point? It is still very important that we try to 

salvage the American automobile business if we can. 

Mr. WAGONER. Congressman, I thought the instructions that we 

had for the submissions of the report were very helpful in that they 

specifically asked us to cover a downside scenario as to U.S. industry volumes. And so we asked our people to look at what they 

thought would be an extreme extended downturn. We used industry volumes, which in the last 2 months have been very difficult, 

and took that level of industry for all of 2009 and then grew it only 

very gradually, recovering to 12.8 million units by 2012. If you 

have 4 years in a row running from 10.5 to 12.8 million units, this 

is the kind of automotive performance we haven’t seen for decades 

in the United States, frankly. And under that scenario, we believe 

that we can rely on the 12-plus $6 billion credit line and actually 

begin to pay some of the money back in 2010. 

The CHAIRMAN. Thank you. The next Democrat who did not get 

to question this panel, Mr. Wilson. 

Let me say that we did not keep the list, but we will check afterwards, so— 

Mr. WILSON. I knew you would. Thank you, Mr. Chairman. 

In Ohio, we appreciate well the interlocking relationship between 

the Big Three and certainly your suppliers. Do I understand you 

that the failure of one of the Big Three or one of the major suppliers could bring the auto industry down altogether? 

Mr. Wagoner? 

Mr. WAGONER. Yes, that is our view. 

Mr. WILSON. Is there securitization for the suppliers, then, tied 

in with what is going on with the bridge loans that are being discussed for the Big Three? 

Mr. WAGONER. The specific requests that we have for GM relate 

to GM’s funding only. We are working closely with our suppliers. 

And as Mr. Nardelli said, the strong message we get from our supplier council on a regular basis is that what we can do most to help 

them is to ensure the viability of GM and continue to work closely 

with them. And I think you know, but when an individual supplier 

has a specific circumstance of tight liquidity, or whatever, we regularly work with them on a one-on-one basis to do our best to help 

them get through tough times, but we don’t have a specific pot of 

funds here to support broadly the supply base. 

Mr. WILSON. I am just wondering, if I can, Mr. Chairman, if that 

should be part of the language. Because if we get the Big Three 

propped up, and we hope they will be and will be successful, we 

also need to be concerned about the major suppliers. 

Thank you. 

Mr. WAGONER. That could be helpful. 

The CHAIRMAN. The gentleman from New York, Mr. King. 

Mr. KING. Thank you, Mr. Chairman. 

Again, I want to thank the witnesses for their testimony. 

And as I stated in my opening statement, the concern I have is 

that, if we do provide the loans, the bridge loans, that we don’t 

know exactly how much is really needed. For instance, last week 

it was $25 billion, now it is $34 billion. There was testimony yesterday that over $100 billion could be what is actually required. 

25 

And to follow up on what Mr. Castle said, I am looking for some 

reasonable assurances that as we go forward, this will work. 

Now, Mr. Gettelfinger is here today, and I am not trying to pinpoint the UAW at all. But in the testimony, Mr. Nardelli, for instance, you spoke of continuing to negotiate cost savings. Now, that 

is in the future. If the money is given, for instance, what assurances do we have that those negotiations will continue between the 

UAW—and I know there are others besides UAW as far as the parties that have to be negotiated with—what assurances do we have 

that once the money is there, the negotiations will continue, and 

we won’t be back here 6 or 8 months from now saying, we got the 

money up front, and therefore we sort of put this on hold, sort of 

the way the American people were doing with gas prices, when 

they were $4 a gallon, $4.50 a gallon, they were in a panic. Now 

that it is back under $2, and they are forgetting the potential crisis, I am wondering, can we be assured that you will not forget how 

important and how vital this crisis is and that the temporary 

money you get will not put off those negotiations? 

Mr. Gettelfinger? 

Mr. GETTELFINGER. Thank you very much for the question. I 

would like to first of all say that, compare this to a ballpark right 

now. In 2005 we went on first base, 2007 we went on second base. 

Just recently, this week, we are on third base. Other participants 

have not even entered the ballpark yet. We are prepared, as I have 

stated in my testimony, to go back to the bargaining table. In fact, 

we took action this week, but we think everybody should be at that 

bargaining table. We think the board of directors, we think the 

management, suppliers, dealers, equity holders, and especially 

creditors should be at the table. And we believe that there should 

be equal sacrifice. But we also believe that the men and women of 

the UAW who have stepped up should be given recognition for the 

three negotiations in which we have already made major concessions. But yes, sir, we are willing to go back to the bargaining 

table, providing everybody else comes to the table as well. 

Mr. KING. Now, if I could ask the auto executives. You heard Mr. 

Gettelfinger say it sounds like almost ongoing negotiations. Do you 

feel the other parties will be at the table? Do you feel that you can 

make the type of progress that has to be made, that Mr. 

Gettelfinger believes has been made with his people, that you will 

make with the others? 

Mr. NARDELLI. Congressman, if I could very quickly, and then 

allow the others to comment. In our plan we are asking for $7 billion. We have also identified $4 billion of concessions across all constituents, just as Mr. Gettelfinger had identified. We are willing to 

put in a benchmark date that if not by March 31st we don’t have 

those concessions in line, because that is when we start to realize 

the benefit of those, then we should be back here and pull the loan. 

Mr. KING. Mr. Mulally. 

Mr. MULALLY. Yes. 

Mr. WAGONER. Our plan comprehends the same approach, to use 

the short-term advance of funding and the oversight board as forcing mechanisms to ensure that we deliver all parts of the plan. 

Mr. KING. Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. The gentleman from Florida, Mr. Klein. 

26 

Mr. KLEIN. Thank you, gentlemen, for being here today. 

Mr. Chairman, I also want to just voice my support for use of the 

TARP funds for the auto financing issue. We have heard from a 

number of our dealers and many others about the lack of availability of financing for customers, and that certainly is one of the 

factors right now that is dealing with the lack of sales that is going 

on. So I think that is already out there, but Congress doesn’t have 

to do anything further. It is more of the Treasury’s move here to 

make that available, and certainly I would support that. 

Gentlemen, what is going on here in this discussion is a balancing act of what is palatable, what is feasible, what is politically 

supportable, and what makes economic sense. None of us are experts here, we are all trying to combine together with you and others to come up with a good solution. 

I want to throw an idea out that was sort of brought to me by 

some local people who are economists, people who are business entrepreneurs. And maybe it is just too common sense, but I want to 

put it out there and see what you think. 

We all know about the idea of collaboration and research. We 

know that you are on different tracks and different points on hybrid and electric vehicles. We know that your competitors overseas 

are at different stages as well. We all know that in order for you 

to be not only short term, but long term, and have a sustainable 

plan, you have to have the most advanced, the most cutting-edge 

technology on these automobiles that will be attractive for us, as 

consumers, to buy them here in the United States and everywhere 

in the world. We want you to be on top of that and at the forefront. 

What about the idea of taking whatever level of technology and 

research you have going on right now and creating some type of 

joint enterprise, whether it is public, not for profit, maybe some different way of doing it or maybe some private collaboration, taking 

some of the money that you are asking for here right off the top 

so the American taxpayer can understand there is something tangible that they are going to see come out of this in terms of longterm sustainability, if they are listening to the discussion today 

and your explanations, some of it may be supportable in the way 

they view it, and some may just think we are pouring money back 

into a problem, but taking part of this and say, let’s take whatever 

technology you have and collaborating together and making that effort to say we are going to do something together, our Manhattan 

Project, if you will, for the moment, to say in some timeframe we 

are going to put together the most far-reaching, the most supportable, the best concepts that we can put together, take all that and 

put it together, and then make it available back to each of the companies for future development and commercialization. 

What do you think about that? 

Mr. NARDELLI. Congressman, let me say, first of all, I couldn’t 

agree with you more. Two is, we ought to use the $25 billion that 

has been approved for fuel efficiency and environmental compliance. We should take a portion of that money and we should create 

exactly the format you have suggested. Therefore, rather than each 

of us trying to spend a portion of the money in developing the same 

technology, we do it collectively, it works back, and we gain our 

brand identity and differentiation through the vehicles we put it in. 

27 

I fully would support that because I think without that we might 

be trading and trying to gain oil—removing our dependency on oil 

to dependency on foreign technology. So I would totally subscribe 

to the concept. 

Mr. WAGONER. For my side, in fact in our submission we specifically raised the concept. I would have to put a footnote on that 

though as far as if the funding is taken out of the request that we 

have put forward. We would have to tell you how much we actually 

have in for our own R&D spending just to make sure we balance 

it out right. But other countries do a lot of their research this way. 

It is not a coincidence that the leadership in battery technology in 

the world today is in Korea and Japan. They do things just like you 

are saying. So I think if we want to move this country to leadership 

in the next generation technology, this kind of collaboration, plus 

a heavy amount of government support and basic R&D, is going to 

be an essential aspect and we would welcome it. 

Mr. MULALLY. Sir, I agree. And in a big way we are doing that 

through our suppliers because, as you well know, about 75 percent 

of the dollar value of all our automobiles are with the suppliers and 

they supply to all of us. So we work very closely to make sure that 

we are targeting the most effective enabling technology so we 

would bring that on. But that is a great idea also, to take it a step 

further. 

Mr. KLEIN. And I would like not just to talk about through the 

supplier chain; I understand some of that technology is advanced 

through manufacturers and research that way. I am literally talking about physically taking this research and these very bright people, I am convinced the brightest people in the world, the scientists 

and the entrepreneurs, are right here in the United States. And if 

we took this idea and took each of you in your present form and 

bring this together under one roof, physically under one roof, and 

put this out and say this is going to be it, this is how we are going 

to focus all of our attention on this, obviously you have to stay 

alive, but I think that is something to consider, Mr. Chairman. 

The CHAIRMAN. The gentleman from Alabama. 

Mr. BACHUS. As you all know, back in 1980, the government got 

warrants from Chrysler, and then 3 years after that Chrysler became profitable and Chrysler tried to get out of that obligation. 

President Reagan went ahead and enforced it and insisted that the 

warrants not be called back. If warrants were given to you or there 

were some other agreement as to interest rate at a later date, 

would you attempt to come back to Congress or to Pennsylvania 

Avenue and try to get out of those agreements? 

Mr. WAGONER. No, sir. 

Mr. NARDELLI. No, sir. 

Mr. MULALLY. No. 

Mr. BACHUS. The one reason I mention that is of course AIG did 

just that, they borrowed $85 billion, had an agreement at a certain 

interest rate, and then 6 months later—or 6 weeks later, actually, 

they complained that was much too high and it was an onerous 

agreement. And actually over one weekend they came in, didn’t 

have to come to Congress, didn’t have to testify, and they got a 

lower interest rate and $65 billion more, which sort of brings me 

to my second question. And either Union representative, Mr. 

28 

Gettelfinger, or you, Chrysler has filed for a TARP application. You 

haven’t had any word on that, right? 

Mr. NARDELLI. No, sir. 

Mr. BACHUS. You know, Citibank and AIG got relief over a weekend without ever coming to Congress; Congress found out about it 

after the fact. I am sure you all feel a little singled out, and I think 

Mr. Ackerman mentioned that. And it is a good point, it is just 

amazing that there seems to be a glaring double standard. 

Chrysler Financial has had an ILC application for 31⁄2 years. And 

during the last year there has been no moratorium. You still 

haven’t heard about that, have you? 

Mr. NARDELLI. No, sir. 

Mr. BACHUS. That would help, wouldn’t it? 

Mr. NARDELLI. It would help tremendously because it would give 

us access. 

Mr. BACHUS. Toyota, and some of you are calling it Volkswagon, 

they have had that advantage over you. Ford has had a request 

since last February. Have you heard? 

Mr. MULALLY. I have not. It is very important. It could really 

free up the credit for the consumer. 

Mr. BACHUS. Yes, it is amazing to me. And let me conclude by 

saying GMAC has had an application for a bank holding company 

for some period of time. You have not heard anything, have you? 

Mr. WAGONER. Our application is under consideration. 

Mr. BACHUS. Under consideration. You know, Morgan Stanley 

and Goldman Sachs, they got expedited status because there was 

a financial problem or because of the financial issues. I can’t imagine why you are not being given expedited consideration. But it 

does appear that our Federal regulators certainly have two tracks, 

one for Citi, one for AIG, one for Morgan Stanley and one for Goldman, and a much slower track, almost a dirt road track, that you 

take. And we have urged them, and I know the chairman— 

The CHAIRMAN. If the gentleman would yield, you mentioned the 

moratorium. But even during the period of that moratorium, in our 

new charter for industrial loan corporations, we had made it clear 

that the auto companies should not be covered by that. So even 

during the period of the moratorium, we made that clear with regard to GMAC’s application, and others. So I am in total agreement 

with the gentleman. 

Mr. BACHUS. This committee and the chairman and I moved legislation with the support of people on both sides saying if Toyota 

and Volkswagen had that tremendous advantage, then Ford and 

Chrysler certainly ought to have it. And it is quite discouraging to 

see $7.7 trillion worth of different credit facilities, TARP funds and 

all of this, and yet when our motor companies appear before these 

regulators all they do—they certainly don’t do anything. 

Thank you. 

The CHAIRMAN. The gentleman from New Hampshire. 

Mr. HODES. Thank you, Mr. Chairman. 

I want to thank the witnesses for appearing today, and thank 

you for the work you did in putting together your business plans. 

I think they have gone some way to showing that you are connecting the dots because a couple of weeks ago, at least what I 

heard from my constituents, was that you folks simply were in anVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
29 

other universe and you weren’t connecting the dots and that you 

didn’t have the answers that people expected before exposing taxpayer money, again, given what we have just done with the financial system bailout, to loss of taxpayer money. 

I am not opposed to helping your industries. I think that they 

are crucial to our economy, the jobs that are connected are upper 

most in my mind. I have met with representatives of the UAW in 

New Hampshire, I have met with the auto dealers who, despite the 

fact that a third of them are going to disappear under the best of 

circumstances, are supporting helping the auto industries. But I 

think that, even assuming your business plans worked and we 

spent $34 billion, what I am hearing here today from my colleagues, and what I have heard from others, including the auto 

dealers, is that is only one-third of the problem. You can hold yourselves open for business with the money we give you, the $34 billion, and I think that is a short-term fix, it will get you on the road, 

but not get you down all the way to a long-term transformation. 

But the issue with the credit availability is a serious, serious issue. 

That is the second component to the true cost to the taxpayers. 

And so you have heard from the ranking member and the chairman that there is support for the idea, perhaps, of the transformation of bank holding companies and ILC, and also from other 

members about accessing the TARP funds. What amount of money 

do you put on the need of the credit companies, whether it is spent 

in an asset purchase program or direct injection, or whatever Secretary Paulson comes up with as plan A, B, C or D, what amount 

of money for the credit companies do you see as necessary? And 

would they accept conditions that say the money they get has to 

go for auto loans as opposed to what we did with the bailouts 

where the banks are sitting on the money? That is question number one. 

And number two, don’t you think we also are going to realistically need incentives for consumers who are worried about losing 

their jobs, losing their houses, and are frankly concerned about 

spending $30,000 or $40,000 on a car purchase? And if that is 

going to be required, what is the dollar amount, what is the plan 

for that, how do you think it ought to happen, and aren’t we really 

talking about a really much bigger number than $34 billion when 

those are factored in? 

Mr. NARDELLI. Well, let me, first of all, sir, answer the first part 

of your question. Chrysler Financial, that is what they do. It is the 

easiest and the cleanest allocation of funds that you will see. They 

basically provide about 70 percent of consumer loans and close to 

a similar amount of floor planning. Our dealers have been tremendously disadvantaged relative to the rates, as we went out and got 

a new conduit and what they have to pay there. So termination of 

the lease program took 20 percent of our volume away, and the fact 

that dealers now cannot floor plan beyond 1 year has imposed additional hardship on them. So the support for our financial institution, the financial arm of our company is important. The short-term 

request for Chrysler was about $1.6 billion for wholesale, that request is in, and another couple of billion to support retail, so that 

when consumers come in, they can get competitive rates and they 

have access to loans. 

30 

Today, at a 700 to 750 FICA score, at least our consumers, the 

hardworking men and women of America who buy our products, 

just aren’t qualifying. 

Mr. HODES. So is Chrysler’s answer $4 to $5 billion on the credit 

side? 

Mr. NARDELLI. That is the current request that is in today. 

Mr. HODES. And do you think that is sufficient under the current 

circumstances? 

Mr. NARDELLI. Along with getting ILC that will allow us then to 

sell paper, to increase the capacity, and we will be able to get that 

flow going back through Chrysler Financial, supporting our dealers, supporting the consumers. 

Mr. HODES. GM, Ford. 

Mr. WAGONER. Our situation is a little different. Our finance 

company, which we only own 49 percent of, is applying for a bank 

holding company status. And if they achieve that, they would then 

be eligible over time to access funds that have already been appropriated under the TARP. I can’t give you that exact amount now, 

I can check and try to get back to you. But it is critical. 

The CHAIRMAN. Mr. Mulally, if you can go very quickly. 

Mr. MULALLY. As you know, we are in a very different situation 

because we have our own finance company. And the relationship 

that you are talking about is very important. We support 77 percent of all the wholesale financing. And so what we have in for the 

short-term, asset-backed commercial paper with the Federal Reserve is $16 billion, and we have accessed $4 billion of that to support the customers. 

The CHAIRMAN. The gentleman from California, Mr. Royce. 

Mr. ROYCE. Thank you, Mr. Chairman. I would like to ask a 

question of Mr. Wagoner and also Mr. Mulally. And it goes more 

to the long-term question of Ford and GM because over the last few 

years, Ford and GM internationally have performed very, very 

well. And one of the questions I have is what is it about the business environment or the tax structure or the operating costs, as 

you go down the reasons for the success for Ford and GM in past 

years and looking forward over the long haul, why they are projected to do well overseas and international competition and why 

it is a greater burden here. I would like a discussion from each of 

you in terms of what some of those determinants are. 

Mr. WAGONER. I will be glad to start. When we go into new or 

newer markets, frankly we don’t take some of the burdens of the 

past that we might have for being in business in the United States 

for 100 years, so we get to use, you know, all of our accumulated 

knowledge of the industry. But then as we go into new markets, 

we go in on an unencumbered basis. Frankly, not so different than 

some of the transplants who have come to the United States later, 

they come using the latest knowledge, the latest thinking about 

dealership structures and things of that sort. So sometimes, ironically, coming a little bit later can be an advantage. 

So the reason that we have been successful in growth markets 

is we really use our global capabilities and we build up with the 

latest best practices, whether it is lean manufacturing or when it 

is the right product technologies, whether it is the right distribution strategy. So I think that is a plus. And by the way, those overVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
31 

seas businesses, over the last several years, almost uniformly have 

been quite profitable. And they have, in almost every case, been 

able to send dividends back to help us address funding issues in 

the United States. 

I think the other thing that we have struggled mightily with 

here in the United States is the fact that we have had huge pension and post-retiree health care obligations. Our report indicates 

that we have spent about $103 billion over the last 15 years to 

fund pensions and post-retiree health care obligations. Those were 

responsibilities that we had from our past, and so we felt it was 

appropriate to try to fund those. But in all candor, that is a use 

of cash that in a newer market we wouldn’t have to allocate funding for. And obviously if we had the $103 billion and could use it 

for other things, it would enable us to be even farther ahead on 

technology or new equipment in our plants, or whatever. 

So I think that is maybe two of the points that I would cite there. 

But I do want to highlight that a lot of that is behind us now, 

thanks to the funding we have put in and the work we have done 

with Mr. Gettelfinger and his Union. So we do think we have a lot 

of those issues behind us now in the United States, and so we are 

looking forward to our next 100 years here with a cleaner slate, if 

you will. 

Mr. ROYCE. Let me ask Mr. Mulally the same question. 

Mr. MULALLY. You bet. As you all know, Ford has grown up as 

a global company, very regionally operated though, but because of 

that we had just an absolute laser focus on the Ford brand. And 

in the United States over time, especially with our cost structure 

in the United States and fuel prices being relatively low and low 

interest rates, we were focusing on the larger vehicles, the SUVs 

and the trucks. Well, around the world, the majority of our vehicles 

are much smaller. And we all know how neat they are because the 

fuel prices are relatively higher. 

So going forward, especially because of the work we have done 

with the UAW where we can now make smaller vehicles in the 

United States profitably, we are leveraging all of those fabulous vehicles from around the world in the United States, so we will have 

a balanced portfolio now of small, medium and large cars, utilities, 

and trucks. I think we are going to be able to profitably grow now 

in the United States using those lessons learned from around the 

world. 

Mr. ROYCE. Let me also ask you, the spread here that we have 

seen on auto loans, and asset-backed securities in general, getting 

back to the ranking member’s question, just how much of a benefit 

would it be since your competitors, for example—well, Toyota operates under an ILC. If it were possible to achieve the bank holding 

company position, or the ILC status, how much of a difference 

would that make in that very large spread right now? Would that 

diminish those costs in financing significantly if you were on par 

with your competition? 

Mr. WAGONER. It would have a huge impact for us because right 

now we either can’t get credit, or the spreads have moved up dramatically. And if we had a bank holding company status and then 

you would have deposit taking capability, the cost of funds would 

32 

go down. I can’t give you an exact basis point on that, I could look 

it up and get back to you, but it would be a tremendous advantage. 

The CHAIRMAN. The gentlewoman from Wisconsin. 

Ms. MOORE OF WISCONSIN. Mr. Wagoner, you mentioned in your 

last response, you talked about the legacy cost, which, as you said, 

in the last 15 years they have cost you $103 billion and it has constrained investment in more advanced manufacturing product technologies. And you have a very elaborate plan. Wouldn’t this have 

been a great time for GM to say, we need a national health care 

program in order to stay viable? You correctly identify the problem 

that other markets—China, Latin America and Russia—where GM 

doesn’t have the burden of those costs. Why did you stop short of 

saying that this kind of initiative would help our industry? 

Mr. WAGONER. Well, it undoubtedly would help to level the playing field for the industry. I remember back to when President Clinton first brought forth proposals on health care back in the early 

to mid-1990’s, our chairman and my predecessor, Jack Smith, was 

a very proactive proponent of it, and we have tried to be very active 

in the health care debate since here in Washington, but our endorsement per se wouldn’t necessarily have resulted in the enactment of a policy. But our competitors do, in most other countries, 

operate with a significantly greater government role in health care. 

Ms. MOORE OF WISCONSIN. But it is very much not a part of your 

plan here. 

Let me move on to ask a question about the warrants and about 

the first position of taxpayers. How can taxpayers manage to retain 

a first position, GM and Chrysler, if, in fact, you plan to honor all 

of the trade debtors in other countries? Can you just walk through 

for the committee how you would be able to do that? 

Mr. WAGONER. We at GM have a fairly significant collateral pool 

that has not been pledged yet of assets, for example, our ownership 

position, overseas subsidiaries, and trademarks. And so, as one 

thing, we could offer that as collateral against any borrowing that 

we do, and that would be a first lien for the government. 

Mr. NARDELLI. And in our position, our assets are all securitized 

against the first lien, and therefore it would take a congressional 

action to subordinate that to the government loan. 

Ms. MOORE OF WISCONSIN. I think one of the things that makes 

a lot of people nervous, there are conservatives and so-called liberals, and I think that there are nervous people on both sides, and, 

Mr. Gettelfinger, your Union has made a lot of sacrifices in this. 

