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RAMIFICATIONS OF AUTO INDUSTRY 

BANKRUPTCIES (PART II) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COMMERCIAL AND ADMINISTRATIVE LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

JULY 21, 2009 

Serial No. 111–54 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

TAMMY BALDWIN, Wisconsin 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

DANIEL MAFFEI, New York 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM ROONEY, Florida 

GREGG HARPER, Mississippi 

PERRY APELBAUM, Majority Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW

STEVE COHEN, Tennessee, Chairman 

WILLIAM D. DELAHUNT, Massachusetts 

MELVIN L. WATT, North Carolina 

BRAD SHERMAN, California 

DANIEL MAFFEI, New York 

ZOE LOFGREN, California 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

JOHN CONYERS, JR., Michigan 

TRENT FRANKS, Arizona 

JIM JORDAN, Ohio 

HOWARD COBLE, North Carolina 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

MICHONE JOHNSON, Chief Counsel 

DANIEL FLORES, Minority Counsel 

(III) 

C O N T E N T S 

JULY 21, 2009 

Page 

OPENING STATEMENTS 

The Honorable Steve Cohen, a Representative in Congress from the State 

of Tennessee, and Chairman, Subcommittee on Commercial and Administrative Law ........................................................................................................... 1 

The Honorable Trent Franks, a Representative in Congress from the State 

of Arizona, and Ranking Member, Subcommittee on Commercial and Administrative Law .................................................................................................. 2 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, Chairman, Committee on the Judiciary, and Member, 

Subcommittee on Commercial and Administrative Law .................................. 3 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Ranking Member, Committee on the Judiciary ......................... 5 

The Honorable Daniel Maffei, a Representative in Congress from the State 

of New York, and Member, Subcommittee on Commercial and Administrative Law ................................................................................................................ 6 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Member, Subcommittee on Commercial and Administrative Law ........................................................................................................ 7 

The Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress 

from the State of Georgia, and Member, Subcommittee on Commercial 

and Administrative Law ...................................................................................... 8 

The Honorable Melvin L. Watt, a Representative in Congress from the State 

of North Carolina, and Member, Subcommittee on Commercial and Administrative Law ........................................................................................................ 9 

The Honorable Darrell E. Issa, a Representative in Congress from the State 

of California, and Member, Subcommittee on Commercial and Administrative Law ................................................................................................................ 14 

The Honorable Sheila Jackson Lee, a Representative in Congress from the 

State of Texas, and Member, Committee on the Judiciary .............................. 15 

The Honorable William D. Delahunt, a Representative in Congress from 

the State of Massachusetts, and Member, Subcommittee on Commercial 

and Administrative Law ...................................................................................... 15 

WITNESS 

Mr. Ron Bloom, Senior Advisor, U.S. Department of the Treasury 

Oral Testimony ..................................................................................................... 16 

Prepared Statement ............................................................................................. 19 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Letter submitted by the Honorable Melvin L. Watt, a Representative in 

Congress from the State of North Carolina, and Member, Subcommittee 

on Commercial and Administrative Law ........................................................... 11 

Page

IV 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to Post-Hearing Questions from Ron Bloom, Senior Advisor, U.S. 

Department of the Treasury ................................................................................ 59 

(1) 

RAMIFICATIONS OF AUTO INDUSTRY 

BANKRUPTCIES (PART II) 

TUESDAY, JULY 21, 2009 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COMMERCIAL

AND ADMINISTRATIVE LAW, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 11:10 a.m., in 

room 2141, Rayburn House Office Building, the Honorable Steve 

Cohen (Chairman of the Subcommittee) presiding. 

Present: Representatives Cohen, Conyers, Delahunt, Watt, 

Maffei, Lofgren, Johnson, Franks, Jordan, Coble, Issa, and King. 

Also present: Representatives Jackson Lee and Smith. 

Staff present: (Majority) James Park, Counsel; Adam Russell, 

Professional Staff Member; and (Minority) Daniel Flores, Counsel. 

Mr. COHEN. This hearing of the Committee on the Judiciary, 

Subcommittee on Commercial Administrative Law will now come to 

order. Without objection, the Chair will be authorized to declare a 

recess of the hearing. I will now recognize myself for a short statement. 

With our hearings today and tomorrow, we will continue to explore the ramifications of the automobile industry bankruptcies. 

Back in May, the full Judiciary Committee heard testimony from 

a wide spectrum of viewpoints, most of which to some degree, took 

issue with the plans of the presidential task force for the auto industry for restructuring Chrysler and General Motors. 

Today is the opportunity for the task force to answer critics of 

its plan. One issue that has raised considerable concern with Members of Congress, on both sides of the aisle, is the treatment of 

automobile dealers in the Chrysler and GM bankruptcy processes. 

As part of its restructuring, there were 789 dealerships that were 

eliminated by Chrysler, giving in effect the dealers less than a 

month’s notice. Similarly, General Motors plans to wind down and 

then close 2,500 of its 6,300 dealerships, representing 40 percent 

of its dealerships. That is a lot of jobs in our communities and in 

America. 

The affected auto dealers contend their stores are not a cost to 

either General Motors or Chrysler. The dealers assert that GM and 

Chrysler benefit from having more dealers not fewer. The car dealers also contend that GM and Chrysler select the dealerships for 

termination by using an arbitrary selection process. 

2 

I am particularly concerned about the impact these have on minority dealers, who I fear will suffer disproportionately. In my district, Mr. John Roy, the owner of a Chrysler dealership in South 

Haven, Mississippi, but a resident of my district, was the only African American Chrysler dealer within a 300-mile radius around 

Memphis. 

He sold cars not only in Tennessee but in Missouri, Arkansas 

and Mississippi. Over many years he built a reputation for high 

quality customer service. He is one of only two Chrysler dealers in 

the Memphis area to receive an elite five star rating for customer 

satisfaction with Chrysler. 

He was also number one in sales for the Memphis metropolitan 

area for Chrysler. Notwithstanding all those facts and his outstanding business acumen, his dedication to outstanding performance over the years as a loyal Chrysler dealer, Chrysler decided to 

terminate his franchise. To me, it is unconscionable that Chrysler 

would treat a successful and loyal dealer in such a manner. 

While I understand the task force had no role in selecting particular dealerships for closure, I would like to know to what extent 

the task force considered the impact of widespread dealership closures on the economy and on communities around the Nation and 

on the minority community that had been held back for so many 

years in this industry as well as others, but this industry especially. 

Another issue of some concern to Members is the treatment of 

those with tort claims against the old Chrysler and General Motors. Totally new system, central to the reorganizations of Chrysler 

and GM was the sale of their viable assets, newly created entities, 

pursuant to Section 363 of the Bankruptcy Code. 

These new entities become the new Chrysler and General Motors. The sales were approved free and clear of liabilities including 

claims of accident victims, victims of defective products and present 

asbestos claims. 

The end result is the tort victims can recover little or nothing for 

their injuries because they can only assert their claims against the 

limited assets of the old GM and the old Chrysler, which is negligible. I would like to know the task force plans for ensuring that 

tort victims receive just compensation for their injuries, which they 

should and have in other particular situations like this. 

I thank Mr. Bloom for appearing before the Subcommittee today 

and I hope his testimony will be enlightening. I am sure it will be. 

I now recognize my colleague, Mr. Franks, the distinguished Ranking Member of the Subcommittee for his opening remarks. 

Mr. Franks? 

Mr. FRANKS. Well, thank you, Mr. Chairman. Welcome, Mr. 

Bloom. Mr. Bloom, it has been claimed by some that all your auto 

task force ever sought was viable General Motors and a viable 

Chrysler. But sir, I simply do not see the evidence pointing to that 

being true. 

Viable companies aren’t made by delivering ownership of them to 

the union whose unrelenting contract demands and unbending 

work rules drove them headlong down to the road to bankruptcy 

in the first place. 

3 

Viable companies don’t slash and burn the rights of the secured 

bond holders knowing that the issuance of new corporate bonds is 

bound to be a key in their future survival. Viable companies don’t 

ransack their dealerships based on criteria that seem to range from 

arbitrary at best to overtly political at worst. 

Viable companies don’t eagerly sign up for CAFE standards that 

can only force them to make small cars Americans don’t want for 

the nonexistent profits that don’t follow. Viable companies aren’t 

the product of a President who says he doesn’t want to run auto 

companies and then fires the CEO and lets his auto task force run 

them instead. 

Mr. Bloom, it is my view that what the President and the auto 

task force sought was not viable companies but pliable companies, 

companies that could be converted into shells with which the Administration could shake down investors, undermine constitutionally protected property rights and pass large portions of the 

companies to the control of the United Auto Workers Union. 

All of this, to date, has been accomplished. So my question for 

you today rhetorically at first is, why and how did you not see that 

the Administration pursued its short-term political goals, and as it 

was doing so it was devastating the long-term future of our bond 

markets?, bond markets on which the Administration must rely 

upon to finance the overwhelming debt is putting upon the American people? 

Did you not see that the American people would be outraged at 

the Administration’s transparent manipulation of these companies 

would be simply to put the bankruptcies to gift wrap them for the 

union? 

Did you not see that the lawlessness of what the task force was 

doing as it put together deals would be shredding the Bankruptcy 

Code? For the past 8 years, President Obama and others like him 

allege that the Bush administration was lawless. 

A return to lawfulness was their pledge. But this Administration 

that lawlessly gives imaginary constitutional rights to foreigners 

who seek to attack Americans, this is the Administration that lawlessly deprives American citizens and investors of their contractual 

rights, rights that are the bedrock of America’s economy and their 

prosperity. 

This is the Administration that lawlessly is sowing the seeds of 

America’s economic ruin. But Mr. Bloom, I will just say that, you 

know as I have said before, that the foundation of this economy is 

not all what we as conservatives just point at as competition. 

It is trust. It is the belief that those who would put forward capital investment can trust their government to enforce contracts as 

they promised and this Administration has done everything but 

that, and I hope the American people are watching. I hope they 

wake up in time, I am not sure they will. 

With that, Mr. Chairman, I yield back. 

Mr. COHEN. Thank you, Mr. Franks. 

I now would like to recognize the distinguished Chairman of the 

Committee for an opening statement, Mr. Conyers. 

Mr. CONYERS. Thank you, Chairman Cohen. I am happy to be 

here today. I didn’t know I would have to rise in defense of the Administration, the United Automobile Workers, the bankruptcy 

4 

courts and I don’t know who else is lambasted. You give me options. 

Well, it is generous of you. I will probably need more than 5 minutes, but all I am going to do is straighten out one thing because 

I had some other points I wanted to make. For you to think that 

the UAW had so many concessions, I would like to make you feel 

a little bit better. 

They gave up so many concessions that their leadership was 

wrongly criticized because every time they went in to negotiations 

with the admonition that you guys are going to have to come up 

with more, it was the union that gave up more pensions, more sick 

care, more working conditions, reducing staff. 

You know, those weren’t executives that were laid off. The people 

that lost their job, my dear friend, were working people. UAW 

didn’t sit down and say, ‘‘Let us cut out some locals and let us send 

some plants overseas.’’ They didn’t want to do that. 

So for you to think that they won big prizes there was a lot of 

resistance in the automobile systems. And how do I know, because 

all three American automobile companies are headquartered in Detroit and that was how I know that. 

So maybe you will feel a little bit better as a result of finding 

that out and maybe you will hear some more things at this hearing 

that will make you think about what it is we are doing. We are in 

for a tough time, and I think that your misunderstanding of how 

those negotiations went, well we will all help you feel a lot better 

when this hearing is over with. 