I appreciated your testimony setting the record straight that the 

$73 an hour amount really was mostly these legacy costs. And you 

have made agreements, apparently, to cut your workforce severely. 

I guess I would like to hear the narrative or, you know, what do 

we say to folks if we approve this plan, and yet there are 20,000, 

25,000 workers who are going to be laid off, a severe constraint in 

the supplier and dealer market, what do we say as we vote for this 

plan? 

Mr. GETTELFINGER. Well, first of all, thank you for pointing out the sound bite, the $73 sound bite, because that is clearly what it 

was. But secondly, there has to be a restructuring in the industry. 

And what this is about, this is about survival at this point in time. 

And there are going to be, unfortunately, losses. There are going 

33 

to be facilities closed down, we understand that. We are going to 

lose dealerships, we know that. And we are going to lose suppliers. 

But what is the end result if we do nothing? That is the question. 

And as hard as it is to have to say that, that is reality. We can’t 

sugarcoat it, we can’t stick our head in the sand. It is what it is. 

The thing is, if we can just get through this economic downturn, 

then we can hope that there will be growth in the industry and we 

can rebuild and move forward to a brighter future. 

Ms. MOORE OF WISCONSIN. Thank you. I yield back. 

The CHAIRMAN. The gentleman from Illinois, Mr. Manzullo. 

Mr. MANZULLO. Thank you, Mr. Chairman. 

I am quite distressed over the continuous talk coming from the 

Big Three that there is no money available for consumers to buy 

your automobiles. Credit unions, local branches of national banks, 

and community banks are loaded with money and are ready, willing, and eager to give to people to buy your automobiles. 

On the current business environment on the Ford, page 3, 

quoting the Federal Reserve’s senior loan officers, it says, ‘‘Over 60 

percent of banks have tightened standards for consumer credit.’’ 

That is not the case. I talked to a bank yesterday. I said, ‘‘Have 

you changed any standards in the past year?’’ He said, ‘‘No.’’ He 

said what happened is the Big Three set up their own financing 

arm and they pushed the community banks out of lending. And 

then you come back here, and you have created much of the crisis 

among yourselves because you created your own subprime market 

in automobile loans that is sitting out there because it was too easy 

credit to people who couldn’t afford to buy the automobiles that you 

sold to them. That originally is what TARP was set up for was to 

buy that back. 

And now, Mr. Wagoner, you want to go into the commercial 

banking business. You want to be able to take demand deposits or 

set up checking accounts. I mean, you would be a bank on the 

order of Wal-Mart, which we stopped, and Mr. Nardelli, of Home 

Depot, which we also stopped. Why would an automobile manufacturer go into the commercial banking business and wreak havoc on 

the community banks, credit unions, and local branches of national 

banks? You are there to make cars, not to run a banking operation. 

That is part of the bailout, so that you can become a commercial 

bank? I don’t expect an answer because there is no good answer to 

that. Your job is to make cars. 

And the other thing is I noticed that both Ford and GM have 

overseas subsidiaries that are doing quite well. My question to each 

of you is, have you taken advantage of the IRS 60-day window to 

bring back profits from overseas operations to infuse them into 

your domestic operation without having to pay 35 percent tax? Mr. 

Wagoner, have you done that? 

Mr. WAGONER. Yes. We have remitted all of the available funds. 

This isn’t an issue for us because we have an excess tax credit position. 

Mr. MANZULLO. You have already brought it back? 

Mr. WAGONER. Yes. 

Mr. MANZULLO. Mr. Nardelli. 

Mr. NARDELLI. The same for Ford. 

34 

Mr. MANZULLO. The other question that I have is for Ford. On 

page 17 of your plan, you state that you want to accomplish the 

goal to increase more car profitability by improving cars at competitive levels through reduced complexity of global purchasing 

skills. Does that mean you are going to be buying more fasteners 

and tool and die from China to infuse into American cars? 

Mr. MULALLY. It means that we are going to try to standardize 

more and more on all of the parts as well as simplify the vehicles— 

Mr. MANZULLO. Would you answer my question, please? 

Mr. MULALLY. We operate all around the world— 

Mr. MANZULLO. I understand that. Does that mean that we are 

going to lose more fastener and tool and die industry in the United 

States because you are going to be buying those from the Chinese— 

Mr. MULALLY. Absolutely not. Our goal and the plan that we 

have presented grows our business in the United States. 

Mr. MANZULLO. I am talking about the suppliers. 

Mr. MULALLY. Our plan is to grow the business, including our 

suppliers, in the United States. 

Mr. MANZULLO. So you are telling us that if you get the money— 

and by the way, I think everybody in this room is in favor of getting the needed $25 billion that is already there—is that, based 

upon this statement on page 17, that you are not going to be increasing purchases from Chinese and other overseas suppliers of 

tools and dies and fasteners? 

Mr. MULALLY. Yes. What we meant by that, part of our strategy 

is to make them the same standard, not necessarily where we buy 

them. Our plan is to grow our business in the United States. 

Mr. MANZULLO. You didn’t answer the question. Are you going to 

use U.S. taxpayer dollars to source more tool and die equipment 

and fasteners from overseas facilities for American manufacturing? 

Mr. MULALLY. No. 

Mr. MANZULLO. Thank you. 

The CHAIRMAN. The gentlewoman from Illinois, Ms. Bean. 

Ms. BEAN. Thank you, Mr. Chairman. 

I thank you all for your testimony today. I am sure you all wish 

you were here under better circumstances. And I know most of us 

here appreciate how integral the auto industry is to the economic 

fabric of our Nation. I know that as I travel to visit manufacturers 

in the Eighth District of Illinois, most of them that I visited are 

part of your supply chain, and their own economic viability is very 

much tied to yours. 

We have also seen dealer closings in my district and heard from 

the mayors of those municipalities who will suffer the tax consequences of those closings. 

In your proposals, you highlight the strides that you have made 

in recent years relative to development of electric hybrids and more 

fuel-efficient vehicles, and yet when you hear from most Americans, they don’t seem to know about those accomplishments and 

improvements that you have made. Most business plans that I 

have looked at from my business past, one of the most critical parts 

is marketing. And my question to you is, while you seem to, in your 

proposal, talk about narrowing the gaps operationally and economically to compete, you seem to fail to miss the part where you are 

truly failing is in marketing to your potential customers. And so 

35 

my question is, what will you do to market the improvements you 

have already made and any subsequent improvements you make, 

because having the best mouse trap isn’t going to necessarily get 

you there. 

Mr. WAGONER. I think it is a great observation, and I think one 

of the earlier questioners highlighted a frustration that we have 

that some people have a view on a quality gap which doesn’t exist 

anymore. So it speaks well to your point. 

From our perspective, I think the world of marketing has 

changed a lot. The old days of network TV is not as effective as 

some of the new ways. So we have put a lot more effort ourselves 

into Internet-based marketing and I would say trying to put more 

of our efforts into finding ways to use broader communication approaches on new technologies. So things like the Chevy Volt would 

be an example of a breakthrough, brand-new idea, no one else is 

working on that. It is a great piece of engineering, technological 

work. But we have obviously been much more open than we have 

ever been in developing a product, and taking it to market, and 

showing it around the country, and showing here is where we are 

on the battery development. I actually drove one of the early models up to the Senate yesterday. And so I think using the knowledge—and the facts of what you are really doing to tell your story 

in some ways is more effective than the old fancy commercials. 

Ms. BEAN. If I might, I think with the road trips and driving 

down here and making some stops along the way was a good thing 

to do, but I would boldly suggest that you do more of it. Were there 

further comments on that? 

And I would also like to speak specifically even to the cooperative 

marketing funds spent by your dealers. If you open a Sunday paper 

and you look at the auto ads, your foreign competitors are talking 

about miles per gallon on their vehicles. The American ads do not 

include that, which leads consumers to think that you must not 

have something that you are proud of to be talking about. And will 

you impose some restrictions on those cooperative marketing funds 

to your dealers to make sure they are including that? 

Mr. MULALLY. An absolutely other great point. To your point, 

when you look more at the local advertising historically, it would 

be more about the deal and not capturing the real value of the 

products. And a couple of things that have really worked for us 

over the last year, because, as you know, our market share has stabilized. And we are starting to actually grow again, is to really 

stress the value of the products. And the biggest ones on the consumer’s mind has been quality, sustainability, and fuel mileage, 

safety, and then great value. And another thing we have used are 

third-party assessments. So we provided a lot of data, a lot of information on a lot of the vehicles. 

And right now we are rated equal to or above the best in the 

world on quality, on sustainability. Every one of our new vehicles 

now is equal to or better than the competition. And on safety we 

have the most five-star ratings of any manufacturer, but we have 

to use every mechanism we can to get that message out in addition 

to the good value. 

Mr. NARDELLI. Great suggestion. One of the things we did to try 

and dispel the whole issue of reliability and durability, and we 

36 

really have tried to bugle it loudly, is our lifetime warranty on our 

power trains. And the dealers have been tremendously supportive 

of that advertising. I think as we gain momentum in our product 

portfolio on more energy—as I said, 79 percent of our products will 

show fuel efficiency year over year. Your point is spot on. 

Ms. BEAN. My last point is that also have your PR work the 

media a little better, because the coverage you have been getting 

certainly hasn’t framed this very well, and you are not getting the 

credit that you are due in certain areas. 

Mr. NARDELLI. Thank you. 

The CHAIRMAN. The gentleman from Texas, Mr. Hensarling. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

Gentlemen, there is no reason you should remember everyone’s 

opening comments, but there are several aspects of your request 

that trouble me. One is if you get the money, then who doesn’t get 

the money? Can you name me three industries in this economy 

that aren’t hurting, that couldn’t use $34 billion? I can’t think of 

them. I have had homebuilders in my office. I have talked to representatives of the airlines, the largest poultry producer—I believe 

it was the largest, perhaps second largest—Pilgrims Pride, not located in my congressional district but nearby, just filed for Chapter 

11; 50,000 jobs in east Texas are being threatened. 

So I wonder what the standard is. Is it simply because you are 

bigger or perhaps in more pain than other industries in the economy? That troubles me. So if we say yes to who—to you, who do 

we say no to? 

I ask this somewhat rhetorically. I know two—I know the answer. I assume nobody at the table has ever heard of Williams 

Paint and Body Shop in Mesquite, Texas, hadn’t heard of Jacksonville Industries in Jacksonville, Texas, hadn’t heard of the Kinnis 

Framing Contractors in Chandler, Texas. My assumption is you 

haven’t heard of these businesses. They are small businesses located in the Fifth Congressional District of Texas. One has unfortunately failed. The other two are struggling in this economy. 

So the second question I have about your request, given that 

small businesses create three out of four jobs in America, if the 

purpose of Congress is to try to help our economy, save jobs, create 

new jobs, why should you get the $34 billion and not small business, or is it only the small businesses that service the auto industry that should be recipients or beneficiaries of this money? If anybody cares to address that, I would like to hear it. 

Mr. NARDELLI. Let me try, please. 

I don’t think anybody has been immune from this financial crisis 

that we are going through today in this economic trough. I certainly understand your point of view, And as we look at it from our 

perspective, the auto industry, I think at least one of the companies you mentioned is, in fact, impacted by the auto company or in 

support of the auto company. If you look at—you know, again, I 

look at our business, our dealers, 3,300 of them are small-business 

men and women. These are very comparable to the examples that 

you gave us. And the only point I can offer is that a strong OE— 

in our case, there is about a million people depending on Chrysler’s 

success. So I am certainly not justifying because we are bigger, I 

37 

am merely presenting the point that we may have a broader impact 

across the country, sir. 

Mr. HENSARLING. Let me ask another question. There was a report on CBS News last night that you gentlemen have spent roughly somewhere north of $50 million on lobbying fees for the first 9 

months of this year. I don’t know if anybody cares to challenge the 

accuracy of that report. If not, I would simply point out that the 

three businesses, small businesses, in my district certainly don’t 

have that advantage. 

I don’t begrudge you your constitutional right to petition your 

government for redress. That is not my point. But my point is 

clearly we have heard of your name. Clearly you have people that 

you can afford to represent you in Washington, D.C., small business can’t. So something strikes me as patently unfair. 

But I do have a specific question about the lobbying fees. Can 

any of you tell me what portion of those fees were used to lobby 

Congress to remove the restrictions on the money that is already 

in the pipeline versus trying to get the additional $34 billion? 

Mr. NARDELLI. I have been given a number. Zero, sir. 

Mr. HENSARLING. Zero. Zero has been spent on either this trying 

to reprogram the earlier money or to get this additional money? 

Mr. NARDELLI. I am sorry? 

Mr. HENSARLING. I am sorry, Mr. Nardelli. Zero has been expended where? 

Mr. NARDELLI. I think your question was how much has been 

spent on reprogramming money. 

Mr. HENSARLING. I thought it was an either/or question as far as how does the $50 million break down. 

Mr. NARDELLI. I don’t know the answer to that. 

Mr. HENSARLING. Thank you. 

Last question; I know my time is running out here. 

The CHAIRMAN. It is about out; 3 seconds. 

Mr. HENSARLING. Thank you, Mr. Chairman. I will yield back. 

The CHAIRMAN. The gentleman from Indiana, or is it the gentleman from Illinois? 

Mr. DONNELLY. I went last time. 

The CHAIRMAN. I thank the gentleman for his honesty. 

The gentleman from Illinois. 

Mr. FOSTER. Your viability plans assume a significant recovery 

in the unit volume over time, And I would like to poke a little bit 

at how realistic this might be. One of the things that has been 

mentioned anecdotally is that cars are lasting longer, And it is no 

secret that in flat economic times, that will result in a drop in the 

number of new vehicles required each year. Have you made efforts 

to quantify this? 

If you look at the fleet of vehicles that have been produced over 

the last 10 years and will be wearing out, what does that mean in 

terms of the anticipated number of vehicles that have to be replaced? And is there a number you can attach to that, any of you? 

Mr. WAGONER. I don’t have it with me, but we can get it for you. 

Mr. FOSTER. Do you have a feeling whether this means that 

there would be a 20 percent drop? It is my feeling that cars last 

a lot more than 20 percent longer than they used to, and that 

would naively lead to a 20 percent drop in flat economic times. It 

38 

seems to me that if you are really trying to make projections that 

aren’t just seat-of-the-pants things, that would be an important factor to understand. 

Mr. WAGONER. We have that data. I don’t have it with me, but 

we would be glad to review that, and we could get our experts to 

show you the whole model we use. 

Mr. NARDELLI. I would only answer in that our forecast for 2009 

is the exit rate of 2008. In other words, we are looking at the 10.5 

exit rate as an entrance rate and basically holding that depressed 

level, that significantly depressed level, 35, 40 percent year over 

year, throughout 2009. And as we were asked to also do a sensitivity analysis, we took that down another million units in the industry to 10, 10.1. And basically with the request that we have 

asked, even at the lower level we still would be able to repay a billion dollars back to the taxpayers by 2012. 

Mr. FOSTER. My second question has to do with offshoring of 

components and subassemblies, as you mentioned in various testimony, 70 or 75 percent of the value added in a car, which presumably means 70 or 75 percent of the jobs come from subassemblies. 

And I was wondering if you anticipate being able to become costcompetitive with the transplants, particularly for small cars, without increasing the offshore component value in your cars. 

And secondly, just how does that compare now between the three 

of you and between you and the transplants in terms of the fraction of the value that is offshored in a car today? 

Mr. NARDELLI. I don’t know exactly on the transplants; 78 percent of our purchase material is from U.S.-based suppliers. 

Mr. FOSTER. By U.S.-based, do you mean U.S. manufacturing 

plants? 

Mr. NARDELLI. No, no. U.S. manufacturers. 

Mr. FOSTER. So that a battery manufacturer with a plant in Mexico qualifies as U.S.-based by that definition. 

Mr. NARDELLI. It could, sir. I don’t know that secondary split out 

of that. But 78 percent of the materials from a U.S.-based supplier. 

Mr. FOSTER. Well, there is a certain amount of pain that has 

happened by suppliers moving their bases offshore. 

Mr. NARDELLI. I don’t know the— 

Mr. FOSTER. So developing that number for us would be very interesting both now and for your projections and for the transplants, 

getting a comparison, seeing if we are going to see a continuing 

hemorrhaging of jobs under the business plans you are talking 

about. 

And I guess the third quick question is how many of you are personally confident that there will be a solution to the battery problem, that this won’t be this decade’s fuel cell, hydrogen fuel cell, 

that is just something everyone talks about and then, in fact, never 

becomes economically reasonable? And maybe I will just attach a 

number to it. What year do you think there might be a battery that 

is cost-competitive and performance-competitive with the gasoline 

engine? 

Mr. WAGONER. I am personally confident. We are putting a lot 

of money, for example, in this Chevy Volt that I mentioned before 

which we are endeavoring to get into production in 2010. It will 

not, obviously, at that point be fully cost-competitive. I would say 

39 

we should expect two generations of vehicles to do that. So maybe 

a target would be 2016, 2017 we would be completely cost-competitive. But that is going to depend on volume. So if we can get volume up faster than that, then the opportunity to be cost-competitive could be something. 

Mr. FOSTER. As I understand it, you do not have a battery car 

that is technologically competitive right now, not to mention costcompetitive. 

Mr. WAGONER. Well, actually, I drove one yesterday that will 

leap ahead of what anybody has on the market in 2010, the Chevy 

Volt extended-range electric vehicle. 

Mr. FOSTER. But it is not performance-competitive with the gas 

car, correct? 

Mr. WAGONER. I tell you, I drove over today—you mentioned fuel 

cells, but the way the fuel cell drive is a proxy for an electric vehicle, because it is an electric vehicle, it drives in some ways better 

than a gasoline-powered vehicle. 

Mr. FOSTER. But in terms of range and battery lifetime and all 

these issues that people have failed to succeed after 100 years. 

Mr. WAGONER. That is why the concept that we are putting in 

the Volt, which is an extended-range vehicle which always runs on 

the electricity, has a battery which gets you 40 miles, and then you 

can recharge the battery with a very small, efficiently running internal combustion engine, is, I think, a good solution. 

The CHAIRMAN. The gentleman from New Jersey, Mr. Garrett. 

Mr. GARRETT. Thank you, Mr. Chairman. 

Again, thanks, members of the panel, for being here. 

Let me just follow up on a line of questioning. It seems that 

there is a spectrum of ideas out here of potential actions or inactions that Congress could take. On the one end, Congress could say 

they are not going to do anything; on the other end of the spectrum, Congress could come back and say, we are going to pass a 

piece of legislation with all the bells and whistles of oversight and 

so on and so forth for the full $34 billion. And somewhere in between there is, of course, maybe alternatives. 

One of the alternatives that the gentleman from Texas was referencing a moment ago—I think it is one of the alternatives—is the 

idea—his phrase of reprogramming the $25 billion that is already 

approved and signed into law and what have you. 

So let me just throw that question specifically out to you. If Congress in its wisdom decides not to take either end of the spectrums 

of actions today or in the next few days on this, is an alternative 

to take the reprogramming idea? And if we did craft some sort of 

legislation with regard to reprogramming that $25 billion, could we 

do it in a way that we would, say, reprogram a portion of it? And 

the numbers that I am hearing here off the back of the page was 

around $9 billion, $4 billion and then $4 billion, and so on. So is 

there a cumulative aspect of, say, we just reprogram a portion of 

that $25 billion and free up those dollars in cash to your hands 

without the restrictions that those bills have right now? 

Mr. NARDELLI. In the short term, at least from Chrysler’s perspective, we are certainly open to whatever makes the most sense 

for Congress as far as making the bridge loan available to help us 

get through this trough, point one. 

40 

Point two, in our plan, to be absolutely clear, we have a request in for $7 billion in the bridge loan, but we also—our original request in for the 136 money was about $8 billion. We were told to 

assume somewhere between 70 and 80 percent. We have $6 billion 

built in our plan, assuming we would get some of that starting in 

2010, 2011, and 2012 based on the process as we understand it 

today. 

Mr. MULALLY. We have sufficient liquidity. 

Mr. WAGONER. From our perspective, we said however the shortterm funding comes is up to the Congress. I would need to point 

out, though, that we have already filed $8 billion worth of—actually not projects, but the expected funding from those that would 

come out over a several-year period under 136. So if that was all 

drawn down now for short-term needs then, you know, in the future we would hope that 136 could be replenished as well. 

Mr. GARRETT. I only say this because I know the dilemma that 

Congress finds itself in as far as the two ends of the spectrum, and 

also the fact that we know from your testimony here and the Senate testimony as well and other questioning that we hear that the 

numbers may be larger down the road besides the $34 billion. And 

I think one of you gentlemen, I forget who, testified in the Senate 

that March 1st or March 31st might be a point in time that you 

would be coming back after the negotiations and everything were 

all done. This might be that proverbial middle ground. 

Secondly, one of the questions I—or comments I made during my 

opening statement was with regard to one of my major concerns, 

and that is States’ rights and the issues of the dealers that are out 

there. Can any of you address the issues of what really would be 

the savings, and why is there savings with regard to the dealers 

out there and the shrinking of the dealerships? Because I am told 

that as far as the dealer is concerned, that he operates his own 

shop, he pays his own bills. You may have some kickbacks as far 

as advertising and that sort of thing and like that, but he buys 

those cars sitting on his lot, right, or are financed, but those are 

his cars. Can you explain to me why there would be such a significant savings by violating a State’s rights and the contract agreements that are already out there? 

Mr. NARDELLI. So for us, Chrysler, I mentioned the 2 points 

about the 500 dealers; 250 or so are already gone because they 

have had to declare bankruptcy. The other 250 are on credit hold. 

Our program—we call it Genesis—is more about helping assure the 

profitability of the dealers that are out there, particularly in the 

metro area where we may be overdealered. So we work in a harmonious way with them to make sure that the dealer consolidation as 

we try to go to one dealership with all three brands so that we 

don’t have and they don’t have the expense associated with trying 

to cover multiple brands and— 

Mr. GARRETT. That is really their problem, isn’t it? 

Mr. NARDELLI. We want to help them. They are an integral part 

of our success. Without the dealers and strong financial dealers, we 

can’t be successful, sir. 

Mr. WAGONER. Are you talking about the issue of State franchise 

legislation? A lot has been discussed about that. Our plan can be 

accomplished without changing that. And obviously if you have 

41 

more regulatory regimes, sometimes it can slow you down. But we 

are not assuming that there is a need to change State franchise 

legislation to accomplish our plan. 

Mr. GARRETT. I see a yellow light. If I have the time—there is 

the red light. 

The CHAIRMAN. Your time has expired. 

The gentlewoman from California. 

Ms. SPEIER. Thank you, Mr. Chairman. And thank you again, 

members of the panel, for joining us. 

At our last hearing, I asked you each whether or not you would 

meet the fuel economy standards that were scheduled for 2020, to 

meet them in 2015. I think each of you said no, you couldn’t do it. 

And I was stunned by that because in 1960, President Kennedy 

said we will have a man on the moon by the end of the decade. 

NASA didn’t have a clue, and yet we got a man on the moon by 

the end of that decade. 

The European Union is scheduled to have a fleetwide fuel economy standard of 50 miles per gallon by 2015. Are you still of the 

opinion that you cannot meet those standards sooner? 

Mr. WAGONER. From our side, we have a big business in Europe, 

so we meet those standards. I would say one thing, frankly, that 

has been done in Europe differently than the United States is 

tighter coordination of energy policy issues. So as you probably 

know, for example, in Europe, one of the things we have had for 

many years is much higher prices of gasoline due to higher taxation. So consumers, then, react very rationally. So our product mix 

in Europe is very much smaller. 

The CHAIRMAN. Excuse me. Apparently, there was a 

miscommunication. The gentlewoman did get to ask questions of 

this panel the last time, I believe, and this was reserved for people 

who had not asked the last time. That is what we had announced 

earlier. So we will conclude the questioning there. I believe the 

gentlewoman did previously— 

Ms. SPEIER. That is absolutely true. 

The CHAIRMAN. The gentlewoman from Florida. 

Ms. BROWN-WAITE. Thank you, Mr. Chairman. 

I have a large number of retirees who live in the Fifth Congressional District in Florida, both former union members, retired 

union members, and I have some auto execs. So I take this whole 

issue very, very seriously. It really is about their future and also 

the future of their children and grandchildren who may want or 

currently have a job in the industry. 

But one of the things that I think we need to be very careful of 

is that we are not unduly causing concern, because if bankruptcy 

is necessary, reorganization, people need to be assured that the 

Pension Benefit Guaranty Corporation, albeit in the red—which we 

will have to address that issue—will be there for those pensioners. 

And I wanted to make that statement because I have heard from 

so many who are afraid that their pensions are at risk. 

Mr. Nardelli, I have a question specifically for you. If the private 

equity company that currently has the major holding in Chrysler 

has $24 billion currently in assets, and they will not put forth any 

more money to stave off bankruptcy, how can we in good conscience 

42 

expect the taxpayers to take on this substantial cost? And I would 

appreciate hearing from you. 

Mr. NARDELLI. Sure. It is a question that has been asked yesterday. And just to try to bring some clarity, the private equity firm 

is a composite of many investors. They are made up of pension 

funds, they are made up of teachers’ funds, State funds. So they 

have the same regulatory responsibility, fiduciary responsibility, as 

a publicly traded company would be relative to those fiduciary responsibilities. So it is not an issue, one, of them being able to commit on the behalf of those investors to put more in, number one. 

Number two— 

Ms. BROWN-WAITE. Did you ask? 

Mr. NARDELLI. Yes. Exactly. We have asked them. We have 

asked every major financial institution; all 100 of those that got 

TARP funding we have asked for funding. We have gone offshore 

asking for funding. 

Ms. BROWN-WAITE. And the private equity company said no, correct? 

Mr. NARDELLI. First of all, let me be clear. They already put the 

equity in to create the company. We did another $2 billion drawdown on equity on the car side. They have continued to put more 

equity into our finance company to make sure that the car company could continue to provide consumer loans and wholesale support. So I want to be clear, it is not as if they haven’t continually 

tried to provide financial support for us over this period. And just 

finally, they have publicly said that on any carry-forward interest, 

they won’t profit—and they have also on their second lien been 

willing to convert 100 percent of that to equity. 

Ms. BROWN-WAITE. Thank you. 

And my question for the three auto manufacturers is, obviously 

overcapacity has been part of the problem. You have a combined 

market share of about 50 percent, 52 percent in 2007, but there 

are—nearly 70 percent is accounted for your various brands’ dealerships, of dealerships throughout America. How many of those do 

you expect will be closing over the next 4 years even with a bailout? That is question number one. 

And question number two is, what are you doing to help those 

dealers out there, whom every Member of Congress has heard 

from, to help the dealers with the excess inventories that we have 

now? I would appreciate hearing from the three of you. 

Mr. WAGONER. Our plan calls for a reduction in the number of 

dealers of about 800 over the next 4 years. Individual dealers make 

the call that they don’t want to stay in the business because the 

economics don’t work for them anymore, or we have cases where 

we might have five dealers in a city, and we only—really only four 

can be profitable, so we work to try to consolidate them. What we 

are trying to do—their profitability is critical for us, obviously because if they are not profitable, they are not there to support our 

new product launches. 

So what we are trying to do is be very diligent in—for example, 

not overproducing the number of vehicles that we ask them to 

carry in inventory right now is the biggest thing we can do, along 

with helping with financing support. 

The CHAIRMAN. The gentlewoman’s time has expired. 

43 

Ms. BROWN-WAITE. Mr. Chairman, could I ask them, though, to 

submit their answers in writing? 

The CHAIRMAN. Yes. I appreciate that. Any questions that you do 

not get a chance to answer or you want to elaborate on, please submit in writing. And indeed any Member who has questions in addition to those asked, submit them through the committee. We will 

get responses in writing. We ask obviously that they be done fairly 

quickly. 

I now recognize myself for 5 minutes to talk about health care. 

Mr. Wagoner, how much are you obligated to put into this new 

health facility that came out as a result of the collective bargaining? 

Mr. WAGONER. Beyond what we already have put in it over the 

past several years, it is about $20 billion more. 

The CHAIRMAN. Over what period of time? 

Mr. WAGONER. Over a period of time, as I recall, it was about 8 

to 20 years. 

The CHAIRMAN. $20 billion in addition. 

How about Ford and Chrysler, what are your ongoing, looking 

forward obligations for health care? You don’t have—do you have 

the— 

Mr. MULALLY. Yes. And we have put in $3 billion, and we have $7 billion more to go. 

The CHAIRMAN. You have $7 billion more to go? 

Mr. Nardelli? 

Mr. NARDELLI. We have $11.3 billion more to go. 

The CHAIRMAN. So that is $38 billion, if I add correctly, more 

than you are asking for in health care. That is very relevant. One 

of the questions we have is if we were to provide some bridge financing now, this Congress has already been burned by financing 

a bridge to nowhere, and I think we don’t want to repeat that. So 

we would like some assurance that it is a bridge that has another 

terminus. The relevance of that is I hope that in the next Congress, 

working with the new President, we will be doing something about 

health care. Is it then the case that to the extent we could have 

a national health care plan—because I don’t think anyone thinks 

it makes any sense to do anything that is specific to one group of 

employees. But if we were able to establish some form of health 

care at the national level which shifted the burden away from this 

employment nexus to the extent that we could reduce this, we 

would be enhancing the likelihood of success; is that accurate? 

Mr. WAGONER. Yes, sir. And beyond the numbers we just gave 

you, we have ongoing every year health care costs for active employees. It would help us additionally. 

The CHAIRMAN. Mr. Nardelli? 

Mr. NARDELLI. Yes, sir. 

Mr. MULALLY. Yes, sir. 

The CHAIRMAN. Mr. Gettelfinger, I think the Union has gotten 

far too little credit, first for the creativity of the agreement to allow 

this shift for the retirees, but also, as I understand it, the agreement—well, just tell me what the recent announcement was about 

what you would be willing to do with regard to health care. 

Mr. GETTELFINGER. Well, sir, in 2005, we made the initial—what 

we refer to as the 2005 VEBA, which is Voluntary Employee BeneVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
44 

ficiary Association. As in the case of General Motors, that took $18 

billion of their old pay obligation off of their— 

The CHAIRMAN. But you just made a decision to even ease that. 

Tell me what that was. 

Mr. GETTELFINGER. But then in 2007, we put it all in there based 

on these commitments. Like on January 1, 2010, General Motors 

owes $7 billion, Ford owes $4.4 billion, and Chrysler owes $3.5 billion. 

The CHAIRMAN. What did you just decide to do? 

Mr. GETTELFINGER. What we have decided to do, sir, is to draw 

out that obligation, to remove that immediate liability off of their 

books to put them in a position— 

The CHAIRMAN. I appreciate that. So you have made a significant 

offer here that puts off the need for that. The relevance of it is— 

and I do want to think about how we can be constructive—that 

gives us more time to fashion a consensus on a national health care 

plan, so that if, in fact, we were able to do that, to the extent that 

we have a broader plan, that deferral could then become forgiveness altogether. And I think that is very important. It shows the 

linkage. 

First of all, one of the burdens you have been under is the requirement to do health care. I always find the best comparison to 

be between the costs in Michigan and the costs in Ontario, because 

people can’t blame unions. Your sister union in Canada is a pretty 

strong one. You can’t blame environmental rules. The cost difference between Canada and the United States has to be entirely 

on health care. 

Mr. Gettelfinger, you wanted to say something else? 

Mr. GETTELFINGER. Yes, sir. As far as our commitment to each 

other, the company to the Union, the Union to the company, we put 

together what we referred to as a National Health Care Reform Institute to study the entire issue. 

The CHAIRMAN. I appreciate that. And I think—you know, I have 

to say I wish—among the mistakes the auto companies made was 

in 1993 when there was an effort by President Clinton to do something about health care, you didn’t help him, And now you are 

reaping some of that. But it does show the importance of a rational 

national health care plan going forward. Reducing the nexus between employment and health care is good social policy, it is good 

economic policy, and it would have particular relevance here. 

I just want to add one last point. I know one of my colleagues 

will do this. One of the problems you face in getting votes, certainly 

on the Democratic side, is the fact that you are now suing a lot of 

States that are represented here over greenhouse emissions. And 

I have to tell you that that is a serious obstacle. We are being 

asked by some attorneys general—I will put that letter into the 

record—not to go forward while you are suing the States again, 

some of which are represented here, over the question of greenhouse gas emissions. And that is something that you are going to 

have to confront, and I know it is going to be raised later on. 

The gentleman from South Carolina, Mr. Barrett. 

Mr. BARRETT. Thank you, Mr. Chairman. 

Gentlemen, thank you for coming today. And I certainly don’t 

want to get into a health care debate today because there are plenVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
45 

ty of other issues, but I think we are being extremely short-sighted 

to realize that taking health care costs off your role, somebody has 

to pay for that, somebody has to pay additional taxes. And if you 

don’t think you are going to pay additional taxes—and me—I think 

it is a fallacy. 

The one question I want to ask first, driving around my district, 

talking to my folks, the one question they say is why now; why are 

we deciding today that we are going to restructure, that we are 

going to cut our labor costs, that we are going to shrink down the 

size of our lines? I mean, you guys are the ‘‘bestest’’ and the brightest, so to speak. You have men and women who are experts in 

every field. Why today are you realizing that your competitors are 

getting an advantage on you, and all of a sudden we have to restructure? You should have seen this coming for years. And I know 

you have. And all of a sudden you are coming to the United States 

Congress, which is not our job, to tell you how to restructure. But 

you are doing it. I mean, why now? Why not 10 years ago? Why 

not 20 years ago? Please, somebody. 

Mr. WAGONER. Yes. We aren’t just starting this now. We have reduced—for example, over the last 3 years, we reduced our cost base 

against a base of $40 billion of fixed costs, we reduced it to $30 billion working a lot actually with the UAW. So we have been working on this. 

I think now what is different today are two things: Automotive 

demand, the trend had been running kind of 17 million units a 

year for an average of about the last decade, And now they have 

fallen to, in recent months, under 10 million or 11 million units. 

So there is a radical fall-off in demand at a time, frankly, when, 

at least for General Motors, our balance sheet is weak in part because of the massive expenditures we made in the past on health 

care and pensions. 

And so then you say why are we doing the additional restructuring now? Because we have to face the reality that because of the 

state of the credit markets and the U.S. economy, we have to structure the business not to be highly profitable at 17- or 18 million 

units, but now to be highly profitable at 13 million units. And to 

do that, frankly, we are having to take additional and painful 

steps. 

Mr. BARRETT. I understand. But please, you are not the Federal 

Government. You don’t think in 2-year terms. You can move faster. 

And if you are going to be competitive, if this thing is going to 

work, if it happens, you have to be more competitive. 

Another question, Mr. Wagoner. I hate to pick on you. You were 

talking about legacy costs, and when you move into a new market, 

you get rid of a lot of the legacy costs. What makes you think that 

you can’t cut some of the legacy costs faster under a bankruptcy 

type of format rather than government restructuring, which you 

are basically asking for right now? 

Mr. WAGONER. First of all, the pension legacy costs we have paid 

for, that is done. Our pension plans are essentially fully funded. So 

there is no advantage or disadvantage from a bankruptcy there. 

Second of all, as Mr. Gettelfinger pointed out in his comments to 

the chairman’s question, the post-retiree health care benefits, we 

have reached an agreement where those will be the responsibility 

46 

of this trust in 2010. So we will also no longer have those in front 

of us. We do have some payments due to that trust which Mr. 

Gettlefinger has agreed we can stretch out over a period of time. 

We need to sit down and discuss those. But we don’t really think 

from that perspective a bankruptcy helps a lot on those issues. And 

meanwhile, it is going to cream our revenues. And if our revenues 

go down like this, we will never be able to cut costs enough to get 

ahead of that. 

Mr. BARRETT. Mr. Nardelli, I know that you guys have brought 

a plan forward, and you are asking Congress for certain things. Are 

you asking for things in this plan that you wouldn’t ask for, having 

brought it to Congress, if that make sense? Are you bringing this 

plan and asking for things to appease Congress that you wouldn’t 

normally ask for in a regular plan if you were going to a financier? 

Mr. NARDELLI. No. I think if you look at the plan that we have 

submitted, and it is a 120-page document, what we are asking for 

is a $7 billion bridge loan. If I could just build off Mr. Wagoner. 

We started in August when we became independent from Daimler, 

we started on this massive restructuring. And I think the reality 

is two things really hit us. One is 17 million to 10.5— 

Mr. BARRETT. Let me cut you off because my time—does it give 

you enough flexibility? Does this plan with the government mandates on CAFE standards and things like this, does it give you the 

flexibility that you need to turn your companies around, to make 

them profitable, to compete with your competitors? 

Mr. NARDELLI. I believe it does. 

The CHAIRMAN. Time has expired. Any further answers will have 

to come in writing. 

The gentleman from Pennsylvania is now recognized for 5 minutes. 

Mr. KANJORSKI. Thank you, Mr. Chairman. 

Gentlemen, let me ask you a few questions. One, you were examined by Ms. Brown-Waite of Florida just recently. And a masterful 

obfuscation. I think she was asking a very simple question, and I 

have the same question. Why don’t your equity owners provide the 

equity necessary for your company to go on? I do not want to hear 

whether there are pension funds or they have obligations. Isn’t the 

truth of the matter that they do not feel that the presently structured auto industry of the United States is survivable in its present 

form? 

Mr. NARDELLI. Sir, they never conveyed that to me. 

Mr. KANJORSKI. Then why won’t they give you any money? 

Mr. NARDELLI. I assume they have no access to additional funds. 

Mr. KANJORSKI. I think she indicated they had $20 billion on 

hand, $24 billion. That is a considerable amount of money. 

Mr. NARDELLI. I don’t know if that is in the form of cash or in 

the form of assets, sir. 

Mr. KANJORSKI. But the taxpayers of the United States have that 

money on hand, and we should provide it as their representatives 

much sooner than your equity owners? 

Mr. NARDELLI. I am only suggesting that I have tried mightily 

to get funds to keep Chrysler alive. 

Mr. KANJORSKI. I listened intently to the Senate examination 

yesterday, and I thought Senator Corker was excellent. And he baVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
47 

sically told all of these gentlemen that from his business perspective as a businessman—he personally is a very successful businessman. He looked at your balance sheets, and he said they just don’t 

work; you can’t retire your present debt on your plans over the 

next several years unless there is a restructuring, unless there is 

haircuts taken by your creditors, etc., etc. 

Now, I am not familiar with all of the facts of those things, but 

I am reasonably willing to assume that he has looked at it. And 

I think most of you agree that something has to be done. This balance sheet doesn’t make sense to a continuing, successful, viable 

business. If that is the case, it seems to me this is the time. 

Look, labor stepped forward. They have indicated they are ready 

to step forward again. Why can’t the creditors step forward? Why 

can’t the suppliers step forward? Why can’t the dealers step forward? Why can’t management step forward? Instead of a dollar a 

year, I think you ought to take no greater salary than any of the 

successful Japanese companies for as long as you are indebted to 

the United States. When you are out, I don’t care what you do, but 

until that time, you shouldn’t be getting 20 times the salary of a 

successful Japanese automotive executive. It is ridiculous. 

Now, those things are minor and can be solved. It just seems to 

me—and my frustration is, hey, we are running out of time. I don’t 

know if you sense it as I do, but you all are telling us you are within 25 days of bankruptcy potentially. This is not a time for us to 

horse around. What do we have to do? A very complicated agreement. Not that complicated that it can’t be done in a reasonable 

period of a month or 2 months, but too complicated to put together 

and get done before the end of this month. So we are looking at 

the precipice. You are going to go over if we don’t do something. 

It seems to me yesterday there was agreement in the Senate if 

General Motors were able to get an advance, a bridge-bridge loan 

of $4 billion, if Chrysler were able to get a bridge-bridge loan of $4 

billion, and Ford can manage itself until March 31st, we can get 

a hiatus here until March 31st for the new Congress and the new 

President to act; is that correct? 

Mr. NARDELLI. It is correct for Chrysler. 

Mr. WAGONER. For General Motors, the number we have indicated that we need up to $4 billion at the end of this month. Also 

at the end of January. And so the total amount that we would need 

as we see it today through the end of March would be up to $10 

billion. 

Mr. KANJORSKI. Up to $10 billion? 

Mr. WAGONER. Yes, sir. But we do have collateral that we could 

offer against that. 

Mr. KANJORSKI. And Ford? 

Mr. MULALLY. We believe we have sufficient liquidity. We do not 

need any money. 

Mr. KANJORSKI. So you need an adjustment somewhere between 

$14 billion and downward, perhaps as low as $10 billion, to give 

us the 90 days we need as a Congress, both House and Senate and 

the new Administration, to put something together; is that agreed? 

Mr. NARDELLI. Yes. 

Mr. WAGONER. Can I make one more comment, sir? It is important. We were hoping to use the 90-day period to do exactly what 

48 

you suggested, which is to work with debt holders, to work with 

UAW, to use that time period— 

Mr. KANJORSKI. Why aren’t we doing that? Why are we all sitting around talking about a business plan here and a business plan 

there and time is running out? And it almost looks to me like you 

hope that with that target coming down on us, you are going to get 

us to do something and just throw the money out there and say, 

go ahead, do with it as you will. 

I tell you this: I do not sense the Congress’ appetite right now 

to do that. I think you are skating on extremely thin ice. And I 

happen to be a friend of your industry and your intent to get this 

thing straightened out. I think what you have to do is come up 

with a plan for success. That means the haircuts have to be taken, 

the negotiations have to be—we have to know where we are going. 

I would urge you to do that. 

The CHAIRMAN. The gentleman from Georgia, Mr. Price. 

Mr. PRICE. Thank you, Mr. Chairman. 

I want to just make a comment about your bringing up the issue 

of health care and the fact that it would reduce costs significantly. 

I am reminded of the comment by P.J. O’Rourke, who said that if 

you think health care is expensive now, just wait until it is free, 

as the gentleman from South Carolina mentioned. Somebody will 

be paying for it. And whether or not it is in the program that you 

all have identified or elsewhere, it will certainly be paid for. 

Mr. Gettelfinger, you have been saluted for concessions that the 

unions have made, and I want to join the individuals who are commending you for those concessions. I want to address the issue of 

the jobs bank. It seems to me that the suspension of the jobs bank, 

which, as I understand, is a program that pays individuals who 

have been laid off for an extended period of time a significant 

amount of their income—the suspension of that program is an admission that affects the financial viability of the company. To me 

it seems that way. If that is the case, wouldn’t it be appropriate 

to suspend that program definitely, end it definitely, as opposed to 

just suspend it for a finite period of time? 

Mr. GETTELFINGER. Yes, sir. What we are doing is, we are looking at that. But I would just like to point out to you that some of 

the competitors, the foreign brand competitors, pay 100 percent 

when their workers are off. But we have set that aside. We recognize that it really— 

Mr. PRICE. So you are open to ending the program? 

Mr. GETTELFINGER. What we are doing right now, sir, we have 

taken action on Wednesday of this week to suspend the jobs bank 

program, to immediately enter into discussions with the companies 

and work out the mechanics of the program. But also know that 

we have a very few number of people in there. We have a number 

of people who would be coming in there. So we want to enter into 

discussions with the company in a way as humanly possible in that 

program without a lot— 

Mr. PRICE. I am looking forward to positive results from that. It 

is somewhat humiliating, I would suggest, to have you all sitting 

here and taking advice about how to run your business from Members of Congress, many of whom have great expertise in certain 

49 

areas, but I would suggest isn’t necessarily running a large global 

company. 

My good friend from Illinois talked about appropriate recommendations regarding marketing, and you ought to take some of 

those into advice, I am sure. If you get this money, however, there 

are all sorts of folks who are working in other companies, building 

automobiles in the United States. Those individuals pay taxes. If 

you get this money, some of their tax money will go to compete 

against the company for which they work. Why is that fair? 

Mr. WAGONER. If I could just comment. In many cases, those 

companies are seeking support from their own governments right 

now in their home countries for funding. First of all, as you know, 

this is being done almost globally due to the crisis in the industry. 

Second of all, many of those companies benefited from very extensive incentives to locate plants in States, and so their costs were 

reduced from the beginning. And it is certainly true, I suspect, if 

we were building all new plants, we could seek similar support. 

But we have such a huge existing manufacturing base, that frequently the kind of support you get to retool an existing plant 

would understandably be less than paying for a whole new plant. 

Mr. PRICE. You understand the questions that we get at home, 

though? Why should my tax money go for this activity? Have any 

of the three of you looked at how many billions of dollars your companies might be able to save with specific decreases in the three 

biggest cost drivers, taxation and regulation, liability costs that you 

have, and made proposals that might result in significant decrease 

in the cost of doing business? 

Mr. NARDELLI. Sir, from our standpoint, unfortunately, we have 

not been profitable, so there is no Federal tax suggestion that— 

Mr. PRICE. Your liability and regulatory costs aren’t anything? 

Mr. NARDELLI. No, they are. 

Mr. PRICE. Have you looked at what those costs are and how we 

might be able to assist in that area? 

Mr. NARDELLI. We have not explored significant opportunities on 

how to get those down. 

Mr. MULALLY. Nothing there, except that I think that what we 

did last year during the 2007 Energy Independence and Security 

Act to come together, what we really were going to do about fuel 

economy was a very important step. We have one standard. 

Mr. PRICE. GM, taxation, liability, regulatory costs? 

Mr. WAGONER. Same position on taxation. We don’t currently pay 

taxes because we have a tax loss carry-forward position that is 

huge. Regulatory costs—and obviously we have, you know, less 

than we used to, but significant costs related to— 

Mr. PRICE. My time is about to run out. I would encourage you 

to— 

Mr. WAGONER. We can get you a number. 

The CHAIRMAN. Go ahead and finish. 

Mr. PRICE. I would just encourage you to put a sharp pencil to 

those issues. 

The CHAIRMAN. The gentlewoman from California. 

Ms. WATERS. Thank you very much. Again, I would like to thank 

you, Mr. Chairman, for this opportunity to try and figure out what 

50 

the situation is with our automobile manufacturers and see what 

our responsibility may or may not be. 

As you know, I have focused on dealerships, and small ones, because I believe that many of these small, independently owned 

dealerships are anchored in many communities that provide support, but not profit. They create jobs and stability and development. I have not seen the kind of discussion about assistance for 

these dealerships that would make me want to be very anxious 

about supporting a rescue plan. 