Now, there is one problem I have that I hope comes into the discussion, not necessarily with our distinguished first witness. But 

why do we get so much resistance from the amendment that one 

of our colleagues, Mr. Maffei and Obey and LaTourette all have 

passed, that they were opposing this amendment, an effort to try 

to get the dealers a better deal? 

And by the way, it wasn’t just the nearly 800 auto dealers that 

got this rude awakening. It was also about 1,700 Chrysler dealers. 

There were also 1,700 General Motors dealers and some of them 

were importuned to take additional inventory and then the next 

day they got a telegram saying their dealership was being closed 

down. 

And when they tried to return the additional cars, they said no 

you took them now. That is on your watch. So this should be very 

helpful because I really enjoy working with Trent Franks and, just 

to get the record straight, now will be very helpful for both him 

and myself. 

And I will yield to him if he wants me too. 

No? Okay, I turn my time back. 

Mr. COHEN. Thank you, Mr. Chairman. I appreciate your comment. I would like to take Mr. Franks’ defense. He didn’t say anything about the Detroit Lions at all. 

Mr. CONYERS. That was too easy a shot and he is a gentleman. 

He wouldn’t do that. 

Mr. COHEN. The next Member who seeks recognition on this, the 

distinguished Ranking Member of the full Committee, the gentleman from San Antonio, Texas, Mr. Lamar Smith, and you are 

recognized. 

5 

Mr. SMITH. Thank you, Mr. Chairman. And I just want to warn 

the Chairman of the full Committee that he may want to make his 

same comments after I finish my statement as well because they 

are very similar to Trent Franks. 

Mr. Chairman, I am increasingly troubled by the actions of the 

Administration and the GM and Chrysler bankruptcies. Through 

these and so many other actions, the Administration is taking us 

from morning in America to mourning for the American way. 

The GM and Chrysler bankruptcies are a major reason why. 

They have been the leading edge of the Administration’s war on 

capitalism. From the auto bankruptcies to financial institutions, to 

government-run healthcare, the Administration is staging a government takeover of much of the private sector. 

Whether it is taxpayer-funded bailouts or shady deals behind 

closed doors and the auto bankruptcies, the Administration’s solution is to bully businesses into government-run deals that benefit 

political allies. These deals are funded by unprecedented government spending and tax hikes on American families and businesses. 

The auto task force’s actions did not aim to produce viable companies. They aim to advance the Administration’s political agenda 

and reward the Administration’s political friends. The auto task 

force trampled the rights of secured creditors and other investors 

then swept them aside. 

It then delivered company ownership to the UAW, its faithful 

supporter. The union now owns 55 percent of Chrysler. It also owns 

35 percent of GM When the government sells its own stake in GM, 

surely it will turn the union’s share into a majority share. 

The Administration clearly sees these as political gains for itself 

but what have been the gains for the American people? America 

has not gained but has lost much. Through the auto task force actions, particularly its destruction of secured creditor’s rights, the 

Administration has severely undermined the rule of law. 

It has struck a devastating blow to the integrity of the Bankruptcy Code and contract law. It has shaken the confidence of investors and America’s willingness to honor laws that protect creditors. The protection of creditors has made America the gold standard for investors from overseas. 

After the Administration’s actions in these bankruptcies, the 

American standard is looking more like fool’s gold. These actions 

could hardly come at a worse time. The Administration has pushed 

America deeper into debt. 

The GM and Chrysler bankruptcies have helped to reveal the Administration’s way of doing business. This is the Administration of 

the bait and switch. The Administration said it wanted to spend 

taxpayer money only to produce viable companies. 

Instead it spent the money to increase the size of government, 

politicize the economy and reward union patronage. Vice President 

Biden said, ‘‘We have to go spend money to keep from going bankrupt.’’ 

That is the kind of illogical thinking that has perpetuated the recession and led the Administration to take over private companies. 

I thank you, Mr. Chairman, and I will yield back. 

Mr. CONYERS. Well, wait a minute. 

6 

Mr. SMITH. And I will yield to the Chairman of the full Committee first. 

Mr. CONYERS. Well, all I want to do is associate with all the remarks that I discussed with Mr. Franks, I apply to you. 

Mr. SMITH. I understand, Mr. Chairman. 

Mr. CONYERS. Just to save time. 

Mr. SMITH. I understand. I will yield back to the Subcommittee 

Chairman. 

Mr. COHEN. Thank you. We have a difference of opinion here. 

One side thinks this is a war on capitalism and the other side 

thinks it is a surgery to try to protect against Wall Street inflicted 

suicide on capitalism. Anybody, who on this side wants to 

make—— 

Mr. Maffei, you are recognized, sir. 

Mr. MAFFEI. Thank you, Mr. Chairman. If it is all right with the 

Chairman, I am going to actually speak about the topic of the hearing today. I want to thank Mr. Bloom very much for coming. For 

a century, the American auto industry has been a vital pillar of our 

economy, providing well paid jobs to hard working middle class 

Americans who are the foundation of this country. 

My grandfather was a plant manager at a General Motors factory in Syracuse, New York. That plant closed in the early 1990’s 

and now almost all of the auto and parts manufacturing facilities 

in upstate New York are gone, lost as part of past restructuring efforts. 

In the most recent of the multiple restructuring attempts by GM 

and Chrysler, Federal assistance was granted first by the George 

W. Bush administration. I do want to remind my colleagues that 

I know this was 7 months ago, but it was the George Bush administration at the end of 2008 that first granted this Federal assistance. There was no vote by Congress on this policy then and there 

has not been since. 

As 2009 began in an effort to ensure long term viability of these 

companies, President Obama appointed an auto task force to oversee the restructuring process. The task force reviewed and actively 

worked with Chrysler and GM during their reorganization. 

Yet the Congress and the American public were left in the dark 

as to how the task force, then led by Steven Rattner, reached its 

conclusion, and I think that is the underlying problem. There simply has not been very good communication between the President’s 

auto task force and Congress. 

The decisions were implemented without the auto manufacturers 

or the task force presenting evidence publicly or even privately to 

Congress, that some aspects of this reorganization would actually 

benefit the auto companies financially. 

Included in this reorganization was the closing of hundreds of 

auto dealerships around the country, including several in my home 

area of central New York. However, there has been very little 

transparency into how these dealers were closed or how these closings, excuse me, will benefit GM and Chrysler today or down the 

line. 

Then to make matters worse, many of these dealers were able to 

produce evidence that they had been successful, sometimes even by 

the same standards that GM and Chrysler were purporting to use. 

7 

And there was no dealer appeal process for Chrysler, and at the 

time it seemed like a sham appeal process with GM 

At this point I would like to make it clear that I believe that 

Congress has no interest in running the day-to-day operations of 

these companies nor does the Obama administration. Yet, with so 

much taxpayer money invested, it is our responsibility to provide 

adequate oversight. 

We in Congress did not ask for this responsibility, but once public funds were involved, we cannot ignore it. We don’t want to hurt 

the auto manufacturers in their restructuring efforts moving forward, but auto dealers are indeed a big part of our local community 

and the national economy. They employ about approximately 50 

people each and they need to have a seat at the table as well. 

In short, we don’t just want a bailout for the auto industry. We 

don’t want a bailout for the auto industry to become a washout for 

the auto dealerships. 

Thank you very much, Mr. Chairman. 

Mr. COHEN. Thank you. 

We switched from the gentleman from Syracuse to the gentleman 

from North Carolina that passed Syracuse in the NCAA, Mr. Coble. 

Mr. COBLE. Thank you, Mr. Chairman for calling the hearing. I 

have two other meetings, Mr. Chairman. I probably won’t be able 

to stay for the entire hearing. Mr. Bloom, good to have you with 

us. My colleagues, as we all know, automobile dealers generally are 

the leaders in their respective communities. 

I mean, they sponsor the Little League teams. They sponsor Boy 

Scout, Girl Scout efforts. They lead the way in responding to causes 

of charity, to aid the impoverished and now, unfortunately, some 

of these dealers are going to find themselves perhaps in the impoverished ranks along with their many employees. 

Mr. Bloom, as you probably know, many dealers have testified to 

Congress that they can discern no logical principle upon which retained dealers were separated from terminated dealers. And some 

have said, I am not alleging this, but some have alleged that partisan politics may have reared her head in distinguishing between 

the terminated and those who were retained. 

If you know anything about that, I would be glad to hear from 

you. You may not know anything about it. If the termination of 

dealers, in fact, was not based upon any legal or economic principle, I would like to know on what it was based. 

And furthermore, I would like to know, Mr. Bloom, if you know 

if the auto task force played a role in the decisions to terminate 

dealerships and if such a role was involved, what was it? These are 

questions that have nagged at me for some time. Again, I thank 

you for being here. 

Mr. Chairman, thank you for calling the hearing and I yield back 

my time. 

Mr. COHEN. Thank you, sir. I appreciate your statement. Is there 

any other Member on the Democratic side? 

Mr. Johnson, the distinguished gentleman from Georgia and the 

Subcommittee Chairman of the—— 

Mr. JOHNSON. Courts and Competition Policy—— 

Mr. COHEN [continuing]. And I was thinking of antitrust. Thank 

you. 

8 

Mr. JOHNSON. All right. Thank you, Mr. Chairman. And I would 

want to thank you for holding this week’s very important hearings 

on the ramifications of the auto industry bankruptcies. We have 

talked about shared sacrifice over the past year. 

In fact, almost every criticism of the handling of the restructuring of GM and Chrysler is met with the response that shared 

sacrifice is required. No one expected the restructuring of these 

great American companies to be painless, and certainly it has not 

been. 

But exclaiming that bankruptcies require sacrifices from all parties involved does not answer the fundamental question of whether 

or not parties to these bankruptcies have been treated fairly. There 

is a significant difference, Mr. Chairman, between making a sacrifice and being sacrificed. 

And it seems to me that significant numbers of automobile dealers have been sacrificed without just cause, without explanation 

and without any available resource, and if left to their own devices, 

the automobile manufacturers would try to do the same thing to 

their workers who are the backbone of this economy. 

So when the taxpayers are called upon to bail out the industry 

to the tune of billions upon tens of billions of dollars, then the taxpayers have a right to regulate how these companies operate, the 

amount of bonuses that they give out to their top executives for 

being mediocre at best, the rewards that the executives get for having absolutely no vision about the future and also the lack of social 

responsibility 

That every leader in every industry should consider not just their 

own profit but what impact do our decisions have on the future of 

this country and its people and the world, as a matter of fact, because global warming is happening. 

And you know, this was foreseeable; many people tried to deny 

it but at this point, only those who have their heads firmly implanted I guess I will say in the soil, would not dispute the effects 

of how automobiles contribute to the global warming problem. 

And so workers should be able to organize and we shouldn’t 

blame the unions for getting us to this point. Blame is on the financial services industries and on the automobile manufacturers 

for failing to have vision about the future. The chickens have come 

home to roost. 

And I intend to explore through the hearings today and tomorrow the treatment of our Nation’s automobile dealers. GM and 

Chrysler have set the wheels in motion to close thousands of dealerships across the country. 

No one knows why certain dealerships have been chosen for closure while others have escaped this fate. Minority-owned dealerships and their communities are being disproportionately impacted. 

And both GM and Chrysler seem to have abandoned their stated 

commitments to increase and retain the number of successful minority dealers in the United States, again, social responsibility. 

In many communities, and especially in minority communities, 

automobile dealers play an integral role in the community. They 

provide essential services, and they serve as critical economic engines. 

9 

These closures will be devastating. Instead of having a dealership that is easy for consumers to access so that they can purchase 

cars, now we have, you know, if allowed to continue, we will severely restrict the number of buyers of automobiles because they 

can’t go 50, 60, 70 miles to a dealership to purchase a vehicle. 

And if Toyota is right down the street from them, where do you 

think they are going to go? And so it is a mindless, ridiculous concept to shut down the dealerships. I have got a dealership in my 

district that once employed over 100 people and those people were 

local people, contributing to the economy, and now they have about 

13 and this is because of the war on dealers, on automobile dealers. 

I don’t what the intent of this decision by the automobile manufacturers would be or I don’t know what they intended to accomplish, but certainly I support the congressman and he is just a 

freshman but Congressman Maffei, and I know you. 

I am just—mind slips some time. I support your bill that would 

rectify this wrong. And it is not too much to ask that GM and 

Chrysler fully justify their decisions to impose the hardships associated with dealer closures promptly and publicly. 

I want to thank also Mr. Ron Bloom for your public service with 

this presidential task force on the automobile industry. Once again, 

I want to thank the Chairman for scheduling these hearings and 

I look forward to hearing from the witnesses over the next 2 days, 

and I yield back the balance of my time. 

Mr. COHEN. Thank you. Without objection, other Members’ opening statements will be included in the record. 

Would you like to make a statement, sir? I didn’t mean—thank 

you, Mr. Jordan. Thank you. 

Mr. Bloom, thank you for participating in today’s hearing. Without objection—— 

Mr. DELAHUNT. Mr. Chairman, the Chair of the Committee. 

Mr. COHEN. Thank you. That is why I have a Vice Chairman to 

help me on such things. 

I would like to recognize the gentleman from North Carolina, Mr. 

Watt, I didn’t recognize him. Thank you, Mr. Vice Chairman 

for—— 

Mr. WATT. I will be very brief, Mr. Chairman. I just wanted the 

Committee to know that while a number of the Members of our 

Subcommittee and Committee were imagining conspiracies that 

were taking place in this sector of our economy, some of us were 

out there actually trying to help the dealers. 

And so I wanted to submit for the record, ask unanimous consent 

to submit for the record, a letter that we addressed to the chairman of the Federal Reserve and the acting administrator of the 

U.S. Small Business Administration and the secretary of the Treasury back on March 26, 2009 requesting that the Administration 

consider taking some steps to assist the small and minority dealers, who, even before bankruptcy was being contemplated, were experiencing severe economic distresses. 

We suggested that the Administration consider an adjustment of 

SBA’s size criteria. We suggested that they allow floor plan loans 

to be guaranteed by the SBA. 

We suggested that they enact a support program similar to the 

Auto Supplier Support Program that they had just approved, and 

10 

we suggested that they waive the AAA rating requirement for automobile loans under the term asset-backed securities lending facility 

that was under the Financial Services Committee’s jurisdiction and 

was included in the legislation that we passed, or authorized at 

least, in the legislation we passed. 

And a number of these steps have been actually taken by the Administration and I didn’t want us to lose sight of the fact that 

while all of the criticism was taking place and the conspiracy theories were being dreamed about, that there was some actual work 

being done by some of us to try save some of these dealerships. 

And I hope we don’t, in the context of these hearings, lose sight 

of one question that I hope Mr. Bloom will address is whether we 

are making some progress in saving the domestic automobile industry. It is one thing to look back and criticize everything that has 

been done, but we have an obligation, in my estimation, to also 

look at what progress, if any, is being made and I hope we don’t 

lose sight of that. 

And since all of the statements up to this point had been a little 

conspiracy oriented and negative, I thought I would at least ought 

to try to put a little balance on these statements. With that I appreciate the Chairman yielding me a little bit of time since I was 

here early for this hearing, and I yield back to the Chair of the 

Subcommittee. 

Mr. COHEN. Thank you, Mr. Watt. Were there any statements 

you wanted introduced in the record without objection? 

Mr. WATT. The letter dated March 26, 2009. 

Mr. COHEN. Without objection, it will be entered in the record. 

[The information referred to follows:] 

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Mr. ISSA. Mr. Chairman? 

Mr. COHEN. Yes, sir, Mr. Issa, you seek recognition? 

Mr. ISSA. Yes I do. 

Mr. COHEN. You are so recognized for an opening statement. 


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*At the time of the printing of this hearing, the Subcommittee had not received this information for the record. 

Mr. ISSA. I would like unanimous consent to put my full statement into the record.* 

But as I sit next door where we are with the special I.G. for the 

TARP, it was irresistible to go back and forth and to include in 

what I believe this hearing has to concentrate on. 

And that is the whole question of whether or not both the TARP 

and, Mr. Bloom, I realize that you are brand new to the job, but 

we are certainly going to need to ask you questions like, with $3.8 

billion simply waived, forgiven on the sale of—the DIP financing 

money was that forgiven when Chrysler was sold while other assets weren’t? 

We are going to have to ask why is it that when a General Motors dealership in my district has their franchise taken away, even 

though they are outperforming a competing one, with it is not 

taken away the several million dollars they owe to GM’s financing 

arm for the purchase of that franchise? 

And I hope that you can shed some light on how when in fact 

franchises that had real value had them taken away through government fiat. Ultimately the government made the deal and codified the deal and the courts have upheld it and yet, companies 

which had assets taken away and given to the competitor across 

town, have not had the liabilities given at the same time. And it 

is one of the great questions. 

Today we are seeing auto dealers around the country, everyone 

on the dais having them, who were top performers, who performed 

better than the companies across town that were given their franchises and effectively given all their business, and now they are 

finding themselves with personal guarantees. 

So after they take what is left of a company, basically the real 

estate on the dealership, they have taken the franchise away. That 

real estate is devalued because there is nothing else you can do 

with it, and there is no brand name under which you can, they are 

being gone after personally. 

So I hope today when, essentially under your predecessor’s 

watch, billions of dollars were simply given away of TARP money 

in the transaction of moving Chrysler to a foreign owner, that you 

can also answer the question of how we are going to bring some 

effective justice to the employees and owners of those franchises, 

who through no fault of their own, and quite frankly through no 

precedent under which they were being denied State franchise 

rights and the rights that they would normally have been granted 

to at least be compensated for the taking. 

This is not like Chrysler and GM were renting facilities. Chryslers and GMs had an asset developed by these people that was simply being given to somebody else without any predetermined basis 

and showing of need. 

So I hope today, in addition to all the other questions that you 

are prepared to answer how you are going to bring some fairness 

to the process after the fact when your predecessor certainly didn’t 

bring fairness to the process during it. 

With that, I thank the Chairman and yield back. 

15 

Mr. COHEN. Thank you, Mr. Issa. Was government fiat a double 

entendre? 

Mr. ISSA. Yes, the government fiat of selling to Fiat, and by the 

way, just in case we are wondering, I really would like to see where 

that great technology that Fiat’s going to bring to Chrysler is because I personally own two Dodge vehicles that has the great technology of Mercedes, and the last time I checked in Europe, Fiat 

doesn’t quite equal Mercedes when it comes to technology, Mr. 

Chairman. 

Mr. COHEN. And I have an Alfa that has been in my garage for 

3 years. 

Mr. ISSA. And that is the best place for it, you know that. 

Mr. COHEN. Mr. Delahunt, you are recognized, sir. 

Mr. DELAHUNT. I thank the gentleman—I am going to yield to 

Mr. Watt as much time he may consume. 

Mr. WATT. No, I am reacting to what Mr. Issa said more than 

anything because he made it sound like Mr. Bloom is brand new 

to the job. He is not. And it reminded me that through an oversight 

on my part, I failed to acknowledge that right after we sent this 

March 26 letter that I have submitted for the record, Mr. Bloom 

was on the job at that point, and I had a discussion with him late 

at night. 

He was working, trying to work through some of these issues. I 

had a phone conversation with him and I wanted to publicly appreciate him for going beyond the regular business day and having 

that conversation with me about some of the proposals that we had 

submitted. 

I will yield back. 

Ms. JACKSON LEE. Mr. Delahunt, would you yield just a minute 

to me? Mr. Delahunt, will you yield just a minute? I will be very 

brief. 

Mr. COHEN. I don’t think we can do that. We have to limit it to 

Members of the Committee, Subcommittee. 

Ms. JACKSON LEE. I don’t think there is a Committee rule. 

Mr. DELAHUNT. I will yield 45 seconds to the lady from Texas. 

Ms. JACKSON LEE. I thank the gentleman. Let me thank the 

Committee for holding this hearing. Mr. Bloom, thank you. I engaged, we didn’t finish our conversation but I do thank you. I just 

want to lay on the table a question that I hope we can all come 

to, the Administration and the Congress, how can we help the 

automobile dealers? 

How can we work with the manufacturers to make them whole, 

to place them back in their community, to keep the jobs and to 

make them the viable, economic engines that they are? I think if 

we can work together on that, we will be moving this country’s 

economy forward. 

Thank the gentleman, and I yield back. 

Mr. COHEN. Thank you. 

Mr. DELAHUNT. And reclaiming the time, and I will be very brief. 

I will just simply echo the sentiments of the gentlelady from Texas. 

And I think the concern that you are hearing here is that every 

Member of Congress has within his district several dealerships. 

And I think it was the gentleman from North Carolina, Mr. 

Coble, who indicated that it isn’t just about a business, it is about 

16 

a vital piece of the community because it is the car dealer that is 

the face of GM or Chrysler or whatever company because historically, those dealerships have played a significant role in the life of 

every community and I think every Member on this panel will testify to that. 

And I think the gentlelady is correct when she requests your 

guidance and possibilities to, you know, bring a fair measure of justice to the auto dealers. You know, transparency is important. 

There have been significant complaints about transparency. 

The gentleman from California, Mr. Issa, talks about government 

fiat. Well, I don’t know if the government was sitting in in the 

creditors’ meetings. That just simply isn’t the case. Understanding 

that there has to be shared sacrifice here, but everyone is entitled 

to a full explanation of the rationale for decisions that are made. 

And with that, I yield back. 

Mr. COHEN. Thank you, sir. 

If there are no further statements, we will proceed with Mr. 

Bloom and we thank you for participating. Without objection, your 

written statement will be placed into the record, and we have 

asked that you limit your remarks to 5 minutes. 

There will be a lighting system, green, go, yellow, you are down 

to the last minute and red, you are supposed to be concluding. The 

Subcommittee Members will be permitted to ask questions, but 

also subject to the 5-minute limit after you conclude. 

I am pleased to introduce our witness, Mr. Bloom, Senior Advisor 

to the Department of the Treasury, heads the presidential task 

force for the auto industry, previously special assistant to the president of the United Steel Workers based out of Pittsburgh since 

1996. And prior to that he was an investment banker, graduate of 

Wesleyan University, received his MBA from Harvard Business 

School. 

Thank you, Mr. Bloom, for being here. And will you proceed with 

your testimony, and let us know if we are going to continue to be 

able to see the USA in our Chevrolet? 

TESTIMONY OF RON BLOOM, SENIOR ADVISOR, 

U.S. DEPARTMENT OF THE TREASURY 

Mr. BLOOM. Members of the Subcommittee, thank you for the opportunity to testify before you today. On behalf of the Obama administration and its auto task force, I am here to report on the 

restructurings of General Motors and Chrysler. 

As you know, the new GM and the new Chrysler have recently 

emerged from bankruptcy and are now operating as independent 

companies. While this process has been very difficult, it has resulted in two great American companies being given a new lease 

on life and has kept hundreds of thousands of Americans working. 

During the bankruptcy proceeding, every affected stakeholder 

had a full opportunity to have his or her claim heard and every 

creditor will almost certainly receive more than they would have 

had the government not stepped in. 

I want to make clear from the outset that this is a position that 

neither the President nor his Administration invited. Only a few 

months ago, both of these companies came to the government in a 

17 

state of complete insolvency, facing almost certain liquidation without government support. 