Of course, let me say to UAW, we are very concerned about the 

workers, and we believe that if we are able to move to the point 

of a rescue plan, that we would be able to save many families who 

depend on these companies that they have worked with for many 

years, and that those families are key to the stability of our community. So we are concerned about that. 

But I don’t see any discussion about how you plan to—I understand when you say you are going to do consolidation. You don’t 

explain it thoroughly, but to me it looks as if consolidation means 

that the big dealerships with access to capital and multiple locations will be able to buy up the small independent dealers and just 

put them out of business, and that bothers me. I don’t see the 

small dealers having access to capital from our banks and financial 

institutions or your financial arms. 

Chrysler, for example, when you were purchased by Cerberus, it 

looks as if they purchased, according to an article, for a very low 

price of $7.4 billion. Only $2.2 billion of that purchase price was 

for Chrysler’s carmaking operations. The other $5.2 billion or so 

bought Chrysler Financial Services, which is doing very well. But 

there is no commitment that I see from that financial services operation to give support to those small dealers who have been profitable, operated their businesses good in the past, and only got into 

trouble with this economic turndown. Chrysler, you have money to 

help these dealers. What do you plan on doing for these small, 

independent dealers who are the anchors in these communities? 

Mr. NARDELLI. The current financial structure of Chrysler Financial is the arm that is providing the capital support for the dealers. 

That is the current funds flow. It does not come out of the car company. It does come out of the financial arm. I don’t know the exact 

amount. 

Ms. WATERS. But they are not making any money available to 

these small dealers now. As a matter of fact, they are calling in 

some of the commitments that were made in asking people to pay 

off these loans. What do you plan on doing—you are here to get 

help. What are you going to do to help them? 

Mr. NARDELLI. You are exactly right. Due to the capacity limitations on Chrysler Financial because they have not been able to access the window, in fact they cannot make additional funds available, they have certain tripwires that if they cross over, that they 

will be in violation of some of their governing documents. So that 

is to our earlier conservation today, it is critically important that 

Chrysler Financial gets access to the TARP funds both to improve 

liquidity and capacity for our dealers and our customers. 

Ms. WATERS. But it seems to me that Cerberus is doing pretty 

well. They basically own Chrysler. They have done things like— 

51 

well, literally private equity fund that purchased Mervyn’s and 

stripped it of all of its real estate and made a lot of money on it. 

The financial arm is doing very, very well. Why can’t that be used 

for support for these small dealers rather than saying just sell out 

or get out? 

Mr. NARDELLI. I don’t—to be honest with you, I don’t know the 

extent of the financial funds available at the Cerberus or parent 

level. I know that, again, they have investment funds that have 

certain criteria relative to how those funds might be used and 

where they are invested. So I really can’t give you a more complete 

answer, but I would be happy to try to get that for you. 

Ms. WATERS. Is there a commitment by any of you to give support to these small, independent dealerships that include a lot of 

minority dealerships that are going to close down? 

Mr. MULALLY. Absolutely. In Ford’s case, as you well know, we 

have the Ford Motor Credit Corporation. We have provided the financing support for all of the dealerships, 77 percent of them. And 

we are absolutely committed to our small dealerships as well as the 

larger ones. The most important thing we can do right now is get 

them the credit. That is why we are encouraging the Fed to approve this—and this medium-term asset-backed commercial paper. 

The CHAIRMAN. The others will have to answer in writing. 

The gentlewoman from Illinois. 

Mrs. BIGGERT. Thank you, Mr. Chairman. 

In my opening statement, I asked the question about what are 

the reasons that people are not buying the cars. And I just wondered since most of us sitting up here have been doing surveys— 

or a poll, as we would call them, during the past year, I wondered 

if any of your companies do surveys annually or whatever to determine what the customer thinks. 

Mr. WAGONER. Continually we do surveys. 

Mrs. BIGGERT. So you know the answers why people are not buying your cars? 

Mr. WAGONER. Well, I don’t know. But, yes, basically what is 

going on now is I think the macro issues are customer sentiment 

is very—consumers are concerned about housing and their jobs and 

stuff, so they are not disposed to buy things they don’t have to. Second of all, we talked so much about credit availability I think is 

a huge issue. And then I think just concerns about the economy are 

the big issues that I would say. 

Mrs. BIGGERT. If I might return then to the other issue of the 

ILCs, which I had mentioned also and was brought up several 

times. And then Mr. Manzullo touched on the fact that the community banks, the credit unions, and the local branches of national 

banks are really standing in the wings waiting to help to—and provide finances. How exactly are you working with the existing financial institutions to ramp up financing for consumers? 

Mr. NARDELLI. I would like the opportunity to answer because I 

didn’t get a chance. We got approval from Chrysler Financial to go 

out and test that market. We gave half of our country the opportunity to with some private—with some publicly traded companies. 

And in November, we consider half of the volume, 80,000 plus units 

that we sold in November, 573 were supported by financing outside 

of Chrysler Finance. 

52 

Mrs. BIGGERT. According to the Wall Street Journal in an article 

published Wednesday—I believe Wednesday afternoon—they said 

that, ‘‘The auto firms don’t appear to have collateral that would 

meet the Fed’s lending criteria.’’ Is this true? 

Mr. WAGONER. We have, as I have mentioned earlier, significant 

collateral that is undesignated right now. I am not familiar with 

the specifics of the criteria of the Fed. I can get back to you on 

that. 

Mrs. BIGGERT. All right. Thank you. 

Would anybody else like to add anything to that? Okay. Then if 

Ford and Chrysler were approved to be ILCs tomorrow, which 

would technically make them eligible to apply for TARP funding, 

do you think you would get the TARP funding. And, GMAC, if 

you—if you are a bank holding—would the Fed give you a loan? 

Mr. NARDELLI. We certainly would hope so; that if we received 

approval and got access to the window, as I mentioned earlier, we 

are looking for $1.6 billion immediately and another $2 billion for 

wholesale and retail, which we would be able then to provide to our 

dealerships to try to get some more volume into our business. 

Mrs. BIGGERT. In your plan submitted to Congress, you mentioned the introduction of 20-plus new models by 2012. And each 

of you also highlights the significant investments the overall industry has made in R&D. With this in mind, have you identified specific ways you will shorten the car concept-to-dealer timeline in 

order to meet long-term CAFE increases and customer credit? And 

I am worried about this because it seems like the transplants have 

really been able to bring to market some of their ideas a lot faster 

than you all have. 

Mr. WAGONER. I would observe—I think that is a comment that 

for some of them—not all of them, by the way, but some of them— 

might have been true 5 or 10 years ago. Generally today, I think 

all of us use the same kind of computer-based engineering design 

systems so we can move through much more quickly than we used 

to. And I think the competitive band is very tight right now. 

Mrs. BIGGERT. Would that be like 21⁄2 to 4 years? 

Mr. WAGONER. Right. And it depends on—you know, if it is an 

all new vehicle from the ground up, it is going to take longer. If 

it is a modification of an existing platform, it could be at the shorter end of the timeframe. 

Mrs. BIGGERT. Thank you. 

I yield back. 

The CHAIRMAN. The gentlewoman from New York. 

Mrs. MALONEY. Thank you, Mr. Chairman. Mr. Chairman, you 

raised a very relevant point earlier when you mentioned the efforts 

by our guests to block laws that we have adopted in our States. In 

fact, 16 States have adopted or planned to adopt laws to lower 

greenhouse gas emission standards. And my basic question to you 

is, why in the world should my constituents or taxpayers in New 

York State or any State provide $38 billion in loans for your companies if you will continue to attempt to undo laws that we have 

adopted in our States? Wouldn’t that be equivalent to giving you 

money to sue us? 

So I would like to ask each CEO, will you pledge today to cease 

all legal and lobbying efforts to block the California greenhouse gas 

53 

standards for cars that have been adopted in New York and many 

other States, and tell us, are you going to use this money to sue 

us, or do you pledge today that you will block your efforts to lobby 

and sue States that have adopted a stricter antipollution standards? 

Mr. NARDELLI. Let me try to go first. It is not our intent to use the $7 billion, if we are fortunate enough to get a favorable decision, to sue those States. I would also say that it adds a level of 

complexity and cost at a time when we are trying to get simplification. To be able to produce cars unique to a State or unique to a 

city in some cases would add tremendous complexity in manufacturing and in our technology. 

Mrs. MALONEY. Thank you. 

Mr. Wagoner? 

Mr. WAGONER. Yes. I would just add that we have been of a view 

and continue to have a view that a single national standard as aggressive as it would be is a far more efficient way to reduce greenhouse gas emissions and reduce imported oil, so that remains our 

strong preference. 

Mrs. MALONEY. And the California standard being adopted by 16 

States is moving toward a national standard. 

Mr. MULALLY. We agree with one national standard. 

Mrs. MALONEY. Secondly, my constituents are asking about your 

efficiency, your fuel efficiency. Many countries have far more fuelefficient cars, and they want to know why you can’t meet the 

standards of other countries. We can’t export if we are not more 

fuel-efficient. I noticed in your plans you have talked about your 

standard and your goals of becoming more fuel-efficient, and I 

would like to hear the year and specifically how many miles per 

gallon you propose to do by 2015. 

And secondly, I would like to hear your comments on electric 

cars. I know that GM has talked about having one on the road in 

2010. And Ford, in your plan you talked about moving towards 

electric cars. 

But before you answer, I would like to request if the chairman 

would allow me to place in the record— 

The CHAIRMAN. Without objection. 

Mrs. MALONEY. —a report that was issued earlier at a Joint Economic Committee meeting which I chaired on the unemployment 

numbers for this month. They were the worst in 124 years. We lost 

over 533,000 jobs, and the Commissioners of the Bureau of Labor 

of Statistics made a very compelling point for a bridge loan to the 

auto industry, indicating that 21⁄2 to 3 million American jobs are 

directly or indirectly tied to this industry. Through November, almost 20 percent of all job losses in 2008 were directly associated 

with the auto industry; 13,000 auto jobs lost this month, 135,000 

this year; 115,000 more jobs lost this year with auto dealers, and 

240,000 workers, companies are directly employed now to the auto 

industry. 

I would like to place in the record the full report, but I would 

like to hear your goals and your benchmarks. What do you propose 

to achieve in fuel efficiency and also your comments on electric cars 

and your plans to move there and what would that mean to our 

economy, our fuel efficiency, our jobs in America. 

54 

Mr. WAGONER. Just in the interest of time, our report lays out 

our fuel economy plans, but they involve significant increases over 

the next 4 years and I would be glad to share with you the 2014 

numbers. I don’t have them right with me. It shows a dramatic improvement, and I think I can just say we share your passion for 

developing electric vehicles. We think that is going to be the breakthrough for the future. 

The CHAIRMAN. The other responses have to be in writing because the time has expired. I said we would end at 12:30. I am 

going to ask for your indulgence. We have one member on this committee from Michigan, and if we go another three members, we can 

reach him. If members are very good about keeping to the time, if 

that is okay, I am going to go ahead so that we can reach our colleague from Michigan. Now, it is the gentlewoman from West Virginia. 

Mrs. CAPITO. Thank you, Mr. Chairman. I want to thank the 

panelists, too, for coming before us. I have a question for Mr. Wagoner. In your proposal brought forward, you have asked for $4 billion to take you to the end of the month, $4 billion to take you to 

the end of January. Just briefly, can you give me a snapshot of 

what is $4 billion between now and December 31st going to be used 

for? You recommend an oversight board as well when you and I 

both know that the creation and sustainability of an oversight 

board in 26 days is pretty much impossible. I just want to know 

what is $4 billion getting you, and then what is it going to get you 

in January? Is it like paying your mortgage every month or something? 

Mr. WAGONER. No. Basically the funding request up to the end 

of the month of up to $4 billion is what we think we need to be 

able to make all of the significant annual monthly payments that 

we normally make at the beginning of the following month. 

Mrs. CAPITO. So payroll and production costs? 

Mr. WAGONER. Right. And suppliers, etc. The reason the number 

is so high is that production has been slashed over the last weeks 

because of dealers’ inability to finance wholesale units or to get 

wholesale financing. 

Mrs. CAPITO. Is it the same? 

Mr. NARDELLI. Yes. For us, we have $11.6 billion in expenses. $8 

billion is for suppliers, $1.2 billion for vendors, $900 million on 

wages, healthcare is $500 million, and capital expenditures are 

$500 million, so we have $11.6 billion of distribution during the 

quarter. And so the $4 billion of inflow, plus a revenue inflow, 

would allow us to have a minimum level at the end of the first 

quarter. 

Mrs. CAPITO. So you are anticipating that by March 1st, the sales 

will back up and the ship will get righted at least to a certain extent. Is that why it goes down in March? 

Mr. NARDELLI. By March 31st, but we are assuming a very, very 

depressed January in our analysis. The first quarter is typically 

seasonably low. And we believe January will be even more extreme 

relative to our overall manufacturing output as we try to get dealer 

inventory back down to an acceptable level. When I took over here, 

there were 600,000 units in the field. We got it down to 400,000. 

55 

We would like to get it lower to reduce the floor planning cost for 

our dealers. 

Mrs. CAPITO. And another question I had was obviously the dealers have made a push to all of us, and I congratulate them for putting really the human face of a small business and the amount of 

workers and the community involvement that they all have in our 

States and in our districts, and I think that really helps. I was actually, just to add a little levity to this, I was thinking about, you 

know, we think about our cars and our automobiles, and I started 

thinking about all the cars that I had, and I remembered all the 

names that we had. You know, we had Leroy and Big Blue and 

Crasher and Goldie, and then the one my dad drove which was an 

old Chrysler wagon and called that the ‘‘chick magnet.’’ So I mean, 

everybody has a name or an attachment, sorry, Mr. Chairman, for 

their automobile. 

The CHAIRMAN. It is just not something I would ever want to 

drive. 

Mrs. CAPITO. Anyway, getting back to the dealers, they are very 

fearful of the bankruptcy option. They feel that the confidence that 

is lacking in the consumer right now is going to become exasperated by any kind of bankruptcy, whether it is preplanned or 

whatever. And I think what is really killing us right now is just 

this uncertainty. We don’t know what direction it is going to go. It 

is almost like tell me what the pain is going to be and let me move 

forward. And so I understand that in a context of putting it within 

a time limit is where you all must be feeling this. 

Is that sort of the general feeling that you have, we just have to 

find an end here so we can rebuild? I would also like just, and I 

know I have taken probably all of my time, but the bankruptcy option, if you could just go back through that one other time. I know 

Mr. Gettelfinger did a nice job on that. 

Mr. NARDELLI. The quick answer to one is this morning’s survey 

that was reported; 57 percent of the consumers surveyed would not 

buy a vehicle from a company that they anticipate is going into 

bankruptcy. 

Mrs. CAPITO. Well, I mean, I have already had two people tell me 

in the last week they had options that went the other direction because of the fear of bankruptcy. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman from North Carolina. 

Mr. WATT. Thank you, Mr. Chairman. I thought I was about to 

get cut off, so I appreciate you extending the time. I, in my opening 

statement, encouraged the members to go out and look at your new 

generation cars, which I did earlier today. But one of the concerns 

I have is that none of those cars are yet on the market. Is there 

anything that can be done to speed up the process of getting those 

cars on the market? And is there anything that can be done, I 

asked this question out there to the people who were out with the 

cars this morning, to create a bridge for people who are buying 

these first new generation cars, so that when the second and third 

and fourth generation more efficient, more cost effective comes on 

the market, those people don’t get stuck? Because I think that is 

really stopping a lot of people from buying cars now, because they 

think next year there is going to be a more efficient car on the marVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
56 

ket. Is there anything that can be done to speed up and create that 

bridge for people who are willing to take the front end risk? 

Mr. WAGONER. I would like to comment that we do have a lot of 

hybrids and flex fuel vehicles on the road today. But we do hope 

that the next generations will get better and at lower costs. I know 

the President-Elect has expressed a lot of interest in energy policy. 

What would really help to move to the next generations faster are 

closer alignment between government policy on energy and the expectations and the technologies that we work on in the auto sector, 

because the issue is getting scale to battery manufacture, fuel cell 

infrastructure. Pick your technology. The issue is kind of breaking 

through the traditional oil-based infrastructure that we have into 

one of these new infrastructures. By the way, that is one of the reasons electricity makes sense, because most everybody— 

Mr. WATT. Well, we have a Volt that is sitting out there now, 

that won’t be on the market until 2012. Is there anything to do— 

or 2010, I guess. Is there anything that can be done to advance 

that Volt to the point where it can be sold next year? 

Mr. WAGONER. We have, I checked the other day, 1,200 engineers 

and designers and research people working on trying to get that 

car to market as soon as possible. As this whole concept of developing this battery technology and making it robust for automotive 

use, we are hustling like crazy to get it to market in 2010. But I 

do think your point is relevant. What can we do to ramp up the 

production faster and get to the next generation faster. And this is 

where I think, for example— 

Mr. WATT. And what can you do to protect those who are willing 

to take the first generation as you evolve to the next generation? 

Mr. WAGONER. We are going to have to give them things like extended warranties that are transferrable so they don’t have a burden of trying out the new technology. And I think beyond that we 

have a very long waiting list for the Volt right now, so we have a 

lot of people who want to buy it. 

Mr. WATT. That is good news. 

Mr. NARDELLI. I think one specific answer is we went to Denso, 

which is one of the cooperative companies owned by Toyota who 

does have advance battery technology, but as you might guess, no 

capacity. And so back to the discussion we had earlier this morning, the faster we can get a cooperative effort between national development, government and the manufacturers, from our point of 

view, the battery is probably the single biggest limiting factor in 

us being able to get those vehicles on the road. 

Mr. WATT. Let me try to get another question in to Mr. 

Gettelfinger in particular. I do talk radio shows sporadically and Al 

and Stacey are always after me at WBT. They are concerned that 

you are cutting down employees as part of this transition rather 

than employ more people. And I say, well, what about the people 

you are saving the jobs for; go through that equation again for Al 

and Stacey at WBT in Charlotte. 

Mr. GETTELFINGER. Well, unfortunately, there has been a lot of 

restructuring taking place in the industry. If you go back in the 

past, while people didn’t think restructuring was going on, it really 

was. In 1979, I believe it was General Motors had 460,000 UAW 

members. Today they have had 63,000 on the rolls. Since SepVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00060 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
57 

tember of 2005 through September of 2008, General Motors has reduced 47,000 members, UAW workers. At Ford, that number is 

through 2005 up to this point it is 37,000, I believe. 

Mr. WATT. Give me that in writing. My time has run out and I 

have to yield back. 

Mr. GETTELFINGER. The point is there has been major restructuring going on in the industry. And it has been extremely painful 

for our membership, for the company’s employees, for their families, and for the communities and States where they live. 

The CHAIRMAN. Mr. Gettelfinger, I think if I heard the question 

correctly, what would also be requested would be why this is in the 

interest of the workers. 

Mr. WATT. That is the part of it that people don’t understand. 

The CHAIRMAN. Why those arguments don’t figure up. So that is 

what I think the gentleman would like in writing. 

Mr. WATT. Give me something in writing so I can send it to Al 

and Stacey. 

Mr. GETTELFINGER. Okay. Thank you. 

The CHAIRMAN. The last question comes from the gentleman 

from Michigan. 

Mr. MCCOTTER. Thank you, Mr. Chairman. I appreciate your indulgence. I have a question. But I would like to go back to what 

I laid out as a potential proposition for a compromised bill that 

could be passed by both Chambers and signed into law by the 

President. Because it appears we are really having two conversations within Congress. The first conversation is whether or not 

there should be a bridge loan to the auto industry. And that is predominantly what you are encountering in front of both the Senate 

and in front of the House, are Members grappling with the question of whether a bridge loan to the American auto industry is a 

good idea. 

The second step, which is one that we are going to have to take, 

I hope relatively quickly, to facilitate that process is what should 

such a bridge loan look like, starting with where does the money 

come from. I have to point out at this juncture that one of the misconceptions in the public’s mind is that we are talking about a new 

appropriation of new money. That is not what the discussion that 

I have heard has been about. We are talking about redirecting already appropriated money. 

So for those, especially on my side of the aisle who say we are 

going to save taxpayers $25 billion or $34 billion by voting against 

or denying this bridge loan they are mistaken, because the money 

is already targeted and appropriated to be spent elsewhere. The 

money that we are talking about for a bridge loan is going to come 

from one or both of the following places: It is going to come from 

TARP funds, which were going to go to Wall Street firms if they 

are not used for the bridge loan; or they are going to come from 

DOE energy innovation loans which are going to be expended as 

well if not applied to the bridge loan. Which is why I continue to 

go back to a request for people to seriously consider the Solomonic 

approach of taking half of the bridge loan from the TARP funds 

and half of the bridge loan from the DOE funds. 

The logic behind this is quite simple. The TARP funds are there 

to help unfreeze the credit market. Mr. Paulson in front of this 

58 

committee the day before you first testified said that the underlying problem in the credit market is the foreclosure crisis and that 

we must do everything we can to end the foreclosure crisis. That 

will unfreeze the credit markets. So my first question, and I will 

do them one at a time, preferably in a series and let you answer. 

The first question is if the bridge loan is not approved, you will 

face a bankruptcy proceeding and will not thousands of your employees potentially face foreclosures on the homes they are currently in and that would undermine the very logic behind Mr. 

Paulson’s TARP plan. 

The second question is, the DOE funds are there to spur energy 

innovations and green technologies. As we all know, the auto industries and the American industries have been leaders in these 

innovations, especially for your research and development funding. 

That strikes me as a reasonable use of the DOE energy funds, is 

to preserve what you are already doing by incorporating it into a 

bridge loan. Money is fungible. What would happen if the bridge 

loan is not approved and you have to face bankruptcy, what happens to the research and development you are currently engaged 

in and how far will that be set back. 

The final question is regarding taxpayer protections, and it is for 

Mr. Gettelfinger. I believe that what you said about the incoming 

Administration and being the stakeholders to the table to have discussions and have a process in place to bring back to Congress not 

a bankruptcy proceeding, but something that could be called an accelerated restructuring map where all the stakeholders come up 

with an idea, show the viability and come to Congress not merely 

for money, if at all, but what we can legislatively do to help facilitate the industry’s restructuring. I think that is something that 

this committee, Mr. Chairman, if legislation is pursued, should try 

to facilitate within that legislation to show our commitment to it. 

Because that, in the long run, is what is going to help the restructuring process after the bridge loan is necessitated and hopefully 

approved. And I would like you to just talk briefly more about your 

ideas in that regard because I think it is a very timely idea, and 

it goes to the heart of taxpayer protections in the bridge loan. 

Those are my thoughts. 

The CHAIRMAN. We will extend the time a little bit for that question and that will wrap it up. So if each of you could take about 

30 to 45 seconds on this we can go. 

Mr. WAGONER. I will just start. There were two questions for us, 

one asked if bankruptcy would impact employees’ abilities to pay 

mortgages. I feel like that is an absolute certainty. And it would 

go far beyond our employees; it would also be dealer employees and 

supplier employees. So I think your thesis is right. You ask what 

the impact of bankruptcy would be on our green technology, and 

it would be a horrible waste because we have committed a huge 

amount of money to develop electric cars, fuel cells, flex fuel. And 

it would be the United States throwing away a massive investment, and in some cases a leadership position globally which would 

seem to be a terrible loss. 