Despite this, President Obama made a decision that he could 

only responsibly justify providing additional taxpayer dollars if the 

companies fundamentally restructured their businesses, which 

meant real and painful sacrifices from all their stakeholders, from 

workers and retirees to dealers, suppliers and communities. 

In addition, the President gave his auto task force a clear directive, to take a commercial approach to these restructurings and refrain from intervening in the day-to-day decisions of the companies. 

He did this because the long-term viability of these companies 

and their ability to repay the government investment would be seriously undermined if the government became involved in individual business decisions. 

In only a few months, both companies have achieved a degree of 

restructuring that many thought impossible. After proceeding 

through open bankruptcy processes, they have now emerged 

stronger and more capable of competing as global companies. 

The companies are now being run by their management teams 

under the direction of new independent, world class boards of directors. As is appropriate given these developments, the task force will 

be shifting its focus to monitoring the taxpayer’s investment as we 

move forward. 

As is the case whenever a company as large and interconnected 

as GM or Chrysler is fundamentally restructured, the costs in economic and human terms are substantial. However, completely 

avoiding these costs would have required an unacceptably large 

amount of taxpayer resources. 

For both companies, this meant substantial sacrifices from all 

stakeholders, sizable reductions in their workforces, plant footprints in dealer networks, significant reductions in the claims of secured and unsecured creditors, significant concession on compensation and benefits for active employees and healthcare benefits for 

retirees and leaving behind a variety of unsecured claims, including on product liability and worker’s compensation, a decision the 

companies made on a commercial basis. 

I know that several of you and your colleagues have raised particular issues with different aspects of the restructurings, all of 

which I am happy to discuss here today. Before turning to your 

questions however, let me say a brief word about automobile dealers. 

The Administration understands the importance of supporting 

America’s dealers during this period of crisis and has taken steps 

to ensure financing for dealers at this time. Indeed, had the President not stepped forward, GM and Chrysler would have liquidated. 

All of their dealer franchise agreements would have been terminated and just about all of their dealers would have failed. 

Instead, as a result of the President’s commitment, both new 

companies are now in a position to move forward with a substantial majority of their dealer networks intact. As was the case for 

plant closings, brand consolidation and other business matters, the 

task force was not involved in the specifics of the companies’ dealer 

consolidation plan, nor in any individual decisions about affected 

dealerships. 

18 

However, the companies have presented a commercial case for 

their overall plans, which is supported by the overwhelming majority of independent industry experts and which we believe is necessary. There is no question that this process has been difficult for 

some dealers. 

But I think it is important to recognize that the sacrifices being 

made by the small minority of dealers that are being wound down 

in this process stand alongside the substantial sacrifices being 

made by thousands of workers, retirees, creditors and communities 

across this country. 

This explains one of the Administration’s primary concerns with 

the amendment to the financial services appropriation and other 

legislation on dealers. It could set a dangerous precedent, raising 

substantial legal concerns to attempt intervention into a closed judicial proceeding on behalf of one of these stakeholders. 

It could also jeopardize taxpayer returns as private capital markets, which will be the future investors in these companies and 

purchasers of the government shares, may be loathe to participate 

where there is ongoing uncertainty about the rules of the game. 

I understand that several Members have raised concerns about 

the dealer restructuring process, and while specific questions are 

best posed to the companies themselves, we have played and will 

continue to play a role in helping facilitate this communication and 

ensuring that the process is open and transparent. 

In a better world, the choice to intervene would not have had to 

occur. But amid the worst economic crisis in three quarters of a 

century, the Administration’s actions avoided a devastating liquidation and put a stop to the long practice of kicking hard problems 

down the road. 

While difficult for all stakeholders involved, these transactions 

provide GM and Chrysler with an extraordinary second chance, 

and a very real opportunity to succeed and prosper in the years 

ahead. Thank you. 

[The prepared statement of Mr. Bloom follows:] 

19 

PREPARED STATEMENT OF RON BLOOM


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Mr. COHEN. Thank you, Mr. Bloom. 

We will now have questions, and I will yield myself 5 minutes 

to ask. First, when we started this hearing, you came up to the 

panel and were kind enough to express some thoughts to some 

Members and some of that was very optimistic on the automobile 

dealerships, the automobile company’s success as General Motors. 


Bloom-8.eps
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Can you share some of that with us so that we have some positive 

ideas? 

Mr. BLOOM. Yes, I think there is some good news. I think it is 

much too early to speak definitively about whether or not these 

restructurings will indeed succeed. But as we examine General Motors and as we examine Chrysler, we believe and continue to believe, that with this difficult and painful restructuring the companies can succeed. 

I think I mentioned to you that, for example, General Motors has 

in the last few years released some cars that are very popular 

among the American people that have received numerous accolades 

in the automotive press by objective outsiders. 

The Malibu was the car of the year. The new Chevy Camaro, 

which has been released recently is selling quite well, appears to 

be very popular. So we believe these companies are positioned for 

success, but obviously the implementation of these plans is still 

going to take a lot of hard work ahead and we intend to be monitoring that closely. 

Mr. COHEN. Do you believe Cash for Clunkers is successfully 

going to spur new automobile sales? 

Mr. BLOOM. We are quite hopeful that the Cash for Clunkers 

Program will have its intended effect, which is to boost sales of new 

cars by inducing people to turn in older, less fuel efficient cars. Yes, 

we are very hopeful it will succeed. 

And while it is a given amount of money in a particular period 

of time, hopefully if it appears to be a success, Congress will consider expanding it in the period ahead. 

Mr. COHEN. Let me ask you this. On the question of the dealerships and the particular one I mentioned in my area, Mr. Roy in 

South Haven, outstanding dealer, top flight, give me the logic or 

the understanding or should there have been some or can there be 

some consideration given to a successful minority dealer? 

Mr. BLOOM. Well, obviously by the opening statements, and as I 

tried to indicate in my remarks, obviously the situation confronting 

dealers is one that is occupying a lot of attention and many Members of Congress have reached out to us directly to speak about 

this. I am not in a position to give you a chapter and verse about 

a particular dealer. I am certainly happy to—— 

Mr. COHEN. How about just a general thing about a minority 

dealer who does great and gets recognized? 

Mr. BLOOM. The fundamental reality facing the companies and 

their dealer network was the following. By all measures, these 

companies had far too many dealers relative to the number of cars 

they were selling. 

As for an example, the average Toyota dealer sells almost four 

times as many cars as the average Chevrolet dealer. And all outside experts that we consulted, and we obviously came to our independent decision, but we did listen to a lot of voices. 

All those voices agreed that this over dealer-ing, this too large 

dealer network was placing a burden on the companies in terms of 

their long-term ability to succeed. Having too many dealers erodes 

the brand equity and therefore the company’s ability to get a fair 

value for its product for all of its dealers and therefore eventually 

for the company as well. 

28 

And so the decision was made, and it was not our decision specifically about exactly which dealers would be eliminated, but we 

did press the companies to say, ‘‘You have to do a lot of things to 

become more profitable.’’ 

‘‘You have to rationalize your plant network. You have to get concessions for your hourly employees. You have to reduce your level 

of interest payments on your debt. You have to take many, many 

difficult, hard steps that put many, many people into a very difficult circumstance and that included the dealers.’’ 

And so the company came forward with a program to substantially rationalize their dealer network. We wanted to assure ourselves, and we did assure ourselves, that that program was based 

on objective criteria and the companies have then gone and they 

have implemented that program. 

We believe that that program, not by itself but as part of these 

other steps, was a critical part of positioning these companies for 

future success. 

Mr. COHEN. Let me ask you this because my time is about to expire. I understand you are trying to do rational, objective basis and 

all, did that not in fact discriminate against in an inordinate manner minority dealers who might have gotten into the game late and 

had areas that weren’t as necessarily as affluent historically as the 

nonminority dealers? 

Mr. BLOOM. We were concerned about that issue. The data we 

saw, particularly from Chrysler, but GM as well, showed that in 

fact there was not a disproportionate impact on minority dealers. 

That said, we have met with the Minority Dealers Association. 

We have met with the company. The companies have assured us 

they are committed to their minority dealer programs where they 

are trying to increase their minority dealer representation, and we 

intend to monitor that progress well. 

I would also add that the SBA Program, which member Watt 

spoke about earlier, in some respects was not—while not targeted 

to minority dealers, was targeted at the smaller dealers, and that 

program was modified to permit it to do auto dealer financing, and 

that program is underway as well. 

Mr. COHEN. Thank you. 

I now recognize the Ranking Member of the Subcommittee, Mr. 

Franks, for 5 minutes. 

Mr. FRANKS. Well, thank you, Mr. Chairman. Mr. Chairman, I 

made a point earlier that bankruptcy law over the years and the 

process has always given great deference to secured lenders, and 

of course there are a lot of reasons for that. 

But one of the most important reasons is that when someone 

makes a secured loan they have confidence that the government 

will enforce that and that is the basis of being able to make loans 

sometimes in challenging circumstances like in the Chrysler bankruptcy. 

Now, under the Chrysler bankruptcy, the secured lenders, the secured creditors of Chrysler got 29 cents on the dollar. These were 

secure. That is a very unusual situation. Usually in a bankruptcy, 

they are paid 100 percent and then the unsecured lenders are—the 

remainder of the assets are split up among them. 

29 

But in this case, very unusual, they got 29 percent on the dollar 

for secured. Now, the unsecured, UAW, the unsecured I think the 

UAW was owed around $20 billion in all, got 55 cents on the dollar 

and the ownership of Chrysler to which the secured creditors were 

probably entitled. 

And now this turns lending expectations in the future upside 

down, and it literally changes the Bankruptcy Code to where nobody knows what it means. And if the airlines go into bankruptcy 

in the future or face some of these same kinds of crises that the 

auto industry, we are going to rue the day that we tossed law aside 

and justice aside for the sake of political expediency. 

And I think that sometimes all too often justice is sacrificed in 

the name of expediency in this place, but in this particular situation, it is going to have a very real consequence on the future bond 

market. So Mr. Bloom, let me shift gears and talk to you a little 

bit about that Chrysler bankruptcy. 

Tom Lauria, counsel for Perella Weinberg, has stated that your 

predecessor, Steve Rattner, threatened Perella Weinberg that the 

Obama administration, ‘‘With the full force of the White House 

Press Corps would destroy its reputation if it continued to fight,’’ 

the auto task force’s proposed shortchanging of secured Chrysler 

creditors. 

Let me ask you a series here, did you witness that? Did Mr. 

Rattner ever discuss that with you? Did Mr. Obama ever discuss 

it with you? Did Rahm Emanuel ever discuss it with you? Did any 

other White House or auto task force official ever discuss it with 

you? 

And I will stop there and ask you among those, did any of those 

individuals, did you witness that or any of those—— 

Mr. BLOOM. I would be happy to answer that specific question if 

you would like. I could address your opening comment, as well, if 

that is helpful. 

Mr. FRANKS. Well, answer the question. 

Mr. BLOOM. As to your specific question, since this matter was 

the subject of an extensive court proceeding, I, in fact, discussed 

this matter extensively with Mr. Rattner, and the simple fact is it 

never occurred. No comment of that nature was ever made by anybody associated with the auto task force. 

Mr. FRANKS. So you openly deny that? All right, I appreciate—— 

Mr. BLOOM. Absolutely, categorically deny it. 

Mr. FRANKS. That is a straightforward answer, Mr. Bloom, and 

I appreciate it. So let me—— 

Mr. BLOOM. And if you would like, I can comment on your statement about turning bankruptcy law on its head but—— 

Mr. FRANKS. Sure, that would be fine. 

Mr. BLOOM. All right. I think I would respectfully disagree with 

your view, Congressman, and let me try to explain it this way. 