Mr. NARDELLI. Sir, for us, if we were denied the funds, it certainly would push us in that direction and possibly even worse, to 

liquidation. There are 1 million people in our calculation counting 

59 

on Chrysler, point one, who certainly would be unemployed and 

therefore run the risk of not being able to pay their mortgages. Second, in this plan, there is about $12.8 billion, including some of the 

energy funds that you reference. But again, it would be funds not 

expended. And therefore payments not made either to engineers, to 

scientists or to people who make tools and dies and capital for the 

future of our energy independence. 

Mr. MULALLY. Even though we are not requesting a bridge loan, 

it is so important, this industry so important, that is why we have 

joined our colleagues. Because if one of us goes in, it has the potential, as we have talked about, to take all of us in. And what that 

would mean to the economy would be tremendous. Then, instead 

of being part of the solution to get through the worst economic crisis all of us have been in across this great country, we would be 

part of the problem. 

Mr. GETTELFINGER. Then on the question of the stakeholders 

coming to the table outside of bankruptcy with some kind of oversight, whether it be a trustee or other named governance, that all 

the stakeholders come to make sure that we share in the sacrifice 

that has to be made to make these companies viable. 

The CHAIRMAN. The panel is dismissed with our thanks, and we 

will ask them to leave quickly. People who want to talk to them 

can talk to them outside. We will get the new panel in. Please 

leave right now. Go. 

We will now proceed with the second panel. We will begin with 

the Acting Comptroller General, Mr. Dodaro. I appreciate the fact 

that you are not in the best of physical health right now, and I 

thank you for accommodating us. The Comptroller General from 

the Government Accountability Office. 

STATEMENT OF THE HONORABLE GENE DODARO, ACTING 

COMPTROLLER GENERAL, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. DODARO. Thank you very much, Mr. Chairman. I am pleased 

to be here today to assist your deliberations and all the members 

of the committee’s deliberations on the automakers’ request for 

Federal assistance. GAO has been involved in Federal rescue efforts and bailouts dating back to the 1970’s. And over this period 

of time, we have developed three basic principles that we think can 

help guide congressional deliberations in this particular matter. 

First, is clearly identifying the problem at hand. Clearly, here we 

have a confluence of short-term liquidity issues as well as fundamental restructuring of the industry against the backdrop of a very 

uncertain economic climate. 

The second fundamental principle is determining the national interest and whether or not it is in the national interest to intervene 

with Federal assistance. Once that policy decision is made, there 

needs to be a clear articulation of the government’s goals and objectives and an exit strategy so that the businesses can be returned 

to their normal status as soon as possible. The third fundamental 

principle is protecting the government’s and the taxpayers’ interest. 

Here concessions are important. Concessions in this instance from 

management, labor, creditors, suppliers, dealers. There needs to be 

collateral. The Federal Government should be the first lien stakeVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
60 

holder in terms of recouping the money in the event of a particular 

problem. There also needs to be compensation for the risk through 

warrants or other things so that if there is an upside to the company’s recovery, the Federal Government can then recoup not only 

its initial investment, but benefit from the risk that it has been 

taking. 

There needs to be controls over management. In this case, making sure that the Federal interests are protected. Now, there are 

two main points I would like to make here, and then I would be 

happy at the appropriate time to answer questions. First, it is critically important from my standpoint that the Congress consider 

having a strong independent board overseeing and protecting the 

Federal Government’s interest in this matter. The board needs to 

have the right leadership, the experience, and the resources to be 

able to look at the operating plans of the companies, determine 

when reimbursements should be made, overseeing the use of the 

money and anticipating future events that might be occurring both 

in the general economic situation, as well as with these companies 

themselves, so that the Federal Government is not put, and the 

Congress in this case, in a position of making future immediate decisions that are made over time. 

The control board function and independent board has worked 

well in the past both with the Chrysler loan guarantee effort, and 

in our opinion also worked well most recently with the airline stabilization board which was set up to make loans to the airlines following September 11th. 

Lastly, there is a real opportunity here, we believe, to look at 

this both from an immediate issue, as well as a long-term issue 

given the fact that the companies are presenting the more immediate needs to the Congress so that in our opinion, there could be 

an approach made here that is a two-pronged approach dealing 

with the immediate situation that they have and then dealing and 

protecting the government’s interest not only there, but setting up 

a longer term approach to this, particularly as the restructuring efforts would proceed if the Federal Government determines to intervene in this matter. 

So that concludes my opening summary. I also want to underscore the fact that GAO stands ready to help the Congress in making this important and very difficult decision. Thank you. 

[The prepared statement of Mr. Dodaro can be found on page 136 

of the appendix.] 

Ms. WATERS. [presiding] Thank you very much. 

Mr. Altman. 

STATEMENT OF EDWARD ALTMAN, MAX L. HEINE PROFESSOR 

OF FINANCE, LEONARD N. STERN SCHOOL OF BUSINESS, 

NEW YORK UNIVERSITY 

Mr. ALTMAN. Thank you very much, Madam Chairwoman. My 

name is Edward Altman, and I am a professor of finance at New 

York University’s Stern School of Business and director of its research program in financial markets and credit risk. I have been 

a professor at Stern School for 41 years, and my areas of teaching 

and research expertise are in the area of corporate finance, bankruptcy, and reorganization and credit risk. My comments today will 

61 

center on an alternative plan to that presented by the automakers 

and also on the financial health and solvency prospects of one of 

our largest, or the largest automaker, General Motors Corporation. 

I have been analyzing the health of GM and Ford for many 

years. And we predicted that both GM and Ford would be downgraded to noninvestment grade status several years before it took 

place in the spring of 2005. I was one of the first analysts to advocate that General Motors should file for bankruptcy protection 

under Chapter 11 of the Bankruptcy Code, but that the U.S. Government should not turn their back on these very important automakers. And it is very important to underlie that I am advocating 

that they get a $40 billion to $50 billion loan, call it debtor and 

possession loan, in bankruptcy, and I will elaborate that in a moment. On the other hand, General Motors Corporation is asking for 

a $12 billion loan and a $6 billion line of credit. Unfortunately, this 

traditional loan, even for $18 billion, is inadequate and is destined 

to fail in the current environment and will likely be followed by additional requests for more rescue funds or a bankruptcy petition. 

GM’s cash burn of more than $2 billion a month will reduce its assets even further and the loan would be exhausted in 6 to 9 

months. The global automobile industry, not just GM, is facing the 

likely prospect of an extended and severe economic recession likely 

to last for another 2 years. 

In my opinion, GM should file for protection, yes, protection, 

under the U.S. Bankruptcy Code as soon as feasible. The benefits 

afforded to firms whose assets are protected and whose fixed payments on most liabilities are suspended while reorganizing under 

Chapter 11 is quite clear. And another sometimes overlooked enormous benefit of a firm in bankruptcy is that they are entitled to 

what is called debtor in possession loans which gives the lender, in 

this case the U.S. Government, as I am advocating, a super priority 

status over all other creditors, unsecured creditors at first. Also, as 

you heard in the testimony, at least General Motors has a number 

of unencumbered assets that could be put up as collateral in this 

debtor in possession lending. Therefore, first priority, even if it 

doesn’t work, the U.S. taxpayer is more than likely to be paid back 

in full. 

There have been thousands of cases of debtor in possession financing in the past, and only 1, 2, 3 have actually resulted in anybody who has made the loans losing money. Critics of this idea will 

quickly point out that the current market for their financing is 

closed. Because of that, and the enormous amount that we are advocating, it is necessary that the U.S. Government be the lender 

of last resort with respect to the DIP financing. I advocate that the 

government work with one or more banking organizations who are 

experienced in structuring and monitoring DIP loans. Don’t try to 

do it yourself. There are experienced people out there. And I also 

suggest that the Treasury Department encourage several of the 

banks who have received the TARP loans to participate in the DIP 

financing. 

This is actually an excellent investment for these banks to be 

made at this point in time or any time in the past. Bankruptcy status enhances the ability for management, the existing ones or new 

management that could be brought into play if the firm goes bankVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
62 

rupt. To renegotiate existing and legacy pension and health care 

claims which is much more difficult outside the protective confines 

of the court system. Some feel that a GM bankruptcy announcement will cause immeasurable harm to the U.S. economy. But 

pointing out the high likelihood of bankruptcy will reduce the surprise impact. 

In addition, a clearly articulated communication of guaranteed 

government support will blunt consumers’ fears of liquidation, lost 

warranties, spare parts, availability, or other bankruptcy costs. A 

bankrupt company under Chapter 11 is not a liquidation. They 

stay in business. 

[The prepared statement of Professor Altman can be found on 

page 111 of the appendix.] 

Ms. WATERS. Thank you very much, Mr. Altman. 

Now, Mr. Rohatyn. 

STATEMENT OF THE HONORABLE FELIX G. ROHATYN, FGR 

ASSOCIATES, LLC 

Mr. ROHATYN. Thank you, Madam Chairwoman. I appreciate 

being invited here. I had a certain level of experience in areas sort 

of parallel to these over the last years, mostly in connection with 

New York City’s flirtation with bankruptcy, which we avoided with 

great effort. I thought I could sort of give you some of my thoughts 

and some of our experience since we managed actually to survive. 

We found very quickly in May 1975 when the banks cut off the 

credit of the City of New York that we had no other place to go 

except the Federal Government, and the Federal Government 

quickly turned down our request for an emergency loan. 

So at that point we found ourselves pretty much alone and felt 

that we—but we decided, certainly Governor Carey and his people 

decided, that we should not file for bankruptcy, that bankruptcy 

was the last thing we wanted to do in terms of the economic life 

of the City, in terms of its social life, and in terms of its future. 

So having said, that we turned towards the only potential 

sources of capital that we could identify; namely, the New York 

City banks; and secondly, the New York City pension funds. We negotiated with them the creation of the Municipal Assistance Corporation which would finance the City, and the creation of the financial control board which was the equivalent of what I think you 

are talking about now in terms of oversight. And we managed for 

8, 9, 10 months a year to survive on this with this combination. We 

did finally run out of steam. And a week before we were about to 

file for bankruptcy, which was Thanksgiving of 1975, we were finished, we were about to file, we got some unexpected assistance 

from abroad. Because the first western economic summit was taking place near Paris and President Ford, who was then President 

of the United States, attended that meeting together with Arthur 

Burns, who was Chairman of the Fed. And he brought us a message from the president of France and from the chancellor of Germany which said, don’t even think about going bankrupt, everybody will think the United States is bankrupt, and the dollar will 

have a crisis and you will have a crisis. 

This was 4 days before we were going to go into bankruptcy, and 

luckily President Ford turned out to be more reasonable than I 

63 

thought he might be. He stepped back from the brink, came back 

to the United States, and signed legislation that gave us a seasonable loan of, I forget how many billion dollars, but which was going 

to see us through until a time when hopefully we could have a 

budget that is back in balance. And that was about a 5-year pull. 

For the City of New York, this was an absolute must that we just 

couldn’t imagine the City going bankrupt or filing for bankruptcy. 

And sure enough, we also had the good fortune to elect a very good 

mayor, Ed Koch. We had a spectacular governor. And within 4 

years after that, we had a balanced budget. For the next 30 years, 

we balanced the budget except for 9/11. I doubt that we could do 

that again now as a matter of fact. Now, I look at what is happening today and the efforts that we are trying to make here to 

save an industry which is powerful and important. And the first 

comment that I would make is to hurry up because I think the 

economy is falling out from under our feet, and there is very little 

time left in which you will be able to act without having whatever 

actions you take preempted by other players, whether they are 

courts, whether they are the legislature, or whether they are the 

State. 

And so the first suggestion I would make to you is take your 

ground and go to sign because you are going to run out of time. 

Chapter 11 is not a very quick process, but if that is what you 

want to do, do it. Or in my judgment, what is much better is an 

agreement among the stakeholders with respect to salaries, with 

respect to investment, with respect to balance of power, if you will, 

which is what we did in New York City. We created essentially in 

a city, which was heavily a union city, we created a partnership between the business leadership and the labor leadership and the 

State both in terms of how the City was going to be managed, and 

how the pension funds and the banks would work together to provide us financing until we could hopefully do it on our own. I think 

at this point, I will stand down. 

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

220 of the appendix.] 

Ms. WATERS. Well, thank you very much, and we will be back to 

you at the point that we begin to ask the questions. 

I would like to now call on Mr. David Friedman. 

STATEMENT OF DAVID FRIEDMAN, RESEARCH DIRECTOR, 

CLEAN VEHICLES PROGRAM, UNION OF CONCERNED SCIENTISTS 

Mr. FRIEDMAN. Thank you, Madam Chairwoman, and thank you, 

members of the committee. I truly appreciate the opportunity to 

testify before you today. I am a research director and senior engineer with the Union of Concerned Scientists. And as an engineer, 

I hope to bring a different perspective to this hearing. But first, I 

would like to point to the perspective of the American taxpayers 

whose money would be on the line. As I am sure you are all well 

aware, Americans have, by and large, lost confidence in the Detroit 

automakers. Recent polling indicates over 60 percent of Americans 

oppose government financial assistance to them. This is despite the 

fact that about half the cars and trucks sold last year are from the 

Detroit 3. Now, there are a lot of reasons for this lack of confidence. 

64 

But if this committee, the House, the Senate, and the American 

people are going to support giving money to the automakers we 

need to find a way to ensure that this is not a bailout. 

Instead, the package should be structured as an investment 

where taxpayers are given a very clear return through money 

saved at the pump. To help rebuild confidence in the auto industry, 

and to build confidence in a package, I suggest four steps: 

First, we need to acknowledge what we already know. The survival of the Detroit auto industry depends on their ability to deliver 

the products consumers need in a world of volatile oil prices and 

a changing climate. No matter how they restructure themselves, if 

automakers fail to produce millions, millions of highly fuel efficient 

cars and trucks every year they will not be able to compete and 

they will not become profitable. 

Second, we need to require a return on taxpayer investment. 

This will help ensure that this package is in our Nation’s interest. 

Automakers should be required to comply with fuel economy standards 3 years early as GM has effectively said it is going to do in 

the plans they just submitted. If Detroit automakers were required 

to follow this path, consumers would see net savings of more than 

$30 billion through 2025. And that is with gas at just $2 a gallon. 

Third, require that automakers not bite the hand that feeds 

them. In return for taxpayer monies, automakers should be obligated to drop lawsuits seeking to block States that are requiring 

cleaner cars. These States represent over 35 percent of taxpayers 

and they are demanding cleaner cars through a single global warming pollution standard. Frankly, it would be a slap in the face to 

ask their residents to put up money to help an auto industry that 

is undermining their efforts. Further, based on submissions from 

GM and Ford it looks like they could be in a position to comply 

with the State standards. If the auto industry wants one single 

standard, a great way to deal with this is to simply adopt the State 

standards nationwide. 

Fourth, we should preserve the 2007 energy bill’s 136 advanced 

technology loan package and do not even temporarily bypass its 

modest requirement of a 25 percent increase in fuel economy for 

qualifying investments. In their plans, the automakers said they 

are already depending on this and they said that they can deliver 

on that 25 percent. There is no reason to sidestep that. 

If there are other barriers to getting that money to car companies as soon as possible those are the things that should be addressed. Now, Madam Chairwoman, the reason why I am so focused on building confidence in car companies by ensuring a return 

on investment is because I had very mixed emotions in studying 

their plans. There are a lot of reasons for hope in some of the plans 

the automakers submitted. From a promise to essentially meet 

2015 fuel economy requirements 3 years early, to the planned introduction of a hybrid family car that beats the competition by at 

least 6 miles per gallon, the automakers appear to be laying out 

a more positive direction than they have followed in the past. 

But these promises also sound a little too familiar. They sound 

too much like the unfulfilled promise to deliver an 80 mile per gallon family car or a commercially available hydrogen car in return 

for billions in R&D money under the partnership for new generaVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00068 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
65 

tion of vehicles or the freedom car program. I honestly think that 

automakers that made these promises can carry them out. That 

has never been the question. Detroit’s automakers already have the 

technology to do this and they are working hard at the more advanced technologies. And they have an extremely talented work 

force. 

So I am genuinely excited about the products they can produce. 

The question is not whether they can deliver; it is whether they 

will. And it is up to this committee and the Congress to make sure 

they deliver on these in return for financial help. Now, I have been 

a critic of the auto industry so it probably doesn’t surprise you to 

see me pointing out the risk and accepting them at their word. But 

I also strongly believe that we need a viable domestic auto industry 

to tackle America’s oil addiction while avoiding the worst impacts 

of climate change. If we avoid something that looks like an auto industry bailout and instead invest in them and require cleaner cars 

and trucks we can save money, save gas, reduce global warming 

pollution, and create new jobs along the way. Thank you. 

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

150 of the appendix.] 

Ms. WATERS. Thank you very much. 

Mr. Damon Lester. 

STATEMENT OF DAMON LESTER, PRESIDENT, NATIONAL 

ASSOCIATION OF MINORITY AUTOMOBILE DEALERS (NAMAD) 

Mr. LESTER. Thank you, Madam Chairwoman, and members of 

the committee. I want to thank you for inviting me here to speak 

to you on behalf of all the small new automobile dealers in the 

United States. My name is Damon Lester, and I am the president 

of the National Association of Minority Automobile Dealers 

(NAMAD). NAMAD represents over 2,000 ethnic minority automobile dealers, who represent less than 5 percent of the overall 

automobile dealer network in the United States. 

However, I am here today not simply to talk about ethnic minority automobile dealers, but the owners of all small dealerships in 

the country as this automobile industry and this economy is facing 

a complete global economic meltdown. Today, small dealerships 

throughout the United States are suffering at an alarming rate and 

are running out of cash and will close their doors if access to capital is not provided to them immediately. While NAMAD supports 

the bridge loan requests made by the Big Three, we also believe 

that fair consideration should also be given to those small dealerships who sell the products that the manufacturer produces. 

There is a direct correlation between the success of a healthy 

manufacturer and a healthy and profitable dealership. We support 

the requests made by Congress for the Detroit 3 to come up with 

a plan depicting how they are going to spend the requested funds. 

We support the need for more fuel efficient vehicles and we also 

support the concessions made by the UAW as well. As all of these 

efforts provide a blueprint on how the manufacturer will and has 

revamped its operations. 

However, we are concerned about the small dealer. Without the 

dealership operating effectively, without the manufacturer having 

a strong consumer confidence in the brands and in the corporation, 

66 

consumers will not purchase a vehicle and we need to change that. 

As I have reviewed the plans submitted by the Big Three, which 

focus on both short- and long-term viability of their respective companies, I am extremely concerned with some of the language that 

was alluded to in their proposals of having an excess number of 

dealerships. We believe that this deserves some review. 

As all small dealerships in rural and suburban America on aver- age employ 53 employees and generate over $33 million in gross 

annual sales, a small dealership is Main Street. These dealerships 

provide so much to the communities they serve that if a dealership 

closes today, the local churches will suffer, the local school and 

summer athletic teams will suffer, the local 4–H Clubs and Lion’s 

Clubs will suffer, the local Boy Scouts and Girl Scouts Club will 

suffer, and the local print and television stations will suffer as well. 

This is what Main Street is all about; grass roots, roll up your 

sleeves and becoming active in the communities in which they 

serve. As this Congress is considering the requests for immediate 

capital and liquidity by the Detroit 3, fair consideration and attention must also be given to the small dealerships. One very simple 

way to provide access to capital for these small dealerships is by 

the Small Business Administration Loan Guarantee Program. It 

has come to our attention that in the past 10 years, the SBA Loan 

Guarantee Program has been shortchanged and attempts to fund 

it have been shortchanged as well. 

In fact, just modifying the definition of who is eligible for the 

Loan Guarantee Program would help small dealerships. Currently 

the size standard, which is the definition used by the SBA to determine whether or not a business is deemed small, is stated as either 

employee based or in gross annual receipts based. As it relates to 

automobile dealers, the size standard currently is $29 million in 

average gross receipts, which is well below what the average gross 

annual sales are today. We believe if the size standard was modified to reflect an 100-employee based model, it will provide greater 

assistance for these small dealerships to survive. 

It is our hope that the loan guarantee will provide more assurance for financial institutions to begin lending to automobile dealers as it has come to almost a complete halt right now. We understand with any financial assistance program not all will be saved, 

but we truly believe that those dealers who have been historically 

profitable but are now going out of business for the lack of access 

to capital, can survive. I believe if there were an increase in the 

SBA Loan Guarantee Program of $1 billion from the TARP, which 

should be dedicated to provide assistance to small dealerships will 

potentially cover over 80 percent of those dealerships running out 

of cash now and being forced to close their doors. 

This loan guarantee will provide assistance to those rural and 

suburban dealers as well. In addition, I will recommend that $1 billion of TARP dollars from the manufacturer requested funds be directed to support small dealerships with the stipulation that these 

funds be used to purchase real estate, equipment and provide job 

training. And on behalf of the National Association of Minority 

Automobile Dealers, I want to thank the Detroit 3 for opening the 

doors for the diversity we now see among the small auto dealer 

network through its dealer development programs. Thank you. 

67 

[The prepared statement of Mr. Lester can be found on page 165 

of the appendix.] 

Ms. WATERS. Thank you very much. 

Mrs. BIGGERT. Madam Chairwoman, I have a Parliamentary inquiry. I notice that this witness is not on the memo to us, nor do 

we have his testimony. And I don’t know whether the chairman 

and the ranking member discussed this, but I would hope that this 

would not set a precedent, and I am not sure that the testimony 

should be entered into the record. 

Ms. WATERS. Certainly the chairman is not here, but it is my understanding that a decision was made. I don’t know what conversation took place between the chairman and the ranking member, but 

I would certainly hope that there would be no opposition to this 

testimony being a part of the official record. And I would suggest 

that there may be follow-up conversation with the chairman about 

it. 

Mrs. BIGGERT. I certainly don’t want to dismiss the testimony, 

and it is very relevant to this. But with the caveat that I would 

not want to see this set a precedent that this happens when none 

of our staff is aware of this. 

Ms. WATERS. I can appreciate that. And I do not think that there 

are many situations where the chairman would add someone at the 

last moment without that kind of conversation. I certainly think we 

should note that. I shall talk with him based on this conversation 

that we are having and hope that would not happen again. 

Mrs. BIGGERT. Thank you. 

Ms. WATERS. You are certainly welcome. 

The CHAIRMAN. I made the decision to add Mr. Lester, as I made 

the decision to extend the time to accommodate Mr. McCotter. 

Sometimes we don’t always have things as we anticipated. It struck 

me that the dealers should be represented. We did have a dealer 

representative on the last panel. And frankly, also the aspect of the 

impact on the minority community seemed important. So it did not 

seem to me that anybody would object to any witnesses. As I said, 

from time to time, I think it is important to make decisions that 

will I think accommodate important interests reasonably in ways 

that don’t cause any problem. Does the gentlewoman have any further questions about it? 

Mrs. BIGGERT. If the gentleman would yield. No, I just wanted, 

since you were not here, and the question was that there is no testimony that we have or anything. I just wanted to know, just to 

make sure this isn’t a precedent that will be when this is not discussed— 

The CHAIRMAN. No. 

Mrs. BIGGERT. And I can understand. 