First, the treatment of the secured creditors was approved by the 

bankruptcy court. It was approved in an extensive decision by 

Judge Gonzales, who went on at great length to determine that, in 

fact, this was absolutely ordinary course treatment. 

There was no turning of the law on its head. Judge Gonzales’ decision was upheld by the court of appeals in a unanimous ruling 

30 

and the Supreme Court saw no reason to intervene in the process, 

so in fact there was no turning of the law on its head. 

A judge, whose job it is to ensure that bankruptcy law is upheld, 

had no problem whatsoever with the treatment of the secured 

creditors and Chrysler. The secured creditors in Chrysler made a 

business decision to take 29 cents in cash as opposed to their two 

other options. One, is they could have moved to try to have the 

company liquidated. 

They choose to believe, and I think they were right, and the 

judge, in fact, affirmed this point as well that the 29 cents they received was far greater than they would have received in liquidation, which is, in fact, the task necessary to meet it. 

Number two, they could have, and we made clear to the lenders, 

we were perfectly prepared to have them as what is called credit 

bids for these assets and become the owner of them and then they 

could have done with them as they chose. They could have chosen 

to run the assets or again they could have liquidated. 

They chose not to take that option as well. We had a commercial 

arm’s length negotiation with these banks. It was a difficult bargain as all bargains in this situation were, and it resulted where 

it resulted. 

Mr. FRANKS. Mr. Bloom, I am out of time. Do you think this has 

ramifications for future bond lenders? 

Mr. BLOOM. No. I think, in fact, the bankruptcy court indicated 

this was in fact ordinary course treatment. I do not, sir. 

Mr. FRANKS. If you are a bond lender I think you would have a 

different perspective. 

Thank you, Mr. Chairman. 

Mr. COHEN. Thank you, Mr. Franks. 

Mr. Conyers? 

Mr. CONYERS. Thank you very much, Chairman Cohen. I was 

going to refer my good friend Mr. Forbes to the bankruptcy committee that handled, Mr. Franks, I was going to refer this subject 

of bankruptcy to another Subcommittee on Judiciary but you are 

a Member of the Subcommittee that handles bankruptcy. 

So we have got lawyers up and down the back row here that can 

help you appreciate that what happened was not out of the course 

of the usual procedure. Now, I haven’t heard this stated yet, but 

the Chrysler appeal is still pending in the United States Supreme 

Court. Does that make you feel any better? Some, okay, we are getting there. 

Now, the whole idea is that they approved this agreement at the 

lower level, but they did not dismiss the continuing appeal by 

Chrysler and probably a great number of secured creditors who 

would probably like to join in and be heard at that hearing. So this 

was not out of the usual course of events. 

It is an unusual situation and, you know, as one who has some 

knowledge of the labor movement in the automobile industry, they 

made great concessions on hourly wages. That was not something 

that President Gettelfinger had any pleasure in taking back to his 

union to be approved, and they did approve it, but they weren’t 

taking over. 

And finally, just remember the auto industries came to the government. We weren’t looking for companies’ takeover. They were 

31 

going out of business. They were desperate. They came and fortunately this Administration took a whole lot of concern, and they realized that to let the automobiles, two of the largest go under 

would not be worth it. It would be better for them to work out this 

agreement of creating new companies. 

Now, maybe these other two dealers that were saved should have 

done what the Ford Motor Company did. They refused. They declined. They didn’t want any part of it and so everybody had an opportunity to do that. They came to us on bended knee literally trying to stay in business. 

And sure it was tough and sure they had to give up a lot of 

things but what about the workers that gave up their jobs? What 

about the plants that closed down? And I am investigating whether 

some of those factories moved overseas, which is going to leave me 

thinking about the North American Free Trade Agreement in a 

new light. So I just want you to feel as well as you can as a valuable Member of this Committee. 

Mr. FRANKS. Would the gentleman yield for 1 minute? 

Mr. CONYERS. Sure. 

Mr. FRANKS. I just, I guess, because I take the gentleman’s 

points and I appreciate the sincerity of it, but you still remain in 

a situation here where secured lenders got 29 cents on the dollar, 

unsecured lenders, in the case of, or unsecured creditors in the case 

of UAW were 55 cents on the dollar. 

I realize everybody lost things and a lot of jobs were lost, but if 

this becomes the norm, secured lending will disappear and jobs will 

disappear far more than what has happened here, and it is a precedent Mr. Chairman. 

So that is—I thank you for yielding. 

Mr. CONYERS. Mr. Bloom, how should I answer that to make him 

feel better? 

Mr. BLOOM. I am not sure I can him feel better but I can try to 

answer it again. It is in fact quite common for secured lenders to 

not be fully paid out in a bankruptcy. That is, unfortunately, there 

are many companies whose wherewithal is simply smaller than 

their secured loan, number one. 

Number two, the idea that unsecured creditors of one sort of another receive a different treatment, again, is very common in a 

bankruptcy. For example, in the Chrysler bankruptcy is it true that 

the UAW had their health care benefits dramatically modified but 

not completely eliminated. 

But the suppliers to these companies had their debts paid in the 

ordinary course. Why, because it was a commercial decision by the 

company to maintain relationships with their supply base because 

you can’t make cars without having steering wheels. 

The companies also decided to continue to honor the warranty 

claims of prior owners of their cars. Why, because on a commercial 

basis, the last buyer of a GM or Chrysler car is the most likely candidate to be the next buyer. 

So the companies made a whole series of commercial decisions 

and their relationship with the UAW, which as people who know 

about it know is based on a very, while professional, a very arm’s 

length, sophisticated relationship. They extracted all from the 

UAW that they felt possible. 

32 

And that was the basis on which that deal was done, and likewise their treatment of the secured lenders. So I believe, again, and 

I think the courts have affirmed this that this was in fact while 

it was much larger, while it was done under a microscope, this was, 

in fact, ordinary course treatment. 

Mr. COHEN. Mr. Conyers, do you yield? 

Mr. CONYERS. Yes sir, I return. 

Mr. COHEN. Thank you, Senator. 

Mr. CONYERS. Thank you for your generosity. 

Mr. COHEN. All right, Mr. Jordan, do you seek recognition? 

Mr. JORDAN. Yes. 

Mr. COHEN. You are recognized for 5 minutes. 

Mr. JORDAN. Thank you, Mr. Chairman. 

Mr. Bloom in your opening statement you said that GM and 

Chrysler are operating as independent companies. You said that 

you were instructed as a member of the auto task force to refrain 

from intervening in the day-to-day decisions of these companies. Do 

you really believe those two statements? 

Mr. BLOOM. Yes. 

Mr. JORDAN. Well, let me ask you this. How do those statements 

square with the series of events and facts that we have seen play 

out in the last several months? How do they square with the fact 

that President Obama fired Rick Wagoner? 

How do they square with the fact that the government task force, 

the taxpayers, have a 60 percent equity stake in GM, control the 

majority of the board? How do they square with the fact that 2 

weeks ago in an interview Fritz Henderson said he is on a ‘‘short 

leash’’ when it comes to running General Motors? 

How do those statements square with the fact that Barney 

Frank, as reported in the Wall Street Journal, can call up Mr. Henderson and get special treatment for a facility in his State? How 

do they square with the facts that Mr. Franks brought up where 

you have Mr. Lauria an attorney, a Democrat attorney, who stated 

publicly that he is willing to testify to threatening treatment his 

client got from the White House? 

Let me put it in this context as well. Over the last 6 weeks, I 

have sat through hearings that question Mr. Ken Lewis, that question Mr. Ben Bernanke, questioned Mr. Hank Paulson about the 

treatments Ken Lewis and Bank of America got in their acquisition 

of Merrill Lynch, the threats and the intimidation and, frankly, in 

my judgment, the deception they received from members of our 

government in that dealing. 

So to me it just—when you walk through these series of events 

and I will even say this, I remember the Sunday night before General Motors was going to announce, file for bankruptcy. We were 

on a conference call. Maybe some of the Members of this Committee, I assume Mr. Conyers was on that same conference, or 

maybe our Chairman. 

In the intro to that conference call, Mr. Sperling, made this 

statement, he said, ‘‘We will only get involved in decisions with 

General Motors if they are a, quote, ‘major event’.’’ And so Mr. 

Rattner spoke, Mr. Sperling spoke, and it was time for questions 

and several Members got on and this and that, in fact the speaker 

33 

was on the conference call, majority leader Hoyer was on the conference call. 

I believe maybe Mr. Conyers spoke. And finally I asked a question to Mr. Sperling, ‘‘You said in your opening statements you only 

get involved if it is a major event.’’ I said, ‘‘Can you define ‘major 

event’ for me because it is going to be pretty major tomorrow in 

Mansfield, Ohio when they shut down a facility in our district.’’ 

It is going to be pretty major for the 1,200 families who are impacted by that. I said, ‘‘Can you define ‘major events’?’’ And he 

said, ‘‘Congressman we don’t really have a working definition.’’ And 

he gave a couple of examples, but what that told me was it can be 

any darn thing you guys want it to be. 

And so, again, I am nervous and I want—I guess I will finish 

with this question and let you respond. Are you at all nervous 

about the unprecedented involvement we are seeing from the government in the auto industry, in the financial industry, and if some 

people have their way, coming soon to every family across this 

country in the health care industry? 

Mr. BLOOM. I think I will avoid answering the back two parts of 

your question. I have no comment on the health care industry or 

the broader financial industry. My responsibility is to work with 

the auto task force on the automobile industry, so I will try to be 

responsive to you there. 

I think it is a legitimate concern to wonder about whether or not 

the government will intervene. I think it is a legitimate concern. 

That is one of the reasons why we are here today and candidly why 

the Administration was urging that the deal relative to the dealers 

not be passed because that is exactly the sort of intervention that 

we think is exactly what these companies don’t need. 

Let me try to respond to at least some of the points you made. 

I have made a note or two but I didn’t jot them all down. I said 

already and I don’t know how to say it more clearly that we—the 

statements attributed to Mr. Lauria are not true. 

Now, I don’t know what else to say about it. Mr. Lauria has not, 

in fact, come under oath, and so continuing to raise some—I don’t 

have another answer other than no. 

Mr. JORDAN. Okay, fine. 

Mr. BLOOM. Relative to your comment about Mr. Frank, again, 

I can speak for how the task force operated, and the task force did 

not say to General Motors that the plant in Mansfield, Ohio, which 

you are speaking about, should or should not be closed. 

What the task force said to General Motors was, ‘‘You have too 

much capacity. You have more plants than can justify given the 

numbers of cars you sell. In order for a high fix cost company to 

be successful it has to align its capacity with its demand.’’ And so 

the—— 

Mr. JORDAN. Yes it is, when you got the final plan, let us say 

what you said was accurate then. You get the final plan from GM 

that they said, ‘‘Okay. We are closing plant A. We are keeping 

plant B open. We are going to hold on plant C.’’ Did you give the 

thumbs up or thumbs down when you get the final plan? 

Mr. BLOOM. No, no, we did not. What we gave is a thumbs up 

or thumbs down on the overall plan. Did we believe or did—— 

Mr. JORDAN. Same difference. 

34 

Mr. BLOOM. No, I am trying to answer your question. Did we or 

did we not believe that that the overall plan created the possibility 

of a viable General Motors? The answer is yes. It required plant 

closings. But whether or not the plan—— 

Mr. JORDAN. No but here is the point—— 

Mr. BLOOM [continuing]. Whether or not the plan—— 

Mr. JORDAN [continuing]. At some point you had to, as the auto 

task force, sign off on the plan that had facilities, manufacturing 

facilities, around this country being closed. 

Mr. BLOOM. That is the inevitable result of a company shrinking 

its footprints. 

Mr. JORDAN. So how can you stand there and say—— 

Mr. BLOOM. Plants to be closed. 

Mr. JORDAN [continuing]. We didn’t decide which—I mean there 

is—— 

Mr. BLOOM. Because we didn’t decide which plant would close? 

Mr. JORDAN. And you expect American people to believe that 

when in fact it was the government who told Rick Wagoner to take 

a hike, it is the government who has 60 percent equity stake in the 

company. It is the government who appoints the majority of the 

board. 

It is the government who has Fritz Henderson on a ‘‘short leash’’ 

and this is his testimony or this is his statement, and you expect 

American people to believe that the auto task force is not running 

General Motors? 

Mr. BLOOM. What I said was, ‘‘The auto task force is not running 

General Motors. We are not running it. It is being run by its management and an independent board of directors.’’ If you have ever 

met Mr. Whitaker, who will be the chairman of the board of this 

company, an exceedingly successful private sector individual with 

impeccable independence and credentials, I can assure it is his intention that the board will operate as an independent board and 

will direct the affairs of the company and will be a very challenging 

taskmaster for the management. 

What we will do as the shareholder is we will refrain from intervening in the board’s business or the company’s day-to-day operations. We have reserved, and this is part of the record, we have 

reserved the right to vote our shares up or down on the directors 

but we will not be intervening in the day-to-day operation of the 

company. We didn’t during the restructuring process and we won’t 

in the future. 

Mr. JORDAN. Thank you, Mr. Chairman. 

Mr. COHEN. Thank you, Mr. Jordan. 

I now recognize the gentleman from Cape Cod. 

Mr. DELAHUNT. I am going to defer for the moment to the gentleman from North Carolina, Mr. Watt, because I just walked in 

and I have been unable to get a drift of the questions, so—— 

Mr. COHEN. Mr. Wattsis recognized and the gentleman from 

Cape Cod will bw known from hereafter as Mr. Congeniality. 

Mr. WATT. He certainly will be known as a good friend of the 

gentleman from North Carolina for deferring. I don’t know about 

Mr. Congeniality, but he has been my friend for a long time and 

that is consistent with our friendship. Mr. Bloom, I first of all 

35 

wanted to thank you for the comments about looking forward about 

what you project. 

I know you don’t have a crystal ball about what is out there 

ahead, but this is at least reassuring to know that you believe, and 

the task forces believes and the board and the companies believe, 

that these automobile participants are moving in the right direction. 

Let me ask a couple of specific questions. In order to implement 

the Cash for Clunkers legislation there are some regulations required. Can you give us a status report on how those regulations 

are proceeding and when we anticipate it because I guess nobody 

can really do anything with that program until the regulations are 

filed? 

Mr. BLOOM. Allow me, Congressman to get back to you with a 

very specific response that I know in general people are working 

as quickly as possible and I believe that the hope is to have the 

program fully operational by the end of the month, but let me, if 

I may, get back to you later today with a more precise answer. 

Mr. WATT. Great. Perhaps you will want to get back to me as 

part of that answer with the answer to the next question too because one of the concerns I have heard expressed by the dealers 

and sales people. Actually, it is not the dealers that have expressed 

it in any formal way but sales people that I have talked to are 

friends of mine. 

They are concerned that this Cash for Clunkers thing is going to 

really drive a lot more people to foreign manufacturers than to the 

domestic manufacturers. There is nothing in the legislation, I don’t 

believe, that really prefers domestic manufacturers over foreign 

manufacturers. 

I guess, I mean I know enough about it to know there really is 

no foreign made car or domestic made car. The content of all these 

cars is kind of mixed up with international. But I am wondering 

in response to them whether there is anything—is it possible to do 

anything that would weight this program more towards, in the regulations, to weight it more toward rewarding domestic manufacturers? 

I guess we blurred the lines even more with the merger that got 

approved with Fiat and Chrysler, so you can get back to me on 

that, too. The final question I wanted to raise I raised with you off 

the record. 

There are a number of people who, it seems to me in my conversations with them, are kind of in a deferred purchase mode 

similar to the position they were in when substantial advancements were being made in digital technology, sound equipment, 

you know, the next thing. 

And a lot of people perceived that over the next 2, 3, 5 years the 

whole automobile industry and the technology is going to change 

and improve so much, you will get a lot more efficient cars, and 

they are reluctant to get into the market. 

Is there anything we can do to address that by maybe suggesting 

a program that would empower the dealers or the manufacturers, 

I guess, to take these cars that are being produced now or facilitate 

recycling those, even the ones that are being bought today, probVerDate Aug 31 2005 13:22 Feb 23, 2010 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6601 H:\WORK\COMM\072109\51224.000 HJUD1 PsN: 51224
36 

ably 2 years from now will be out of date, at least a lot of us hope 

they will be out of date because of advances in technology. 

Mr. BLOOM. Well, a couple things. First, just my colleague hands 

me a note, the final rule will actually be issued later this week and 

we hope the program will be up and running shortly after that, so 

that is the answer on the Cash for Clunkers. 

I think our view and we have talked to a lot of experts and 

looked at a lot of survey, there are a lot of reasons why people 

aren’t buying cars today. Our judgment is the key reasons candidly 

are a very bad economy where people are afraid of losing their 

home and their job, et cetera and obviously the President is doing 

everything he can to get that piece moving and the lack of financing. 

And again we have done tremendous things from the investment in GMAC to the utilization of the TALF program, almost $26 billion dollars of retail auto financing has been done through the 

TALF. So we are doing a lot of things, I think, Cash for Clunkers 

among them to stimulate overall demand. 

We haven’t particularly picked up that issue. I mean technology 

continues to move quickly in the industry, and I think that is a 

good thing. Cars are getting better every year. We don’t candidly 

see a step change in the next 4 years, but we absolutely see continuing improvement. But let us look at that issue and we will certainly consider whether that particular problem could be remedied. 

Mr. WATT. I think the gentleman. 

I yield back. 

Mr. COHEN. Thank you, sir. Who seeks recognition on the democratic side? 

Gentleman from Mass? 

Mr. DELAHUNT. Thank you, Mr. Chairman. Could you outline for 

us what would have, in your judgment and the judgment of those 

in the industry, particularly given the economic realities of the past 

2 years, 11⁄2 years, what would have happened if the Administration had not acted in the way that it did? 

Mr. BLOOM. Obviously, the future does not reveal its alternatives, but I think a fair estimate is that both of these companies 

would have gone into what are conventionally called an uncontrolled bankruptcy. There would not have been any debtor in possession financing, so the case would need to have been converted 

fairly quickly to Chapter 7 liquidation. 

In Chapter 7 liquidation, I think small bits and pieces of both of 

these companies might have been purchased. Possible someone 

would have bought a little piece of Jeep, possible someone would 

have been interested in parts of GMC. 

I have no way to estimate the amount the liquidation value of Chrysler. The entire company was analyzed at $1 billion. The liquidation value of General Motors, by its experts, was valued at, I 

think, $6 or $8 billion, so tiny, tiny fractions of their overall companies would have been saved. Just about the entire audit—— 

Mr. DELAHUNT. But it would have been cannibalized? 

Mr. BLOOM. It would have been eliminated. Just about the entire 

auto supply base would have found itself quickly in bankruptcy. 

There are not auto suppliers who—all auto suppliers supply all the 

auto companies. 

37 

Mr. DELAHUNT. Have there been any projections that have credibility in terms of what would have—what kind of impact it would 

have had in terms of lost jobs? 

Mr. BLOOM. I am not—— 

Mr. DELAHUNT. On the vertical, if you will? 

Mr. BLOOM. I am not aware of a single point estimate, but I 

think it is safe to say that the failure of these companies include 

the suppliers, include all the dealers, include all the ancillary suppliers, would have been many, many hundreds of thousands. 

Whether it would have gotten into the millions I don’t know. We 

did not do a single point estimate. We looked at many scenarios 

but I think, you know, devastating is the only word that can be 

used for the consequence, which is why I think the President decided to step in. 

Mr. DELAHUNT. You know, I think we all hope for growth in 

terms of these two new companies now and Ford seems to be surviving well. In fact, I talk about new technology. I just have been 

driving a Ford Fusion. It is truly remarkable. 

Mr. BLOOM. Cool car. 

Mr. DELAHUNT. I mean, you know, 40 miles to the gallon. This 

is the future. But as we see growth, hopefully, in terms of the new 

alignment of automobile manufacturers are you aware have there 

been any discussion that those that were terminated, I am talking 

the dealerships now, would they be given any priority if a business 

decision was made in terms of expansion? 

In other words, those that are terminated I think out of just fairness ought to be at the play and I guess my question is it is obviously very speculative because we don’t know if there is going to 

be growth, but presuming that there is, is there an opportunity for, 

if you are aware, for these auto dealers who have been terminated 

to receive some sort of priority? 

Mr. BLOOM. The issue of whether or not in the case of a future 

expansion the auto dealers who might still be interested in becoming franchisees for GM and Chrysler has been a matter that has 

been discussed between the NADA, the dealers association, and 

both of the companies. 

The auto task force has played a role in facilitating those dialogues. Some of them have in fact included Members of Congress. 

And I think in the context of a non-legislative solution to this situation, I think that is a matter that we would expect to be discussing. 

Mr. DELAHUNT. Thank you, Mr. Bloom. 

Mr. COHEN. Mr. Maffei or Mr. Johnson, either or both. 

Mr. Johnson? 

Mr. JOHNSON. Thank you. All right I just did the same thing 

with my senior as well but—— 

Mr. COHEN. You mean in terms of seniority don’t you? 

Mr. JOHNSON. Yes, that is correct. 

Mr. COHEN. Okay, thank you. 

Mr. JOHNSON. Even though you have more gray hair than I do, 

but I had to look at your driver’s license to determine who is the 

oldest but I do have my suspicions about that. Mr. Bloom, GM and 

Chrysler have decided that they had too many dealers. What was 

the rationale for that conclusion? 

38 

Mr. BLOOM. Well, the companies, again, in comparison to their 

successful competitors, particularly the transplants, have again as 

I said earlier almost four times as many dealers per car sold as 

their most successful competitors. 

And their business judgment was that that dealer network 

erodes their brand equity over time, puts all the dealers into competition to be cutting prices opposed to trying to maintain value, 

hurts resale values of the cars because whenever you sale a car at 

too low a price you hurt the ability of the car to maintain value 

at resale. 

And so like a whole series of consequences, which as I said earlier outside experts we consulted with, universally agreed, was bad 

for the company. 

Mr. JOHNSON. Well, let me say that—— 

Mr. BLOOM. We accepted that broad conclusion. We then tasked 

the companies with coming up with a specific plan as to how to rationalize their dealer networks and that is what they did. 

Mr. JOHNSON. Let me ask this question then. Isn’t it a fact that 

the automobile dealers purchase the automobile as soon as the roll 

off of the assembly line? 

Mr. BLOOM. That is correct. 

Mr. JOHNSON. And they finance those purchases through either 

their own lending sources or through lending programs of the manufacturer? 

Mr. BLOOM. The companies actually provide financing for period 

of time and then the dealer takes over the financing costs, but certainly over time if the car stays on the lot for a while, yes, it is 

the dealer who is securing the financing for it. 

Mr. JOHNSON. Doesn’t it make sense that more dealers would 

purchase more cars and have them available for the public to purchase—— 

Mr. BLOOM. Right the problem is when you have too many dealers or none of the dealers are selling the necessary number of 

cars—— 

Mr. JOHNSON. Well, then how could you choose and select which 

dealers to close? 

Mr. BLOOM. We didn’t choose. 