The CHAIRMAN. It is a response at the last minute to someone 

calling to my attention a mistake, and I realized that there wasn’t 

testimony. So it will not be the regular order, but I couldn’t rule 

out doing it again. And I will say, from time to time, I have accommodated requests that have come from Members on either side to 

change things. We were up to Professor Sachs, I believe. 

68 

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. Mr. Chairman, thank you very much. Let me start 

by commending this committee for keeping at this, because this is 

of extraordinary importance for the American economy. Nobody 

likes this crisis, nobody likes these bailouts. History will record 

that this committee made a great service to the country in passing 

the TARP legislation. We have a crisis that is unprecedented in its 

speed and ferocity. It is hard to get everything right. You are doing 

the right thing. I would plead with you to stay in session to get this 

one done as well, otherwise we will have a meltdown in this economy that is of absolutely extraordinary proportions. This industry 

has enormous value worth preserving. These are some of the largest companies in the entire world. This is absolutely the worst financial crisis since the Great Depression. We all agree, aside from 

specific tactics on the need for a large government loan and a government involvement, so we are down to the details. 

In my view, Chapter 11 is not the best option right now. It is extraordinarily unpredictable. The last time we did a Chapter 11 was 

Lehman Brothers. That turned out to be the single biggest financial shock in modern history. And I think that we want to avoid 

going to that route as a first resort. In my view, it is the last resort. There are tremendous unpredictabilities on the consumer 

side, the finance side and the supplier side, possibilities of cascading disasters that I think we would do best to avoid right now. 

Now, we all agree that we need a significant restructuring. What 

GM put forward in detail, for example, is a very significant balance 

sheet restructuring. I believe that it can be done outside of Chapter 

11, and I think that is what should be attempted right now. And 

I think it is enormously impressive what they put forward and 

enormously important for us to support that process. They call for 

an oversight board that can help that process. I agree with that. 

And I think that this is the basic structure in which this should 

proceed. Who should pay for this? This is the hot potato that everybody is worrying about, understandably. There are three sources of 

funds it seems to me, not just two. One is a direct loan by the Fed. 

I think Chairman Bernanke is the missing personality at these 

negotiations, quite frankly. I do not understand the reticence of the 

Fed right now. The Fed lent against Bear Stearns assets. The Fed 

lent against Citibank assets. The Fed can lend against GM collateral. This is a big mistake that is being made right now. This is 

a systemic financial risk in this country and a substantial one. And 

we need the Fed here as well. So in my opinion, this is the first 

place where we should be looking for financing. Second is TARP. 

It fits perfectly with the intentions of the TARP that this be used 

for this purpose. And I am so happy with the testimony of Mr. 

Dodaro yesterday and again today. This is absolutely appropriate 

that the TARP should be used for this purpose. The third is section 

136. I also support that. 

Let’s be pragmatic. Get this job done so that we don’t have a 

meltdown. Have a new Administration come in. It is going to have 

to take a longer term look at this in early 2009 to help this process 

69 

go forward. This is not the end of the story; this is the beginning. 

That does not mean endless amounts of new money. That is not 

what I am implying. What I am implying is government support 

for a basic restructuring of this industry to achieve financial restructuring, balance sheet change, and model change along the 

lines of the environmental goals that we all share. So we need to 

get there because otherwise we will have a meltdown. I think at 

this point the double standard with Wall Street is so painful and 

so palpable it is hard actually to understand, how one throws a 

$306 billion guarantee over Citigroup without a single hearing or 

a single plan or a single datum, but we can’t get even a loan effectively senior and collateralized for millions of workers is a shock 

to me. 

I don’t even understand what they are thinking right now. Because this is absolutely as systemic as Citigroup or absolutely as 

systemic as the other financial matters. This is our largest industry. Are we going to watch it melt down by Christmas? That is 

what we are talking about, with all of the disintegration of value 

that would go along with this. So I think we have to frankly, in 

my opinion, have Chairman Bernanke and Treasury Secretary 

Paulson here at the table. We have three sources of funds. It needs 

to be worked out. This is not an endless open-ended process. There 

are plans on the table which your committee has successfully elicited, a great contribution of these hearings I might add. And it is 

going to be a process now to get to the next Administration for a 

longer term considered strategy. 

Let me finally add that all around the world, governments are 

supporting their automobile industries. Just yesterday, President 

Sarkozy made announcements about France. This is going to be a 

worldwide phenomenon given that we are in the sharpest downturn in modern history. And so please do not leave this weekend. 

I don’t want to open up to see what the markets look like on Monday morning because Congress has gone home and hasn’t been able 

to figure out how to do $25 billion when we have trillions of dollars 

at stake. Thank you very much. 

The CHAIRMAN. You are pretty free with our weekends, Mr. 

Sachs. 

Mr. SACHS. With all due respect. 

The CHAIRMAN. You may have to give notes to our responsive 

spouses, significant others, and children. 

First of all, I appreciate—let me ask this. Do you have an opinion 

on the response that was made by the Treasury and the Fed in 

various combination to Citigroup and AIG? 

Take them one at a time. What did you think about the response 

to AIG? 

Mr. ALTMAN. I think the AIG bailout was necessary. I think the 

deal that the U.S. Government got was very poor. AIG is a global 

organization with an incredible amount of— 

The CHAIRMAN. They didn’t declare bankruptcy, did they? 

Mr. ALTMAN. No. 

The CHAIRMAN. Do you think they should have? I mean, why the 

requirement for bankruptcy here and not for AIG? I am picking 

up—or similarly with Citigroup. Both of those got large amounts 

70 

of money without bankruptcy. Why is bankruptcy a necessity for 

the autoworkers or— 

Mr. ALTMAN. In this case, what I am advocating is that the government does not turn its back on General Motors when they go 

bankrupt. In fact— 

The CHAIRMAN. I understand that. 

Mr. ALTMAN. —I am advocating a much greater amount of assistance than what General Motors and the rest are asking for. 

The CHAIRMAN. I understand that, but I still—it does seem to me 

there is a difference in the treatment legally in terms of bankruptcy that was provided with regard to AIG and Citigroup on the 

one hand and what you are advocating here. 

Mr. ALTMAN. There is a difference. 

The CHAIRMAN. What is the justification for being harsher on the 

auto companies than on the financial companies? 

Mr. ALTMAN. Well, first of all, I don’t think we are being harsher 

on the auto companies. The auto companies— 

The CHAIRMAN. You don’t think if AIG was told if they had to 

do some form of bankruptcy, they wouldn’t have thought that was 

being harsher? 

Mr. ALTMAN. I am sorry. I didn’t hear the question. 

The CHAIRMAN. Well, if AIG had been told that they had to declare some form of bankruptcy, etc., you don’t think they would 

have considered that to be harsher than what in fact happened? 

Mr. ALTMAN. Sure. Absolutely. 

The CHAIRMAN. Then why isn’t it harsher for the auto companies 

than it was for AIG? 

Mr. ALTMAN. No, no. What I am saying is that I think the only 

hope for General Motors and the rest is to go bankrupt, to restructure, to perhaps even change the management of their companies. 

The CHAIRMAN. We changed the management of AIG without 

bankruptcy, and we restructured. I just don’t understand why you 

have to take the extra step of bankruptcy here and didn’t do it 

there. And there is this concern of a disparity that—and the ranking member made the point with regard to even the treatment of 

requests for approval of various forms of banking. 

I appreciate it. I think that is both a perception problem and a 

real problem; and I have to say I think there is to some extent in 

the culture and at the decision-making level what I have said before, a blue collar/white collar bias. I have heard a lot of requests 

from Mr. Gettelfinger to have the blue collar workers that he aptly 

represents reduce their compensation because it is greater than 

some other autoworkers. But my guess is the average autoworker 

gets significantly less in annual compensation than the average 

worker at Citigroup or AIG. And no one asked that they reduce 

their wages. We did talk about cutting out their bonuses, but I am 

sure the autoworkers would be perfectly willing to give up their bonuses, which they don’t have. So that is what is troubling to me. 

Let me ask the panelists, Mr. Sachs, and Mr. Rohatyn, who have 

some experience here, what is the likelihood in your judgment of 

our taking some action and it leading ultimately to success, to the 

survival of the companies? Mr. Rohatyn. 

Mr. ROHATYN. I would think, Mr. Chairman—and depending on 

how quickly it is done, because every day that goes by creates anVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
71 

other problem—I would think you have a 50/50 chance of being 

successful. The case is difficult to make from a popular point of 

view, but I think it is vital from a substantive point of view. 

The CHAIRMAN. You do substantive and we will do popular or unpopular. 

Mr. Sachs? 

Mr. SACHS. I think the chances of GM and Ford remaining selfstanding, successful companies is over 90 percent. Very, very high 

probability. Chrysler, obviously, the chance that it gets merged 

with some other company is more likely. But these are major global 

enterprises. Unless in the middle of this crisis they are driven to 

disaster, they will survive and they will recover. 

The CHAIRMAN. Thank you. 

Mr. Friedman, one last question because—and I began and Mrs. 

Maloney ably carried out on the issue you raised about the lawsuit. 

One of the arguments we got was, though, that the three American 

companies are only some of the plaintiffs. If they withdrew as 

plaintiffs, would that end the lawsuit? Would it be more than a 

symbolic victory to get them out if other plaintiffs were able to go 

forward on the same legal issues? 

Mr. FRIEDMAN. There are definitely other plaintiffs. But let us be 

honest, the leaders of these lawsuits have been the Big Three. 

The CHAIRMAN. I understand that. But, as a practical matter, 

what would the effect be if they got out? Would their lawsuit still 

go forward? 

Mr. FRIEDMAN. You would have to ask the members of the other 

foreign companies and some of the dealers what they would do. But 

I would think it would be incredibly difficult for them to maintain 

those lawsuits if the Big Three stepped away. 

The CHAIRMAN. The gentlewoman from Illinois. 

Mrs. BIGGERT. Thank you, Mr. Chairman. 

Mr. Friedman, I serve on the Science Committee as well as this 

committee, so I am really extremely interested in the alternative 

vehicles and all that goes into that. And I worry about the fact that 

we have to continue this, particularly with the price of gasoline 

going down as in the 1970’s when everybody suddenly thought, 

well, let us bring back the big cars. But I do see a difference here 

with people really looking forward to having the fuel-efficient cars. 

Do you think that that is one of the factors that—why people are 

not buying a car right now, that they know this is coming soon and 

there are already the hybrids and they don’t want to buy a car that 

is going to lose value, that doesn’t last as long as some cars have 

in the past? 

Mr. FRIEDMAN. I am not sure people are avoiding cars because 

they are just holding back and waiting for the next silver bullet. 

I think the challenge, actually, has been for the last 7 years before the credit crisis people weren’t buying as many cars; and the 

reason for that was because gas prices went up and they were less 

affordable. But, even more importantly, what happened during 

those 7 years was overall sales went down by 1 million, but domestic sales went down by 2 million. And what that means is the Big 

Three were losing market share and the imports were gaining market share in part because they had a better reputation and in part 

because they had better fuel-efficient vehicles. 

72 

Gas prices are low now, but basically we have low prices by recession. That is not a sound basis for a financial and energy or an 

environmental policy. We need to be prepared for when gas prices 

spike again. 

Mrs. BIGGERT. What we also had, though, was the rebates that 

people got with the 60,000 cars in each of the different companies 

if they bought a hybrid car. That was added in 2005, and most of 

those have expired now. Do you think that is one way to spur people to buy cars? 

Mr. FRIEDMAN. I think there are two steps that we need. One in 

general for buying cars, I do think we need to find a way to get 

consumers more resources to buy new cars and that those resources should be directly tied to the performance of those vehicles, 

not just hybrid vehicles but even just a simple conventional vehicle 

like some of the technology Ford is talking about that can boost 

fuel economy by 25, 30, or 40 percent. 

The tricky thing is going to be, how do you pay for that? Now, 

one option is in the broader stimulus to invest money, to encourage 

consumers to buy more cars. Another option is to create a system 

of fees and rebates to help move the market while you are also increasing standards. 

Mrs. BIGGERT. There is, you know, the EISA, section 136. You 

talked a little bit about that, and I wasn’t quite clear what you 

meant. But this really is to encourage the companies to invest in 

the type of cars that we want to see. 

But one of the plans that was brought up was to take some of 

that money and to infuse the three car companies to provide the 

money from that. But isn’t that going to reduce the amount of research and development into finding the ways to improve CAFE 

standards and all of the things we need to do? 

Mr. FRIEDMAN. I do worry there are risks of robbing Peter to pay 

Paul. If that money is shifted over without the same conditions 

that are currently under it, which is that those investments must 

provide at least a 25 percent increase in fuel economy, if the car 

companies and Congress do not accept the fact that the auto industry’s future has to be founded on increasing fuel economy and innovation, these plans will all be doomed to fail. 

We need to invest in them in a smart way and make sure consumers get something back. I think it is powerful if we can tell consumers we will save you $30 billion by 2025 by requiring automakers to do more than they already have to in terms of fuel economy. I think that will build significant confidence in a world that 

right now, because of the previous bailout, are not very comfortable 

with where this money may or may not go. 

Mrs. BIGGERT. Just a short question for anyone who wants to answer. We used to be able to deduct interest on auto loans. A lot of 

that has gone into home equity loans. Does anybody think that 

that should come back? Will that spur coming back? Mr. Lester? 

Mr. LESTER. I think overall that is one mechanism that would be 

able to stimulate consumers to begin to buy vehicles as it was done 

in the past that consumers were able to write off interest on the 

loans. I know it is being researched now through Senator Mikulski. 

But I do think that it is one viable option. 

Mrs. BIGGERT. Thank you. I yield back. 

73 

The CHAIRMAN. The gentlewoman from California. I am sorry, 

the gentleman from Pennsylvania. 

Mr. KANJORSKI. Thank you, Mr. Chairman. 

Mr. Sachs, I listened to your testimony there at the end as I returned from a break, and I have to say I am in full sympathy with 

what you are saying. I cannot understand all of this problem and 

we are arguing over what pot this comes out of. It is like—I gave 

an example just recently when someone asked me: It is like having 

a starving man come up to you, and you go through a mental argument with yourself as to what pocket you should take the money 

out of in order to buy him food. In the meantime, he starves to 

death. 

In this, it seems the inaction of the Congress and the Administration in arguing over the energy pot, the TARP pot, or whether 

we develop a new pot, who really cares? What I do care about is 

how we structure this, because I think there are several precedents 

in the future that we have to make. One I am disturbed about is 

that we are rushing this in the 11th hour to do something very 

quickly with very poor forethought; and just having come off the 

Wall Street rescue program, I think we can all see now that what 

we anticipated to be responsible implementation by the Executive 

Branch of government has not necessarily followed. Now, maybe 

they were great at Goldman Sachs, but I do not think they would 

have written some of the deals they wrote for Goldman U.S.A. and, 

as a result, we have to tighten up what authorities we allow these 

people to do in dealing with the taxpayers’ money. 

Now one of the things that I think we have to come up with is 

several conclusions. I watched all of the testimony yesterday before 

the Senate, and I was particularly moved by the questioning of 

Senator Corker and then the testimony of Mr. Zandi. I think they 

really in a clutch put our problem. 

Mr. Corker is a Republican, and I am a Democrat, so understand 

this is very bipartisan, this discussion. I thought he was absolutely 

on the ball when he talked about the problem with these companies is that they are not real companies. When you look at their 

balance sheet, you reject the viability of success of these companies. 

They are not going to make it. They have to be restructured. They 

have to have haircuts, if you will, through all of the elements of 

contribution, whether it is management, labor, suppliers, creditors, 

dealers. They all have to be brought in. 

Now, that is a hard thing to put together. We know from our experience with Chrysler bailout number one, it took 3 months to do 

that, 90 days. So what can we do in a week? We cannot do much. 

I do not think we can get to a final settlement to prevent bankruptcy if bankruptcy is 25 days off. 

So my remedy would be very simple. Right now, let us take the 

big risk, with what we have pending, do an emergency plug-in of 

$4 billion for General Motors, $4 billion for Chrysler—that is what 

they say they basically need to make March 31st—and then dedicate ourselves, together with the present and the future Administrations, to put a settlement sheet together as to what the Congress and the taxpayers need as assurances which would mean restructuring these companies. And not being too optimistic as to 

whether or not they are going to do this. 

74 

Impose a master, a super master on the board—or oversight that 

can impose a settlement. Tell them what they have to do. If the 

creditors aren’t willing to take a haircut, enforce a haircut. If we 

can did that, I think we can get to a very optimistic program. 

Now, with all that being said, there is one other area I would 

like to hear from you, very quickly. I am disturbed with the fact 

that they have woven into their network the inability for any one 

of them to fail without causing systemic risk to the whole system. 

We have allowed something to occur in this system that one little, 

small company like Chrysler can force the United States Government to come in with untold amounts of money. Because if they 

fail, the suppliers fail, or the other companies fail. It will be systemic risk. Something we did in the law to allow them to get that 

complicated. 

And part of that is having them become financial institutions, 

too. Why can we not spin off their financial elements from these 

‘‘manufacturers?’’ Let them be manufacturers and let banks do financing. What is the problem with that? 

As I hear through all of the testimony, particularly from Chrysler, the biggest part of their business and the most important asset 

they have is the financial part of the asset. I think they would forego the car business. They want to be in the financial business. Let 

us separate them. 

What are your thoughts on this? Very quickly. 

Mr. SACHS. Thank you very much, Congressman. 

I think, in general, the logic that you are making a loan against 

a credible scenario, but it is going to be taken up again in the 

spring by the new Administration in a more clarified structure is 

the right logic of what is happening right now. You don’t have the 

time to fine tune this thing, but you can’t let it go at the same 

time. I would urge you to go a couple of months later, let this new 

government come in, have a moment to find their seats, to actually 

think through this thing so that maybe it is May 1st, maybe it is 

June 1st. 

But you are right, that this is a two-step process. We can’t let 

the meltdown happen right now. The bigger restructuring depends 

on the quality of Executive Branch leadership and your oversight. 

I feel your pain on TARP. I want to commend you for passing 

TARP, though. It made a huge, positive contribution. 

And on the subject— 

The CHAIRMAN. The time has expired. 

The gentleman from Delaware. 

Mr. CASTLE. Thank you, Mr. Chairman. 

I am actually going to follow up along the same lines, Professor, 

that Mr. Kanjorski was just asking about. 

You indicated in your opening statement here that virtually any 

of these sources that have been discussed potentially could help 

with the auto bailout, and you are critical that the Federal Reserve 

has not been involved. You talked about the TARP. You talked 

about, I think, the section 136 funds which are out there. My question is, is there any reason why we couldn’t use multiple sources, 

maybe even some of the larger banks that hopefully are being restored to credibility and more liquidity could be involved as well? 

75 

Mr. SACHS. Essentially, the Fed option is a loan to one of our big 

banks or a group of banks which would then extend a non-recourse 

loan against Big Three collateral. GM testified this morning that 

they have some collateral for that this morning, also. That is why 

they could be a part of this solution. 

No doubt using all three would make sense. But it means getting 

people in the room to negotiate something. That is why I say the 

weekend, as painful as it is, is really important to get this thing 

done. And I don’t think that there is a magic to not using section 

136 or only TARP and so forth, but probably all three can play a 

role. 

Mr. CASTLE. And, just briefly, in answering Mr. Kanjorski, you 

were agreeing that we could do something on a temporary level— 

it could be a 6-month or a 4-month basis over the more permanent 

funding solution at a later time? 

Mr. SACHS. I would urge you not to make it so short term that 

everybody says, my God, there is no solution here. But, on the 

other hand, you don’t have to solve a 5-year problem today; and 

you shouldn’t solve a 5-year problem today. Because you need the 

Executive Branch, and that means a new government and giving 

them a bit of time. So I would go 6 months out and get that done 

with the positive intention that we are on a new path in this country and that this is to make a new industry out of this. And I think 

you will make a great contribution that way. 

Mr. CASTLE. Good. Thank you. 

Mr. Dodaro, have you looked—has your office looked at these 

numbers and are you in agreement with the numbers? I mean, we 

have seen the reports from Ford, Chrysler, and General Motors; we 

have looked at them, and our staff has looked at them. I am not 

saying we have the expertise to understand them. They are making 

representations today which you probably heard about the exact 

amount of money they need even on a month-by-month basis at 

this point. We need, I think, verification of that or the rebuttal side 

of it if that is what the case is. 

Have you all looked at that carefully? Are you satisfied that their 

representations are accurate? I am not suggesting they are misrepresenting intentionally, but they are accurate in terms of their 

numbers? 

Mr. DODARO. First of all, we were brought in at the time when 

they were prepared to plan. So we have only had the opportunity 

like everybody else to look at the plans since they were submitted 

late on Tuesday. 

Mr. CASTLE. That is right. We assume you are a lot brighter in 

this area than we are. 

Mr. DODARO. There are a couple of issues, Congressman. 

Number one, we have read the plans. We don’t have normal access to the records of private sector entities. We have tried to look 

at some of the publicly available information. 

Chrysler, being held by a private equity firm, doesn’t produce 

public financial statements, so the publicly available information 

on them is really very limited. 

And looking at the plans, there are assumptions in the plans 

that I think need to be monitored very carefully. There are assumptions that they can exchange equity for some of the debt that 

76 

they owe. There are assumptions that they can negotiate with a 

number of their stakeholders in bringing down some of their costs. 

There are assumptions about car sales going forward. So that is 

why we have suggested, you know, the immediate approach and 

even the cash draws that are in place. 

There ought to be certifications by the companies that credit is 

not available anywhere else. Someone on behalf of the Federal Government should look at the cash flow information, the details that 

support their plans and disburse the money, even in the immediate 

period. The money is to be needed between January and March, 

and circumstances can change. So somebody on behalf of the Federal Government. 

That is why we had suggested a board or some entity that provides the immediate assistance could get those operating plans and 

cash flow justifications and make sure that it is warranted in that 

case, while the more longer term restructuring issues could be settled along the lines that Professor Sachs is talking about. 

Mr. CASTLE. Well, I agree. I think clearly we need the board; I 

think clearly we need your engagement and involvement in it. But 

it is interesting, because you are sort of endorsing the shorter-solution-first concept as well. 

Mr. DODARO. There are many issues. This is a very complicated 

situation. And I think that if the government goes into it, we ought 

to go in with eyes wide open, that this is—as I mentioned in my 

opening statement, you have short-term liquidity issues, but you 

have restructuring issues, and this is all occurring against the 

backdrop of a very uncertain, unchartered economic climate. 

The CHAIRMAN. The gentlewoman from California. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

I have tried to concentrate my efforts on the small dealerships. 

One of the reasons I do this is because politicians and others are 

constantly saying we are bailing out Wall Street, but what about 

Main Street? And it has become the kind of rhetoric with no meaning to it. I really am concerned about Main Street. And while the 

manufacturers came in here today talking about they have some 

consolidation plans, they failed to really tell us what those consolidation plans are. 

I maintain that simply getting rid of all these small dealerships 

and consolidating by allowing the big boys to buy out all of the 

small dealerships—I want to ask Mr. Lester. Many of those small 

dealerships are minorities. Many of them are in trouble. I keep 

hearing that they can get no help from the financial arms of these 

auto manufacturers, whether it is GMAC or the others. They all 

have these financing arms that have shut down on them. 

One can make an argument, well, they are in financial trouble. 