Mr. JOHNSON. Because that is—— 

Mr. BLOOM. But I can tell you how the companies—— 

Mr. JOHNSON [continuing]. I know of some that were top dealers. 

Mr. BLOOM. I appreciate that people have been approached by 

particular dealers who believe they were not treated fairly. And as 

I said we have encouraged the companies and I believe they have 

complied with this in all times to provide transparency to individual dealers when they believe that the process was not fair to 

them. 

But I can tell you the criteria for instance that General Motors 

used. It was sales. It was customer satisfaction. It was capitalization. It was profitability, four objective measures. 

Mr. JOHNSON. None of which—— 

Mr. BLOOM. Of the dealers—— 

Mr. JOHNSON [continuing]. Seemed to be logically consistent with 

having vehicles available to the public in locations that are accessible to—— 

39 

Mr. BLOOM. Convenience is clearly an important factor. 

Mr. JOHNSON [continuing]. And also the number of people who 

were let go because the dealerships were closing, you know, I mean 

we are trying to create jobs here to pull us out of this economic debacle, which was caused by lack of regulation in the financial markets. 

So we are trying now to create jobs for the American people 

where they can go out and purchase a new car. And by the way 

when they purchase a new car under the Cash for Clunkers situation are there, you probably don’t know this, but fuel efficiency 

standards or are we just going to go from one inefficient fueled vehicle to another like say the muscle cars, the Camaros, and I love 

Camaros. I own one. 

Mr. BLOOM. You should check out the mileage on the new 

Camaro. It is substantially ahead of the mileage on the old one. 

Mr. JOHNSON. Well, I am happy to note that. 

Mr. BLOOM. The Cash for Clunkers program does have a specific 

regulation and it was in the law sorry, in the legislation that requires that the car you trading against have better mileage than 

the car you are trading in. 

Look convenience is clearly and important factor but there are 

other factors and if the dealers undercapitalized, if he is not selling 

a good number of vehicles, if he doesn’t maintained—— 

Mr. JOHNSON. Well, the reason why he is not adequately capitalized is because the manufacturers closed out the lines of lending 

opportunities. 

Mr. BLOOM. The manufacturers didn’t close out the lending opportunities. The lending opportunities were hurt by the overall decline in the economy. There is no question that the loss of jobs for 

dealers is a very serious problem, but the question is, what is the 

alternative? And as we evaluated it the alternatives were two. 

One we could have let the companies liquidate and as I tried to 

respond earlier to Congressman Delahunt’s question I think the 

comparison between that and what has happened is astronomical. 

The second thing we could have done is we could have insisted that 

these companies honor every one of their promises. We could have 

insisted they lay off no employees. 

We could have insisted they pay their bond holders in full, their 

secured creditors in full, and their dealers in full. The problem with 

that solution is it would have cost the taxpayers a multiple, a serious multiple of the already very substantial investment that was 

made. 

So we tried to choose a middle ground where we invested the 

necessary capital to revitalize the company but honestly not more 

than we had to do because these are taxpayer dollars and we wanted to minimize the investment and we obviously want to try to get 

the investment back. 

Mr. COHEN. Would the gentleman yield sir? Just a minute. 

Mr. JOHNSON. Yes, I will ask one question before I yield. 

Mr. COHEN. I asked—— 

Mr. JOHNSON. I want to know why the illustrious Rick Wagoner 

was let go of his responsibilities at GM, and if you could keep it 

very short so I could yield to my friend Mr. Delahunt. 

40 

Mr. BLOOM. I will keep it short. I will keep it short. I think the 

judgment was made that Mr. Wagoner had done many good things 

and worked very hard but that he was not the best person to take 

the company forward in the difficult circumstance it was facing. 

Mr. JOHNSON. All right. Thank you, sir. 

Mr. DELAHUNT. You reference I think, I thank the gentleman for 

yielding, you reference Mr. Bloom a multiple. Would you give us an 

estimate of that multiple? 

Mr. BLOOM. Well, it is hard—— 

Mr. DELAHUNT. I know it is a range, and I know you cannot be 

precise, and I am—— 

Mr. BLOOM. Certainly in the case of General Motors, if all of the 

claimants were to be made completely whole, the Obama administration committed roughly $30 billion to the DIP financing. I think 

you could expect that number to have at least doubled. 

Mr. DELAHUNT. So rather than $30 billion, the taxpayer would 

have been on the hook for more—— 

Mr. BLOOM. More than $60. 

Mr. DELAHUNT [continuing]. Than $60. 

Mr. BLOOM. More than $60. 

Mr. DELAHUNT. And this course was not taken? 

Mr. BLOOM. Right. That course was not taken. 

Mr. JOHNSON. Mr. Chairman, I yield back the balance of whatever time I have left. 

Mr. COHEN. Thank you. 

That gives us time to recognize Mr. Issa here. 

Mr. ISSA. For such time as I may consume I trust? Thank you, 

Mr. Chairman. 

Mr. Bloom, earlier, you know, I was congratulating you on your 

new position and giving you a little bit of a pass for the sins of the 

past even though you were there. Perhaps that was a mistake. So 

let me go through a couple of things. First of all, quite frankly why 

was it in the taxpayer’s best interest to forgive the money that we 

put into DIP financing, $3.8 billion? 

Mr. BLOOM. I assume you are speaking about Chrysler? 

Mr. ISSA. Chrysler. 

Mr. BLOOM. Yes, the $3.8 billion was actually not all forgiven in 

the case of the DIP. That was an original estimate based on the 

bankruptcy going for 60 days. The bankruptcy, in fact, went for 42 

days, so a much smaller amount was forgiven, less than half of 

that and a lot of that will in fact be recouped by the nature of the 

loan we made. 

The loan has various features that include essentially incremental fees and other features that will allow us to recoup. In fact, 

just about all that money if the company succeeds. In addition, the 

government owns 8 percent of the common stock of the company 

and has warrants to purchase additional stock in the company, so 

we are actually hopeful if new Chrysler succeeds that just about all 

of the $8 billion that in total was committed by the Obama administration can, in fact, be returned. 

Mr. ISSA. Why was it that we took 8 percent in warrants and the 

UAW got 55 percent? Why wouldn’t the go forward investment of 

workers who had no statutory claim, why wouldn’t theirs be warVerDate Aug 31 2005 13:22 Feb 23, 2010 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6601 H:\WORK\COMM\072109\51224.000 HJUD1 PsN: 51224
41 

rants? Wouldn’t that have been more appropriate and equally enticing to people to stay with the company and make it succeed? 

Mr. BLOOM. Let me try to answer that. First thing, the UAW 

didn’t receive any stock in the company. The holder of the shares, 

the 55 percent I believe you are speaking about, is held by an independently managed trust called a VEBA whose responsibility it is 

to write heath care for the roughly 150,000 Chrysler UAW represented retirees. 

So the UAW right now—— 

Mr. ISSA. Right, wasn’t that, in fact, a normal in bankruptcy 

claim, which would have had not standing ahead of debt? 

Mr. BLOOM. If there had been a liquidation of Chrysler—— 

Mr. ISSA. No, ahead of our—— 

Mr. BLOOM [continuing]. No, I am—— 

Mr. ISSA [continuing]. $3.8 billion of our DIP financing, our DIP? 

Mr. BLOOM. Yes, well, and again our DIP financing as I said was 

converted into partly the exit facility, which as I explained we hope 

to fully get back. The UAW had a pre-petition claim but in addition, in order to operate Chrysler, it was necessary to reach a labor 

agreement with the UAW because, in fact, if people don’t come to 

work you can’t make cars. 

And so a very—— 

Mr. ISSA. So what discount did you get in return for that 55 percent? What discount did you get in negotiations? 

Mr. BLOOM. Well, the value of that 55 percent at this point in 

time is actually quite low. The company’s equity value today, sitting as we sit, is quite modest. 

Mr. ISSA. Mr. Bloom if you don’t mind, because you were there. 

Mr. BLOOM. I am trying to answer your question. 

Mr. ISSA. Please answer the question. 

Mr. BLOOM. I was trying to. 

Mr. ISSA. No, I don’t care how low it was. What value did you 

get in the UAW contract because you were—— 

Mr. BLOOM. We made a—— 

Mr. ISSA [continuing]. The asset went to retirees. I want to understand what you got in the contract of people who wanted jobs 

and our $3.8 billion in other funds gave them the ability to still 

have a job. 

Mr. BLOOM. What we got was substantial concessions in the ac- tive workforce about $7 an hour of reduction in the hourly compensation of benefits package as such that at this point the Chrysler—— 

Mr. ISSA. And—— 

Mr. BLOOM [continuing]. Hourly employees are paid essentially 

the same as the transplant employees, which had been the admonition in the original Senate bill which was not passed back in December. 

So the sacrifices, which were envisioned at that point in time 

were in fact more than done by the UAW and a very large obligation to pay retiree insurance claims was also substantially reduced 

such that a note for $4.6 billion, not a cash payment, as well as 

this amount of stock, which may or may not be worth something 

in the future was part of an overall bargain that was made with 

the UAW. 

42 

Mr. ISSA. And I am completely supportive of all the—if Chrysler 

turns around these will be paid. 

Mr. BLOOM. Yes. 

Mr. ISSA. My question on behalf of the stockholders here is and 

I would like you to follow up in writing if you would, I don’t think 

we have time to go back and forth here, is simply in the preference 

why we did not give ourselves the most immediate and guaranteed 

returns and give others a stake in the upside but less immediately 

guaranteed and in particularly the stock versus warrant, preferred 

debt, and so on, so if you would answer that in writing. 

Because I have one more question for you which is in this liquidation we gave no consideration to the injured parties in this 

case. The car dealer, A, who had his asset taken away from him 

and given to car dealer, B. Are you willing to on a go-forward basis 

to look for positive win-wins, insist that the auto companies look 

for opportunities in which some reasonable recognition of these 

losses to these dealers who had their asset taken away from them, 

their growing concern, often profitable growing concern? 

That includes the residual inventory they have in the way of, you 

know, their facilities with all this fine equipment, designed specifically for Chrysler, designed specifically for GM Are you willing to 

do that as part of your go-forward, if you will, car czar project? Because in my district I have people who are still being asked to pay 

on buildings and assets and so on that they bought from the car 

company when in fact the asset they bought was taken away from 

them. They still want the liability paid. 

And in their case they are not being given any kind of if there 

is a future expansion will they get a benefit from it, do they have 

the right to be preferred if in fact a new dealership is opened somewhere in America in the foreseeable future, and in the case of certain assets they are holding they are neither being given debt relief 

nor even a preferred position to liquidate those. 

Mr. BLOOM. I am not the car czar. I think I would answer as follows—— 

Mr. ISSA. Okay. 

Mr. BLOOM [continuing]. In the case of Chrysler—— 

Mr. ISSA. Today I know the car czar actually has no official authority. 

Mr. BLOOM. Doesn’t exist. 

Mr. ISSA. You have real authority and real ability. 

Mr. BLOOM. I will try to answer your question, sir. Chrysler has 

made provision and has already agreed that it will buy, it has purchased in fact, just about all the cars from its terminated dealers. 

This may—— 

Mr. ISSA. Mr. Bloom my time is limited. It is not about cars. It 

is about all the other assets used to—— 

Mr. BLOOM. I was getting to that. 

Mr. ISSA [continuing]. Represent a growing concern. 

Mr. BLOOM. I was getting to that. 

Mr. DELAHUNT. Mr. Chairman, I ask unanimous consent that 

Mr. Issa be given as much time as necessary for Mr. Bloom to fully 

answer the question. 

Mr. ISSA. Thank you. 