However, as I understand it, they are literally blocking the ability 

for small, independent companies to be able to stay afloat, just as 

they are asking us to help them do or to be able to buy up some 

of the other smaller dealers that would like to sell. 

Can you help me understand? What do you know about this consolidation plan? Why can’t you get money from these financing 

arms? And if you can’t get money from them, surely you can get 

money from these banks that we are bailing out. What is going on? 

77 

Mr. LESTER. Right now, there is an overall freeze for access to 

capital via a captive institution or a larger financial institution to 

provide credit or capital to any dealership. As a result of this credit 

freeze that we are in right now, most of the banks and the captives 

deem it too high risk to lend to dealers now when, historically, they 

were courting dealers, particularly minority dealerships, for their 

business. 

As relates to the captives, it is even to the point as well as the 

financial institutions that when we are in an environment of decreasing our interest rates, they are increasing them and putting 

a stronger requirement onto the dealerships. And when we are in 

an environment where there is very few traffic in those stores, you 

cannot hold your operating—working capital requirements on a 

monthly basis if you have a squeeze from your local bank curtailing 

your loan, you have a squeeze from your lender, increasing your 

floor plan rates, and you have the inability and also the actual 

shutting down of your access of credit from via your line of credit 

with your financial institutions. 

Ms. WATERS. I understand that, if I may, that many of these 

small independent banks have operated very well for many years. 

They are good managers, and they just happen to be caught up in 

this economic crisis. But if they can stay afloat as the automobile 

manufacturers are asking us to keep them afloat that they would 

be able to resume and make a profit and do well. Is that true? 

Mr. LESTER. Yes. Many of the dealerships believe that if they can 

get some help they can survive these turbulent times. Dealers are 

one of the most resilient entrepreneurs out there. But if there is 

no help or no availability to capital, they will just go away, run out 

of cash and close their doors. 

Ms. WATERS. Are the big automobile manufacturers that were 

here today, are they calling in their loans today at their financing 

arms? Are they squeezing small independent dealers now? 

Mr. LESTER. Yes. They are to the point of asking for—curtailing 

their floor plan loans. They are shutting down lines of credit. They 

are not providing any access to capital to the standpoint where, 

when you had available credit made available, they have actually 

closed those lending down. 

Ms. WATERS. Do you believe that if we are to rescue these big 

automobile manufacturers we should insist or include in our language support for the small independent dealers? 

Mr. LESTER. Yes. If support is going to be given to the manufacturers, the dealers also have to get some fair support as well as 

they have—they work hand in hand. If they can’t make it, there 

is not going to be anyone left to sell it. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

The CHAIRMAN. The gentleman from Alabama. 

Mr. BACHUS. Thank you. 

Professor Sachs, I want to welcome you and express to you that 

I have enjoyed our friendship and working together on issues. It is 

good to see you. 

I am going to address my question to Professor Altman, because 

my question deals with restructuring. And I think we all agree that 

there has to be a fundamental restructuring of the industry. My 

first question is, the Comptroller General mentioned that general 

78 

restructuring—I may be paraphrasing you. There are a lot of complex issues. I think you expressed your concern that these couldn’t 

be dealt with in a matter of months or weeks for sure; is that correct? 

Mr. DODARO. I think they need to be carefully thought through, 

and I think there has to be somebody at the table representing the 

Federal Government and the taxpayers’ interest and safeguarding 

those, to be done successfully, to achieve the right outcome. 

Mr. BACHUS. All right. And I think you are dealing—restructuring, it usually takes years. I mean, does it not? I am not against 

that. I am just saying it is not something you go in on a Friday 

and you come out a month later. Is that—am I accurate? Or would 

you say— 

Mr. ALTMAN. Yes, I would endorse that. In a Chapter 11 reorganization, the average time is 18 months to 2 years. 

Mr. BACHUS. So it is not a short and sweet process. 

Mr. ALTMAN. This is a very complex company with many international as well as domestic aspects. It would not be a short period, 

and that is why they need sustainable funding for a long period of 

time. 

Mr. BACHUS. That is actually where I was going. It is a process 

of several months, at least, if not 18 months to 2 years, particularly 

with the challenges that the domestic automobile industry has and 

the extent of restructuring. So even this idea of prepackaged—I 

mean, there is issues that prepackaged is—certain things should be 

dealt with, but they have to be dealt with during that process of 

restructuring. 

Which brings me to this: They are going to need financing. You 

don’t have restructuring without significant financing. 

Mr. ALTMAN. Absolutely. 

Mr. BACHUS. And I think you have to have successful restructuring to get the money back. So it ought to be—whether you are 

a Democrat or Republican or conservative or liberal, we ought to 

all want a fundamental and successful restructuring. And that 

can’t happen without financing. 

Mr. ALTMAN. Absolutely. And the idea that we put forward is that they would get more than the $18 billion that General Motors 

is asking for. We actually ran through our models to look at what 

the $18 billion would bring to them, and they still come out as a 

likely bankrupt company with the $18 billion. With $4 billion or $8 

billion, you know, there is almost no chance. 

Now, in terms of the restructuring, that probably would take a 

minimum of 12 months, probably closer to 2 years, which is consistent with how long the recession is likely to last. So the best 

time for them to be coming out would be when the recession is 

over; and in this period of time, they need this $40- to $50 billion 

or more. 

The testimony yesterday in the Senate from Mr. Zandi was the fact that they needed $75- to $125 billion, all three of them. And 

the numbers are much larger than what they are asking for. They 

are going to be come back asking for a lot more in a very short period of time. 

Mr. BACHUS. But if you give them $20 million without structural 

changes, then you lose that. If there is a successful restructuring 

79 

and they are profitable, you know, there is not a loss to the taxpayer, at least the taxpayer is protected. So that maybe sounds a 

little different. 

Let me wrap it up by saying that—because my time will expire— 

I am very disappointed—I expressed this to the first panel—with 

the financial institutions that have received hundreds of billions of 

dollars with the express intent of loaning that to America’s manufacturers. And is that not a source of funds? 

Mr. ALTMAN. Yes. Well, let me mention, with respect to the DIP 

financing, it is—these are experienced institutions dealing with 

DIP financing. They could help out enormously, but they also 

should help out in terms of providing part of the DIP financing 

funds. It is a good investment for them. It is a good investment for 

the United States taxpayer. And I believe this is the way to go 

rather than simply having no participation on the part of expertise 

in this area. 

The CHAIRMAN. The gentleman from North Carolina. 

Mr. WATT. Thank you, Mr. Chairman. I have three questions. 

First, Mr. Lester, I take it if we do something either short term 

or intermediate term, your position is we ought to include the suggestions that you have outlined in some detail on the bottom of 

page 3 and the top of page 4 of your testimony? 

Mr. LESTER. Yes. 

Mr. WATT. Mr. Sachs, what is your take on what kind of pressure 

we should be putting on this private equity firm to ante up this 

money for Chrysler’s part of this? There seem to be two or three 

different kinds of spins that are being put on that. Can you give 

me your brief take on that? 

Mr. SACHS. I don’t put the Chrysler situation really different— 

so different from the other two in that regard. I think none of 

them— 

Mr. WATT. Do you think the private equity firm would sit there 

and allow Chrysler to go into bankruptcy as opposed to anteing up 

the rest? 

Mr. SACHS. Yes. 

Mr. WATT. Why? 

Mr. SACHS. Because if there is no chance of financing that gives 

them the way out, that may be their best shot right now, is to take 

zero. 

Mr. WATT. Even if they have the money? 

Mr. SACHS. Yes, because it may just go under. If there is no financing for restructuring, it doesn’t make sense. 

Mr. WATT. Okay. And, Mr. Sachs, again, you talk about a 6- 

month timeframe, but you heard Mr. McCotter’s suggestion that we 

do this on an even narrower timeframe. What was your reaction to 

Mr. McCotter’s suggestion about how we do this on a smaller 

amount with a shorter timeframe? 

Mr. SACHS. I think this is relevant also for this restructuring 

issue. We can’t send a signal that we are just dripping an IV line 

into a moribund patient. That will not work. The idea of doing this 

for 3 weeks is a zero in my mind. It doesn’t make any sense. 

Six months only works, by the way, if it is done in a very positive 

way with President-Elect Obama saying, we are going to make this 

work for the longer term; we are going to be in there. 

80 

And—sorry, if I might, Congressman, just to emphasize—we 

don’t need Chapter 11 to do a balance sheet restructuring. We can 

do it in the shadow of this and preserve value. 

Mr. WATT. You are arguing about something that I am on your 

side on. 

Mr. SACHS. Yes. 

Mr. WATT. What is the 6-month cost? Is that the $19 billion or 

what did that come to, the 6-month cost that you are talking 

about? 

Mr. SACHS. I would have to add up for each of them, which we 

could do on that basis. But it is somewhere around the number you 

are giving. 

Mr. WATT. $16- to $18 billion? 

Mr. SACHS. Something like that. Yes. 

Mr. WATT. So you are suggesting that a viable approach to this, 

instead of making a $34 billion commitment, would be to do it in 

a 6-month increment? 

Mr. SACHS. What I am suggesting in the reality of this is that 

what we are doing right now is getting to a position where a more 

fundamental decision can be taken in the spring. And it is going 

to require more money in the spring. But against the kind of 

longer-term scenarios that have been presented to this committee. 

So I don’t want to cut it so close that the consumers say it is an 

abandonment. On the other hand, you don’t have to settle everything for the long term right now. You really do have to carry it 

in a positive way to the next government. 

Mr. WATT. What is your reaction to that, Mr. Dodaro? 

Mr. DODARO. Basically, we had suggested if the Congress makes 

the determination they want to provide assistance here, structuring 

a short-term and a longer-term approach is an appropriate way to 

go forward. 

Mr. WATT. So what you are saying is consistent with what Professor Sachs is saying? 

Mr. DODARO. Yes. The only additional point that I would make, 

Congressman, is that even in the short term, I think there has to 

be a guardian, a Federal guardian and an independent person 

making sure that the disbursements are warranted even during 

that short intermediate period of time. 

Mr. WATT. To the extent part of that money would come out of 

the TARP, there is already an existing framework for doing that. 

Is there one in the section—whatever—106 money or whatever it 

is? 

Mr. DODARO. Yes. What I am talking about, though, would be 

more rigorous than what is in the TARP program right now. 

Mr. WATT. Do you mean what we expected the TARP oversight 

people to do, rather than what they are actually doing? 

Mr. DODARO. I think we need more information up front to have 

confidence that the government’s expenditures are there, and in 

the short term I would have a higher risk premium. 

The CHAIRMAN. The gentleman from Massachusetts. 

Mr. LYNCH. Thank you, Mr. Chairman. 

I appreciate the ranking member’s work as well. I want to thank 

the witnesses for their thoughtful testimony, all of the witnesses 

here today. 

81 

I remain unconvinced, just after listening to the CEOs of the various companies, that any of these plans might ultimately work the 

way they have laid them out. Just as a threshold matter, the projections that they have for growth in auto sales from year to year 

during this supposed bailout, totally inconsistent with the employment numbers that we saw come out today; and the projections of 

some related industries like the steel industry, they are projecting 

a different trend certainly. 

And if I take Mr. Dodaro’s suggestion, I would make an assertion, sort of put a marker down, that we need to have a domestic 

auto industry in the United States. It may not be the Big Three. 

It might be the Big Two. That might be what has to happen here. 

But I am concerned—I hear the different views of bankruptcy, 

especially with respect to Mr. Dodaro and Professor Altman and 

Professor Sachs. I am concerned, Professor Altman, with your scenario there where they have this, you know, bankruptcy proceeding, we try to take care of this problem in bankruptcy. I have 

had dealings as an attorney trying to represent employees, trying 

to get their pension funds and their health and welfare benefits 

from companies that have gone into bankruptcy. Bankruptcy courts 

are not known for their speed, God knows. And I think easily with 

companies of this size, it could be a very long bankruptcy. It could 

be 3 to 4 years, and they would be in bankruptcy when the market 

comes back. I think they would be at a severe disadvantage with 

respect to some of these foreign automakers. I think they would 

lose a lot of market share, and they wouldn’t be able to respond. 

As well, not only the effect on the firms themselves, but also the 

cascading bankruptcies that might happen, that probably will happen with these suppliers right down the line. 

So what I would like to hear from you—here is the essence of my 

question: Is there some way—and we are looking at this as a prebankruptcy sort of assistance now. Is there a way—you describe, 

Professor Altman, about a super seniority granted to the taxpayer. 

That is job one for us in Congress. We have to protect the taxpayer. 

Is there a way to grant super seniority outside of bankruptcy before 

we go into bankruptcy to any monies that might go? 

And, again, I am not convinced that it needs to or that it should. 

But we have to protect those interests. 

Is there a way to create a receivership in some way to make sure 

that whatever dollar goes to GM or Chrysler or Ford that if eventually they do collapse into bankruptcy that the first dollar that 

comes out of there, before a dollar goes to any of those CEOs, that 

the taxpayers are repaid? Or is there some other configuration— 

I tried to look through history about different examples that 

might be comparable to this one, and I looked at the steel seizure 

cases during the Truman Administration where he went in and 

just took control of the steel industry. He obviously was overturned 

by the Supreme Court because he didn’t have congressional authorization to do that. But, in this case, maybe it would be incumbent 

upon Congress to grant President Obama when he is in office some 

emergency type of power. 

Could you just elaborate on how you see that all working out? 

Mr. ALTMAN. Under the law, you are not permitted to issue new 

debt and take precedent over existing debts that have been 

82 

collateralized with assets behind it. So that is protected. General 

Motors has put forward a plan that they say they have 

unencumbered assets— 

Mr. LYNCH. Let me stop you there, though. If Congress passed 

another law, would it be unconstitutional, would we be derogating 

the rights of contract if we put the taxpayers’ lien ahead of everybody else in the special circumstances? 

Mr. ALTMAN. It would undermine, I think, the entire credit system that we have in the United States, to be perfectly honest with 

you. The flow of credit would come to a halt, even in good times. 

Mr. LYNCH. It looks pretty undermined right now. I am just saying we are trying to protect the taxpayers. I understand the principles involved, but these are extraordinary— 

Mr. ALTMAN. The only way they could get some precedent for the 

taxpayer would have new unencumbered assets be put up as collateral, And then the question is what is the value of those. A lot of 

those are intangibles and would have some trouble convincing me 

that you are going to get your money back in a short period of time. 

Mr. LYNCH. Mr. Chairman, can I have one of the other witnesses—Mr. Sachs, you have a— 

Mr. KANJORSKI. [presiding] Very quickly. 

Mr. LYNCH. Professor Sachs, do you want to take a crack at that? 

Mr. SACHS. On the seniority question, well, I actually wanted to 

respond to the other question, which is that we should not plan for 

failure of sticking at 10 million units per year, which is where the 

economy is right now. I don’t find the recovery scenario unrealistic 

in the same way. We have to plan for a macroeconomic recovery, 

and this is part of it. And there will be a macroeconomic recovery, 

and by doing this it will help it considerably. This won’t happen in 

2009, but it will happen in 2010, 2011, or 2012. We have gone from 

17 million units down to 10.1 million units. We are not going to 

stay at 10.1 million unless we do everything wrong right now. 

Mr. LYNCH. Okay. Thank you, Mr. Chairman. Thank you for your 

forbearance. 

Mr. KANJORSKI. Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. Dodaro? Am I pronouncing that correctly? Sir, I am going to 

exclude you from my questions. And believe me, it is not because 

I love you any less than I love the others. But I do have questions 

for your colleagues who are with you today. My first question is, given that we expended $85 billion plus an additional $37.8 billion plus an additional $40 billion—depending 

on who is counting, between $112 and $152 billion thereabout—to 

bail out AIG, was it in our national interest to do so? Let us have 

Mr. Altman address this first, please. Was it in our interest to do 

so, our national interest? 

Mr. ALTMAN. I think it was in our interest to bail out— 

Mr. GREEN. That will be sufficient. I only say this because time 

is of the essence. I still love you. I want to hear more. But it was 

in our national interest to do so. 

If you concur with Mr. Altman, and you believe that it was in 

our national interest to bail out AIG and to have $306 billion thereabout in guarantees for Citi, if you think that it was in our national interest to do so, would you kindly extend a hand into the 

83 

air? If you think it was in our national interest to do so, in the national interest of the United States of America. 

All right. I think we have all hands, except one. 

Am I to conclude, Mr.—is it—I can’t quite see the name as well 

as I should. Do you differ, sir? 

Mr. ROHATYN. I beg your pardon? 

Mr. GREEN. Do you think that it was in our national interest to 

bail out AIG? 

Mr. ROHATYN. Yes, I do. 

Mr. GREEN. So everybody agrees. All right. Thank you. 

Now to the next question: Is it in our national interest to bail 

out the auto industry? Is it in our national interest? In you think 

so, kindly extend a hand into the air. 

Everybody agrees that it is in our national interest to do so. 

Thank you. You may lower your hands. 

If it is in our national interest to do so, do you think that indecision is going to be a decision that will impact our national interest? 

If you do, raise your hand. Indecision will be a decision that is 

going to impact us. 

Thank you very much. All hands, for the record, were raised. 

And do you agree that indecision will ultimately become a decision that is going to be to the detriment of the national interest of 

the American economy, the national interest of the country? I don’t 

mean to be so elementary, but this is a good way for us to get a 

message to the American people. 

Okay. It appears that we seem to think that we must do something to take care of the auto industry. After all, France is going 

to do it, Japan will do it, China will do it. Countries protect their 

auto industries. 

The question is, will we allow ourselves to become victims of 

what Dr. King called the paralysis of analysis? We can literally 

analyze this to death. We did not analyze AIG to death. Someone 

took bold, decisive action. That bold, decisive action, whether we 

admit it or not, has provided some stability in the financial markets. It really has. Sending a clear and concise message makes a 

difference. At some point, someone in a very high office has to send 

a clear and concise message we are not going to sacrifice the American auto industry. 

Now, they have come in and they have done everything except 

roll over and play dead, and I suspect that if we had said, would 

you be willing to roll over and play dead, somebody would have literally rolled over and played dead. I think they are willing to make 

whatever concessions we can concoct. And we ought to have strings 

attached, we ought to do everything that we can to make sure that 

the American taxpayer is protected, but the truth of the matter is, 

we must act. This is in the interest of the American people. More 

importantly, said another way, it is in our national interest. 

I think that at some point this talk about Chapter 11 and Chapter 7 is going to put us in a position where we are going to bankrupt the American dollar. Now, this is where I—my time is up, so 

I will simply close with this: The full faith and credit of the American economy is based upon the full faith and credit of the American dollar. We are playing with fire. We are playing with economic 

fire. 

84 

Thank you. I yield back. 

Mr. KANJORSKI. Thank you, Mr. Green. 

The gentlelady from California, do you have something to submit 

for the record? 

Ms. WATERS. Thank you very much. I would like to submit for 

the record a letter from John Lewis relative to the small dealerships, and also an article from the New York Times entitled, ‘‘Auto 

Dealerships Teeter as Big Three Decline.’’ 

Mr. KANJORSKI. Without objection, it is so ordered. 

Mr. Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

I would like to say amen to the sermon by Bishop Al Green. I 

do think that he said it all and did it quite eloquently. I just appreciate your participation here. Very good reflexes. 

The issue that I am concerned about is waiting, and I do think 

there is a difference in how we handle Wall Street and how we are 

handling our automobile industry. I get that all things come to 

those who wait. Sometimes, though, it is just leftovers from the fellows who got there first, and this is where I think we find the automobile industry. 

One of the issues that I would hope that you could help me understand and deal with—I have two automobile plants in my district, in Missouri, Kansas City, Missouri. If we don’t act equally 

fast for GMAC and for Chrysler financing, it won’t matter if we can 

make cars if we still don’t have the capacity to buy them. So I 

would like for you to—if I am off base, if you would help me. And 

if I am, support me. 

Professor Sachs. And thank you for being here again. 

Mr. SACHS. Thank you. It is always an honor to be in front of 

this committee. 

We absolutely need first to make sure that these companies don’t 

go into default in the next week, or in 2 or 3 weeks, and second, 

that we spur demand again. There will be many parts of that next 

year. Part of it will be automobile financing turned back on, because it is off right now, as you know very well. Part of it will be 

the overall stimulus program. Part of it will be TARP and its successors working more effectively. So the demand side and preventing this disaster which—where delay is risky are the two goals 

that we need to put together. 

Mr. ALTMAN. I would endorse the need to move quickly. My fear 

is that if we move and we do it with a Band-Aid or two, I know 

$4 billion doesn’t sound like a Band-Aid, but we are going to come 

back very soon to ask for a lot more, and then more, because this 

recession is not going away in 6 months. So we have to be prepared 

for that. And I agree with Jeff that we need to have a fiscal stimulus after the new Administration comes in to get demand going 

again, and so that is part of the package. 

Mr. CLEAVER. My final question: Someone unfortunately brought 

up subprime loans in the automobile industry this morning, which 

was just unfortunate that someone would do that. The economy is 

not in trouble because we have had foreclosures on Cadillacs or 

Chevys. But do any of you see anything wrong with—in any agreement also making sure that to get an automobile loan, your credit 

85 

score doesn’t have to be 700 or 750? I mean, we may need—yes, 

yes, Mr. Lester, I am sure you can respond to this. 

Mr. LESTER. I think that is what the problem is now. The requirements that the financial institutions as well as the captives 

have put on the consumer, no one has the ability—very few people 

have the ability to have a 700 FICO score to go out and buy a Ford 

Focus, for example. We are in an economic disaster, and we can’t 

afford for these manufacturers and dealerships to go away. This 

country can’t take it. You already mentioned that if we go away, 

the dollar will disseminate. 

Mr. CLEAVER. So do you think that something like this should be 

included in any agreement? 

Mr. LESTER. I think TARP loosening up, making the announcement a week before last about loosening and providing access for 

capital to lenders for auto loans and student loans, that is hopefully—once it gets up and running, it will— 

Mr. CLEAVER. What I am asking is, should we have a de-icer 

amendment? 

Mr. LESTER. Yes. 

Mr. SACHS. I would not suggest it. It would overburden this specific action right now. This has to be a priority for the next Treasury Secretary. That is for sure. 

The CHAIRMAN. Thank you. 

Let me just say—I am going to ask for unanimous consent for 

about 90 seconds. I noticed Mr. Rohatyn had a comment he wanted 

to make, and just given his experience, I want to ask him if he had 

something he wanted to add. 

Mr. ROHATYN. Yes, Mr. Chairman, I do. I think it is terribly important that there not be any— 

The CHAIRMAN. You are cutting in and out. 

Mr. ROHATYN. I think it is terribly important, because people are 

going to be listening to what comes out of this meeting, and what 

comes out of the other meeting, whether there is any hope for these 

companies or whether they are being condemned to death, which 

would be a terrible thing for us, and I think somehow, somewhere, 

somebody has to put out some kind of a release or information with 

respect to the commitment to the industry among the political leadership in this country. 

The CHAIRMAN. I have been asked—and I think it is a fair point. 

I have been trying not to say much, because when you are trying 

to work things out—let us just say the better—in advance, but I 

have been struck by a pretty broad consensus here that something 

should be done. There are only a couple of Members who took a 

fairly strong position saying free enterprise being what it is, don’t 

do this. Now, that doesn’t necessarily get us there, but I think if 

you are listening, we have gotten to the question of how to do this. 

I think the majority of this committee appears to me to have resolved the question about whether the answer is ‘‘yes.’’ It is not a 

guarantee of success, but it clearly is a step forward. 

The gentleman from Colorado. 

Mr. PERLMUTTER. Thank you, Mr. Chairman. 

And, Mr. Rohatyn, that is exactly where I was going to go. Three 

weeks ago when the automakers came to this committee, they 

didn’t present us with much that we could get our arms around. 

86 

It wasn’t very helpful. Today the information, their business plans, 

are much more substantial, and much more professional. Obviously 

painted a bleak picture for today, but a much brighter picture 

given restructuring for a year, 2 years, 3 years down the road. The 

technological leaps that they are making with respect to batteries 

and the like really do benefit us as consumers and us as a Nation 

going forward on an energy basis. 

And, you know, just back in Colorado, I have to deal with people 

on the street. So I have to ask three questions. One, is the domestic 

auto industry essential to this country, meaning, if it were to fail, 

would the damage be too great for us to sustain over a reasonable 

period of time? Two, is there a way in the short run to maintain 

these companies so that they are competitive and successful in the 

long run? And three, can we substantially protect the American 

taxpayer in maintaining the domestic auto industry? 

And I think the answer is yes. And I think it is a combination 

of things that Professor Sachs is saying, Professor Altman and you, 

Mr. Rohatyn. It may not be that we do a Chapter 11, because I 

have a lot of experience in that field, and it just takes too long, and 

there are different hurdles and judges and things you have to deal 

with. But we need to have something that provides powers to an 

oversight committee or to somebody to do the restructuring necessary with all of the interest holders in here, the bondholders, the 

shareholders, the management, unions, retirees, the lenders, the 

suppliers. I mean, everybody has to take a hit in this deal. So you 

can’t do it without some sort of law in place to do that. 

And then—and I disagree with you, Mr.—Professor Altman, the 

taxpayer can be assured of a senior interest in this situation. And 

that is what I believe. If, in fact, we are going to be the lender of 

last resort, as you suggested, then we must act like a lender of last 

resort and make sure that our investors, the taxpayers, are protected to the nth degree if we can do that. 

Mr. ALTMAN. I disagree. You cannot be senior to existing loans 

that have collateral. You can be senior to the unsecured, yes. 

Mr. PERLMUTTER. If we were to take a Chapter 11, we could have 

a priming loan. I am not suggesting a Chapter 11. In a Chapter 

11, you can have a priming loan that is senior to any other interest. 

Mr. ALTMAN. Absolutely. 

Mr. PERLMUTTER. And I don’t know why we couldn’t do that otherwise. 

Mr. ALTMAN. You would have to pass new legislation. 

Mr. PERLMUTTER. Right. 

Does anybody else want to respond? 

Mr. ALTMAN. Which would be a massive request, Congressman. 

Mr. PERLMUTTER. And why? 

Mr. ALTMAN. Because you would be changing the whole capitalistic system. 

Yes, you would, Jeffrey. You would be putting existing creditor 

capital at risk at any time that the government could come in and 

take a senior position above existing capital. That is what happens. 

In other countries, when that happens, you lose the capital. 

Mr. PERLMUTTER. But you can do that in Chapter 11 now? 

87 

Mr. ALTMAN. That’s correct, and that is the only place you can 

do that. 

Mr. PERLMUTTER. But we are asked to come in with $34 billion 

in an emergency to keep these companies afloat so they can get to 

the brighter future. I have to protect the taxpayer from something 

that might happen here. 

Mr. ALTMAN. Well, I do believe you can do a lot to get a senior 

status in this loan. One way to do it is to get the existing creditors 

to go away and take equity. And I think General Motors is making 

that plan. I think that is a good idea. And then you don’t have to 

worry about them; they take equity in place of the debt. Then you 

can go in and be senior, and there is nothing wrong with that. 

But just to force it down them, I think that would be a mistake. 

Mr. PERLMUTTER. Thank you, Mr. Chairman. 

The CHAIRMAN. Well, take that—I remember when the press office said you can only do that as a Chapter 11. That is true if you 

are a lawyer arguing in court. 

You are now before the body that wrote Chapter 11 and it can 

rewrite Chapter 11. And there is a problem that lawyers have, 

which is to assume in the normal course of a legal argument you 

are restricted to choose between column A and column B. We can 

write column C third. So the answer is, it would not necessarily be 

that we mandated people to do things, you can come up with constitutional issues with that. 

But the old doctrine of unconstitutional conditions on gifts seems 

to me have long since disappeared into the mists. And if we are 

going to vote all that money, we can put on it any conditions that 

we think appropriate, so we are not restricted to either Chapter 11 

or not. We can write what we think is appropriate with these powers. 

The gentleman from California. 

Mr. SHERMAN. Thank you, Mr. Chairman. 

I think these hearings show that we ought to pass a bill. Our 

best chance to pass a bill is to write one that has tough standards 

to protect consumer warranties, to make sure that the U.S. Government is involved in deciding which plants get closed and which 

stay open, and to deal with executive compensation and perks and 

deal with a number of the other issues that have come up. 

Clearly, everybody has to give something. Now, the shareholders 

are going to give. We are going to dilute them if we get sufficient 

warrants. And if time permits, I want to ask the witnesses about 

how many warrants that ought to be. 

The executives—I think I join several of my colleagues in torturing them, and that is just a taste of what we would like to put 

in the bill. The unions have made substantial concessions, and 

have indicated they are going to make more. But we have been 

talking here about the creditors, and not just making the loans 

senior, our debt senior to theirs, but to actually write down the liability. 

Right now, people are buying GM debt for 15 cents on the dollar; 

and if everything goes swimmingly—should they get a dollar on the 

dollar if things go swimmingly, only because the taxpayers ride to 

the rescue—Professor Altman, do you see a way not only to make 

the taxpayers’ debt senior but to actually provide for a reduction 

88 

in the amount that GM, for example, has to pay on its unsecured 

debt. 

Mr. ALTMAN. Yes. What you are referring to is something known 

as a ‘‘distressed exchange,’’ and the creditors are offered, let’s say, 

20 cents on the dollar in new securities, equity, preferred stock. 

And they have to evaluate whether or not it is to their interest to 

do so. 

Mr. SHERMAN. So this would only be voluntarily. Is there any 

way for us to write a statute that makes it mandatory? 

Mr. ALTMAN. Well, as Chairman Frank said, you can do whatever you want. 

Mr. SHERMAN. I am a little concerned about the takings clause. 

Mr. ALTMAN. I wouldn’t recommend that. It is much better. And 

I think GM has a good plan in that respect to write down the debt. 

$30 billion, I think, was in their plan to reduce it; and I think that 

makes sense. But I ran it through my model, and they still come 

up a bankrupt entity even after doing that. 

Mr. SHERMAN. Mr. Sachs, a new line of questioning: Let’s say the 

doubters are right, and all we can do is give a transfusion to a patient who is ultimately going to expire with regard to GM and 

Chrysler. One of the things about a business cycle is that companies fail at the very time that other companies are failing. It would 

be nice if we could arrange it so that companies only fail during 

good economic times. 

How much higher will our GDP be if we do nothing but delay the 

dissolution of GM and Chrysler by 12 months. 

Mr. SACHS. Very, very slight. And that certainly can’t be the goal 

of this exercise. 

Mr. SHERMAN. So if we were to spend— 

Mr. SACHS. This would not be the right way to do capital spending. 

Mr. SHERMAN. If we put in the money, one of the reasons to put 

in the money is maybe the companies will survive. 

Mr. SACHS. I would say more than a good chance. 

Mr. SHERMAN. Another way to put in the money is, maybe we 

can delay by 12 months their failure to survive. 

You are saying that second objective is of slight value to the 

United States? 

Mr. SACHS. I think that’s right. It would be marginally present, 

but that can’t be the point of this exercise. But I would not be so 

pessimistic to think that there isn’t a trajectory out of this. That 

is the whole point. 

Mr. SHERMAN. I just started with a worst-case assumption. I am 

not asking you to embrace it. 

Mr. SACHS. Absolutely. 

Mr. SHERMAN. Mr. Rohatyn—if I am pronouncing that correctly—the chairman’s draft calls for us to get warrants with a 

value of 20 percent of the money we are putting in. And the question is—I mean, these are companies you could buy the whole company according to today’s values for $2 billion, $3 billion, $4 billion, 

and we are talking about putting in $34 billion. When you use the 

standard approaches used to value warrants, would we end up, if 

we exercised the warrants, owning well over 90 percent of the outVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00092 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
89 

standing shares if you looked at what the value of the warrants 

would be? 

Mr. ROHATYN. Well, I think that you certainly would try not to 

wind up with 90 percent of the equity of the company. 

Mr. SHERMAN. I would disagree with you. If we are taking 99 

percent of the risk, I hope we do end up with 90 percent of the 

company. And if the shareholders don’t want to take that deal, they 

can seek money elsewhere. 

I yield back. 

Mr. GREEN. [presiding] Thank you. 

Mr. Manzullo is recognized for 5 minutes. 

Mr. MANZULLO. Thank you, Mr. Chairman. 

I am sorry I missed your testimony. I was working with two 

small manufacturers trying to keep them afloat during these times 

of crisis. 

My question goes to the $25 billion that has been set aside already. It is actually $7 billion because, I think it was the CBO said 

that they estimated at 20 percent of default. So, therefore, $7 billion has been parked in order to guarantee $25 billion in loans to 

the Big Three for the process of retooling. 

And my question would be, at least at this point, based upon the 

testimony of an immediate need, why not use a portion of that to 

keep these companies going, and then revisit the bigger issue sometime in March or whatever period of time they said the instant 

money would not be available? And all that would take—and I 

think there are votes in both Houses—would be to have a simple 

amendment saying that this money—I think what is called ‘‘136 

money’’—whatever it is, could be reprogrammed for meeting general operating expenses. 

I would like to know your thoughts on that, Mr. Friedman. 

Mr. FRIEDMAN. Well, I think one of the flaws with that plan is, 

if you looked in the companies’ plans, they are already depending— 

they are already expecting that money as part of their recovery 

plans. So maybe there is an argument—in fact, I think there is an 

argument—to find ways to accelerate getting them that money 

under some of the same conditions they were already going get the 

money, such as a 25 percent improvement in fuel economy. 

But they need additional money is what they are asking for. 

They are already expecting that money. 

Mr. MANZULLO. They probably won’t get it. 

Mr. FRIEDMAN. Additional money or the base money? 

Mr. MANZULLO. Well, the additional money. This Congress is 

very reluctant. If this is emergency money, let’s put it this way, if 

you hear at least Chrysler and GMC, they won’t be around in 30 

days even to worry about that 136 money. So why not use a portion 

of that to keep them afloat? You can always come back and add to 

the pot if it is necessary, and some people would vote for that, to 

replenish the original $25 billion for environmentally new cars. 

Mr. FRIEDMAN. Well, I think no matter what you need to find a 

way, even if you move the money forward, you need to find a way 

to preserve the fact that the money is supposed to go towards advanced technology. 

Mr. MANZULLO. How can you preserve it if the company is out 

of business? 

90 

Mr. FRIEDMAN. I think the first step is making sure they are 

going to be sustainable businesses. But you would be mortgaging 

their future if you did not require them to invest in— 

Mr. MANZULLO. They don’t have a future based upon what they 

said unless they get billions of dollars up front. So why not use 

that money that is already there to fix the roof that covers the area 

where the R&D is going on with the new cars? 

Mr. FRIEDMAN. I would argue to accelerate that money under the 

same conditions, and I would argue—I think the panel has discussed that there are two other sources for that money. We have 

to make sure that these companies, as Professor Sachs said, are 

planning for an macroeconomic recovery. And in a macroeconomic 

recovery, gas prices are going to shoot up as China and India and 

the other countries start guzzling gas more. And these companies 

are going to be in trouble again if a— 

Mr. MANZULLO. I can’t agree with what you are saying because 

what you are saying is that it will not come to pass if they have 

no money to keep on going. 

Professor Sachs. 

Mr. SACHS. Congressman, I think using the section 136 as part 

of this is appropriate, in my opinion. But quantitatively, I think it 

is likely that this will need to be part of a package that includes 

some of the TARP. 

I think the Fed can do some things on its own, by the way. And 

this is one of the missing actors here. I would like Chairman 

Bernanke to step up and help this process more than has been the 

case so far, because they are making loans that are a lot riskier 

than this one. 

Mr. MANZULLO. The problem is that the the plans are woefully 

insufficient. 

Mr. SACHS. No. They could be doing this on terms that are better 

than what they are doing right now and are appropriate for preserving our financial system. So TARP, section 136, and the Fed 

offer three ways, and it is going to have to be a package. If it is 

only a very narrow, constricted, begrudging amount, then, Congressman, you will not succeed in your objective, I am afraid. 

Mr. MANZULLO. Anybody else? 

Mr. ROHATYN. I think Professor Sachs is absolutely right. I completely share Professor Sachs’s views. Either we do this on a large 

scale or just there is no point to it. 

Mr. MANZULLO. I mean, the plan isn’t there. You have GMC that 

wants to go into the—GM wants to go into the commercial banking 

business, which I think is absurd. So to pull out of the doldrums 

and to correct our mistakes based on making automobiles, we are 

going to go in the commercial banking business. 

No one has ever done an analysis of the impact that that will 

have on community banks, credit unions, and on national banks 

that have local branches across the country. But that is part of 

their plan. 

The union people sit here—Mr. Gettelfinger sat there, and I 

thought he had a pretty reasonable approach. He says, ‘‘Yes, we 

are here. We are willing to sit down.’’ There has been no viable 

plan that has been presented to this Congress in the details that 

are necessary to warrant that type of money. 

91 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. MANZULLO. Thank you, Mr. Chairman. 

The CHAIRMAN. Do we have any other members? 

Mr. Foster, are you next? 

Mr. FOSTER. One number that I think is absolutely crucial, and 

I would like to see developed by an entrusted third party, is the 

total value of GM’s unencumbered assets, and that could be used 

as collateral either by DIP financing or some sort of prebankruptcy 

financing, and to compare that to the capital injection you are 

going to need for return to viability. 

And that is the fundamental number that I think this whole discussion depends on. And I would be interested in knowing who it 

is that we can trust to develop this number. 

Mr. ALTMAN. I think you would have to get an outside party. I 

don’t think you could trust the companies in this case. And any of 

us—looking at their financial statements would be very difficult to 

understand. You would have to value every one of those assets, 

both tangible and intangible. And I do believe they have 

unincumbent assets. But can you get, for example Opel in Germany, can you get the German government which has a stake in 

this, too, in providing money to Opel under certain conditions, can 

you be able to transfer that equity to a lender here? 

It is a very good question, an excellent question, and one that I 

was wrestling with myself in trying to prepare the testimony. 

Mr. SACHS. Congressman, I don’t think with all due respect that 

it is really the question for this weekend or before you recess or 

before the new government comes in. This has to be viewed practically as a two-part process. You have a basic framework that has 

been put in front of this committee, which I find very valid and 

very credible and absolutely worth the American people investing 

in. 

Then we are going to have a new government that is responsible 

for helping to answer a lot of these questions. We don’t have, with 

the outgoing Administration, the capacity to do these things right 

now, but we are going to have a new government. In 6 months’ 

time you will get a lot of answers. And it is important—even in a 

month-and-a-half’s time, you will get a lot of answers that you will 

not get right now. 

I think, therefore, pragmatically, because these decisions really 

are needed in hours—day two, you are leaving town—that putting 

in the kinds of protections that are in your draft legislation, I 

think, is appropriate. Assigning oversight responsibility to the Cabinet, ministers of departments of the incoming government are 

completely—and of the outgoing government, for that matter—are 

completely appropriate. 

But fine-tuning, in my opinion, is not commensurate with our 

macroeconomic reality. Last week, $306 billion was thrown over 

something without 1/100th of what you are asking for right now in 

scrutiny because events are moving at trillions of dollars very, very 

fast. 

And I think it is important that we understand the macroeconomic crisis that we are in, and that the American people understand the macroeconomic crisis we are in. This is not normal, 

what is happening. This isn’t even normal about a difficult situaVerDate Aug 31 2005 14:17 Mar 09, 2009 Jkt 046595 PO 00000 Frm 00095 Fmt 6633 Sfmt 6633 K:\DOCS\46595.TXT TERRIE
92 

tion for the auto industry. This is a global macroeconomic crisis unprecedented since the Great Depression. And so we have to act 

with the speed that is imperfect in answering a lot of things, but 

it is realistic to the circumstances that our country and the world 

face. 

Mr. FOSTER. It seems to me that the long-term issue that we are 

dancing around is that the problem here is declining market share. 

And the reason for that is, it is fundamentally less expensive to 

produce cars and components in developing nations. You can get a 

good engineer for $10,000 a year in India and $2-a-day factory 

labor in China, and they can be trained to do a decent job of assembling quality cars. The only way to preserve the car industry long 

term is to acknowledge that we have a national security in preserving a self-sufficient automobile industry, and that nothing 

short of some combination of tariffs, nontariff barriers, subsidies or 

repeated capital injections—which is sort of what we are doing 

here—nothing short of that sort of thing is actually going to do the 

trick to make a long-term, stable automobile industry here. And I 

think that sometimes gets called a national auto policy. But it is 

pretty much what it comes down to. 

Mr. SACHS. If that is a question, Congressman, I would disagree 

with that. 

Mr. FOSTER. What is wrong with it? 

Mr. SACHS. The auto industry in the long term is a growing industry. There will be actually hundreds of millions of new vehicles 

when the world’s middle-income countries continue to achieve economic growth. Our industry has a chance to be a technological 

leader. We can make breakthroughs. They have been long delayed 

because our pricing policies, our national policies on this, have not 

been what they need to be. 

It is not only the industry. It is the choices we made as a country 

politically, personally, and the company that has led us to a situation where we are. But we are on the verge of developing leap-frog 

technologies. This is the absolute truth, whether it is fuel cell technologies or plug-in hybrids, these are major, world-class companies 

we are dealing with. 

The CHAIRMAN. The gentlewoman from California. 

Ms. SPEIER. Thank you, Mr. Chairman. 

Thank you all for participating. I have two trains of thought that 

I would like to pursue. One is around demand. All of this to me 

makes no sense at all if we don’t create a demand for these vehicles. And the American people right now are damn mad. They do 

not want us to bail out this industry. And if we then pump tens 

of billions of dollars into this industry over the course of the next 

6 or 8 months, and the American people continue to be angry about 

that, they are not going to buy the cars. So where are we? 

Mr. SACHS. Congresswoman, they are mad that unemployment 

jumped to 6.7 percent today and 560,000 jobs were lost. They are 

going to be very mad when unemployment reaches 9 percent. They 

will be really mad if unemployment reaches 12 percent. If we allow 

the most important industry in this country to disintegrate, believe 

me, the fury will be nothing like what will happen when they hear 

about a $25 billion bailout. 

93 

We have to take the macroeconomics seriously right now. We are 

in the steepest descent we have been in in modern times. It is crucial to stop this. So the American people need to understand this 

isn’t a favor for the industry, this is a favor for the American people. That is the most important thing they need to understand. 

This is to break a collapse of our economy that is under way right 

now. And this can be understood. 

Ms. SPEIER. All right. Let me ask you a further question. 

Does it make sense—and this is a question for any of you who 

would like to answer it—for us to create a tax credit so that American motorists go out and buy cars that American manufacturers 

build that get more than 30 miles per gallon? 

Mr. FRIEDMAN. Congresswoman, we have actually been working 

in California for a plan very much like that, based on vehicle emissions, where if you purchase a vehicle that gets improved emissions, you get a tax break from the government. That will encourage people to buy better vehicles, it will encourage more competition in the industry. And right now when we are in the world of 

a fiscal stimulus we can probably afford to just do that part of it. 

Now, in the long run, you want to add a financing portion of 

that, and that is some sort of fee for vehicles that pollute too much 

and use too much gas. So I think this is an opportunity again to 

take some of the policies that are being formulated in California 

and move them nationally. 

I also think we have other opportunities to stimulate demand 

and to deal with the fact that, as gas prices go up, people are also 

going to be looking for alternatives to cars. We have a lot of truck 

plants that build vehicles that have body-on-frame construction. 

You can start moving some of these plants over to rail, over to 

buses. We can revolutionize our transportation industry while stimulating our economy. 

So this is a down payment. We need a whole other conversation 

about a broader macroeconomic stimulus to get consumers buying, 

but also get consumers options other than cars. 

Ms. SPEIER. Thank you. 

Now, the other train of thought: Cerberus really troubles me. They paid $7 billion for Chrysler, and now they want $7 billion as 

part of their rescue. And they have just stripped Mervyn’s of all its 

real estate, and now 30,000 employees of that company are on the 

street because they are liquidating. 

They are a private equity firm. We don’t know anything really 

about their holdings and what they have done to Chrysler or how 

much money they have already taken out of Chrysler. I don’t understand why we should be bailing them out. 

Comments? 

Mr. DODARO. I think that in that particular case, there needs to 

be a really high threshold and representations that credit is not 

available in other sources before the government moves in. This is 

why I think that there needs to be a Federal guardian. There needs 

to be somebody asking for additional information before the Federal Government makes that decision. Not that we go around with 

a particular point of view, but you need more information. And I 

think you need a greater degree of representation for the reasons 

that you mention. 

94 

Ms. SPEIER. Thank you. I yield back. 

The CHAIRMAN. I thank the panel. 

And responding again to Mr. Levin, let me leave people with a 

two-part question: Should we do something, and if so, what should 

we do? There is a lot more agreement that we should do something, 

unless the President apparently today called on us once again to 

make the $25 billion from the energy efficiency part available in 

ways that many of us disagree with because it would too greatly 

loosen those. 

And I think it is fair to say that the job report today, this disastrous job report, has heightened the interest in doing something. 

The one thing I will say is that it is obviously going to be incumbent upon us, given the wide recognition that it is important to do 

something, we are going to have to have some give here; and if we 

are lucky, we will come out with a bill next week that nobody likes. 

Because any bill that any individual liked couldn’t pass. 

But—there is a sufficient consensus that we have to do something, but I hope we will get something acceptable to enough Members of both Houses so we will avert disaster. 

I will just repeat—and Mr. Rohatyn said it might not be popular—one of the things we have learned is, if we didn’t know it before, averting disaster is no basis for a political campaign. If you 

do something good, people are happy. If you avoid something bad, 

people are not happy. 

One thing—and I have to say to my friends, the economists here, 

on whose judgment we rely a great deal; and they understand 

this—there is one very important metric in economics which is a 

disaster in politics, that is, reducing the rate at which something 

bad is happening. That can be a sign of real success in a public policy term. Any politician who goes and takes credit for saying, yes, 

things are really bad, but boy, would they have been worse if it 

wasn’t for me, perhaps should study to become an economist because he or she will need an alternative profession. 

95 

But I believe—and I am encouraged from talking to my colleagues informally as well as formally—there is an understanding 

that we have to work together. There are a lot of ways to do this. 

No one can be certain, but I have some more optimism than I had 

before that we will get ourselves to a point in a reasonable way 

until next year, and we will have several months in which we can 

work on this. 

The hearing is adjourned. 

[Whereupon, at 3:00 p.m., the hearing was adjourned.] 

(97) 

A P P E N D I X 

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