43 

Mr. BLOOM. Chrysler has also agreed to repurchase the parts 

and the special tools from all their dealers and they are in the 

process of doing that. Regarding your question about the preference, I think answered earlier that we have had discussions with 

Members of Congress, with the companies, and with the NADA, 

relative to whether or not something along those lines could be discussed. 

Again, as I said in the context of the non-legislative solution I 

think we are prepared to play a role in facilitating those continued 

dialogues. 

Mr. ISSA. Okay. And I guess the only follow up anecdotal comment because I feel like what you told us was very good, non-legislative. I think it begs the question of whether or not we should empower legislative solutions both, not just a sense of Congress, but 

in fact something with some teeth in it that, so that in fact this 

unprecedented taking from one dealer and being given to another 

can be resolved at least more fairly than it is. 

Mr. BLOOM. I would just observe and again I guess we are going 

to disagree. I don’t think this is an unprecedented taking. Both 

bankruptcy courts have passed upon this as an absolutely ordinary 

course basis and I think I articulated earlier that the Administration believes that the legislation, the specific legislation, that is 

being considered, is going to make the situation worse not better. 

But with that said, we always believe that dialogue is valuable 

and on the specific issue you raised which is preference in the future, that is an item that has been discussed and I would hope we 

could continue to discuss it. 

Mr. ISSA. But when I say unprecedented, I beg the indulgence, 

pre-empting State franchise laws allowing agreements made with 

companies who had nexus in a State to simply be set aside into a 

one size fits all with no consideration and no ability of a consideration between the gainer, not Chrysler, but a particular Dodge 

dealer and the loser, another Dodge dealer, that pre-emption of any 

recourse, any place for those dealers to go. 

And by the way, sometimes the dealer that was a winner here 

and a looser there, we are not questioning that it might have had 

to have been done, but it does appear as those it was done in a way 

to pre-empt all the other possible considerations including an interparty right of, wait a second, I lost 200 cars a year, you gained 200 

cars a year. What am I getting for that? Those parties don’t even 

have the ability to seek recourse from each other do they? 

Mr. BLOOM. To my knowledge they don’t, but I am not an expert 

on the State franchise laws in your State. If they believe they were 

wronged under State franchise laws presumably they have recourse. In the bankruptcy court, which is where this was approved, 

it was approved as not being either illegal or certainly not unconstitutional, so that is the way and we obviously agree with the decision of the judge and the appeals court who upheld it. 

Mr. ISSA. Well, I thank the Chairman for his indulgence and I 

certainly think the courts have made mistakes. Again I think back 

during World War II and the Japanese internment everyone 

thought it was okay from a court standpoint until long after the 

war. 

44 

And I think this is going to go down as something that could 

have been done better, now has been codified, but in fact I don’t 

think this body has done speaking as to the fairness to the parties 

that have been injured while we have been trying to bail out the 

auto companies. 

I thank the Chairman and yield back. 

Mr. COHEN. Thank you, sir. 

Mr. Maffei, do you seek recognition? 

Mr. MAFFEI. Yes, Mr. Chairman. 

Mr. COHEN. Five minutes, or as much time as Mr. Delahunt 

wants you to have. 

Mr. MAFFEI. Yes. 

Mr. DELAHUNT. Again I recommend that the gentleman have as 

much time as he needs. 

Mr. COHEN. Easy for you to say. 

Mr. MAFFEI. Thank you again, Mr. Bloom for appearing here 

today. I am just trying to get some clarification. Is it the Administration’s position that the companies would have been liquidated 

had the current dealer networks been maintained even if all the 

other reforms had been made? 

Mr. BLOOM. I can’t speculate on a hypothetical as to what would 

have happened if one piece of the puzzle hadn’t been done the way 

it was done. There was a comprehensive plan put forward to save 

the company. All the stake holders were asked to sacrifice. They all 

did and we think it is positioned the company for success. 

It is always possible to imagine one more penny, what one more 

straw in the camel’s back. I don’t know which straw or other straw 

might have done. I know these were completely failed enterprises 

in need of dramatic restructuring and that is what we tried to effectuate. 

Mr. MAFFEI. I think part of the problem that we are having is 

that, you know, when you take a more conventional retailer that 

is trying to sell more products, obviously, to sell more products they 

have more stores. 

So they would create a whole store network, which would hopefully sell more products. If because of economic conditions or because of the products, they just aren’t that popular, the stores stops 

selling as much then they would in fact have to close stores, but 

that is because they pay the people and they pay the employees in 

the stores. They pay the rents or the mortgages for the stores. They 

pay the inventory. 

In this case you have dealers. The dealers pay the employees in 

their stores. They pay the rent and the mortgage. They pay the inventory. They pay even substantially the advertising costs and a lot 

of other things. 

And it is very unclear to us even after all this time and debate 

what exactly the disadvantage is to the company. So, I mean, you 

said earlier in this hearing by all measures these companies had 

far too many dealers relative to the number of cars they were selling. Says who? 

Mr. BLOOM. Well, says all the comparative data with other dealer, with other more successful companies. 

Mr. MAFFEI. Like Toyota and Honda, so—— 

45 

Mr. BLOOM. Every other single successful company and says all 

the outside experts we consulted, and says us based on our judgment of looking at the facts. 

Mr. MAFFEI. I mean, can you give me an actual—can you—— 

Mr. BLOOM. I will tell you on Toyota, Toyota sells roughly four 

times as many—the average Toyota dealer sells roughly four times 

as many cars as the average Chevy dealer. 

Mr. MAFFEI. But the correlation doesn’t mean causation. 

Mr. BLOOM. I agree. 

Mr. MAFFEI. So I am trying to figure out like what—why is there 

a—other than we just looked at other companies and sort of seen 

this. What is the reason why it costs the companies so much 

money—— 

Mr. BLOOM. What I tried to explain is that—— 

Mr. MAFFEI [continuing]. Yes. 

Mr. BLOOM. I will try again and if my explanation isn’t satisfactory I apologize. When you have too many dealers, none of the dealers can achieve the kind of quality of service, the modern equipment that is needed, the advertising revenue that is needed, all of 

those things come with scale. 

And so if you have a whole series of under-scaled dealers, then 

all the dealers are putting forward to the consumer a face that is 

less good than the competition’s face, and at the end of the day, the 

consumer has to choose between a Toyota or a Honda, a GM, a 

Ford or a Chrysler. 

Mr. MAFFEI. And there is no advantage—— 

Mr. BLOOM. And what we want to do, and what GM wants to do, 

and I guess the other point I would try to make is I don’t assume 

that the companies are right about anything they do. We obviously 

are critical of everything they do. On the other hand, I think it is 

logical to assume that their effort here was to become more profitable and nothing else. 

There was no other motive. Now, that doesn’t mean they are 

right. It might be that having four times as many dealers as everyone else is a good business judgment. We disagree with it. But the 

only possible motive for the companies wanting to reduce their 

dealer network was to become more profitable, because they were 

hugely unprofitable. 

And as a matter of justifying taxpayer investment, they wanted 

to try to become more profitable. So they are only motive could be 

the same motive that we would all have for these companies, which 

is that they be successful. 

Mr. MAFFEI. I share that motive and I appreciate your answer, 

Mr. Bloom. I don’t necessarily agree with it though. I don’t know 

why we would necessarily assume that there couldn’t be, possibly 

be other motives involved with the auto companies any more than 

we would assert that there were. I just don’t know how we would 

ever know that. 

Mr. BLOOM. I can’t—— 

Mr. MAFFEI. Obviously—— 

Mr. BLOOM. I don’t know what I don’t know. 

Mr. MAFFEI. Yes. 

Mr. BLOOM. I don’t know what other motive—— 

46 

Mr. MAFFEI. No, I am not saying you should, I am just saying 

that is, I do think that that is a leap of faith and to a certain extent I think that the auto task force, you know, all these experts 

and these measures are fairly vague and I do think that they decided to or that they bought the auto company’s argument that a 

Toyota or a Honda-like model was a better one. 

But for decades we got along well without—— 

Mr. BLOOM. By the way, it is an argument the NADA agrees 

with. I mean, the only issue that has ever been under debate with 

the NADA is the speed of the reduction in the dealer network. 

Mr. MAFFEI. Now, my—— 

Mr. BLOOM. So I haven’t found anybody yet, and maybe I will 

learn something and I am always happy to learn, but I have found 

nobody who doesn’t think that an over-dealered network produces 

a drag on the company’s ability to be successful, but I am certainly 

open to learning new facts. 

Mr. MAFFEI. Thank you, Mr. Bloom. 

Thank you, Mr. Chairman. 

Mr. COHEN. Thank you. I would like to ask you a couple of questions, sir. First of all the issue about dealerships, you are saying 

that dealerships and the number is a drag on the business, is that 

correct? 

Mr. BLOOM. Yes. 

Mr. COHEN. Was that determined by the labor unions that have 

been the object of scorn from some on the other side claiming that 

they are responsible for the problems with General Motors and 

Chrysler or was that the decision of the management? 

Mr. BLOOM. The labor union had absolutely nothing to do with 

the discussion regarding the size of the dealer network or what the 

appropriate actions would be. That was a discussion between us 

and the management. 

Mr. COHEN. And some people have said that the reason people 

buy or are more likely to buy foreign cars than American cars is 

because foreign cars get better gas mileage. Was the determination 

to have cars that got not as good of fuel efficiency as Japanese cars 

the decision of the labor unions or the decision of management? 

Mr. BLOOM. Those sorts of decisions, I think, are normally the 

decisions of management. 

Mr. COHEN. And some said that the reason why people would 

buy Japanese cars is because they were, and European cars is they 

were more durable and better able to survive impacts. Was the design of those cars the decision of labor or the decision of management? 

Mr. BLOOM. I think, normally, those would be management decisions. 

Mr. COHEN. What did management do right? 

Mr. BLOOM. Well, I think that obviously the companies failed, so 

there is plenty of blame to go around. But I do think it is fair to 

note, and let me talk about GM for a minute, that in the last half 

dozen years, the company has, in fact, taken many very good and 

positive steps to rectify its long-term problems. 

There have been a series of innovative contracts negotiated with 

the union even before this that had reduced labor costs and elimiVerDate Aug 31 2005 13:22 Feb 23, 2010 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6601 H:\WORK\COMM\072109\51224.000 HJUD1 PsN: 51224
47 

nated benefits to make them more competitive. The company had 

been starting to produce much better cars. 

If you look at the quality surveys, J.D. Power, the other independent agencies, they will tell you that on new car quality, a significant part of the GM fleet measures up very, very well against 

any other competitor in the marketplace. 

I think the problem was they were simply not moving quickly 

enough, and so we felt, in order to justify taxpayer investment, 

that the things that they were doing needed to be done far faster 

and more significantly. 

But I think the company’s broad strategic direction that it undertook half a dozen years ago was generally in the right direction. It 

just wasn’t as significant enough, as change-oriented enough, didn’t 

involve as many of the difficult sacrifices that unfortunately were 

required to bring the company to position for profitability. 

Mr. COHEN. I haven’t been in the new car market for a long time. 

I have five vehicles. My newest one is a 2000, and it is leap years 

newer than my other cars. But as I think I recall, American cars, 

in general, were equal to or cheaper than European cars. I kind of 

looked at a Lexus one time and they were a lot more than it would 

cost me to get a Chevrolet or a Ford or whatever. 

Is that accurate to say that American cars were—— 

Mr. BLOOM. I think that—— 

Mr. COHEN [continuing]. Not more expensive than European 

cars? 

Mr. BLOOM. I think you got to be careful to compare an apple to 

an orange. I mean, clearly, you know, a BMW or a Mercedes costs 

the consumer more than a Chevrolet, but there are Cadillacs that 

are closer in price to BMWs. 

I think the issue that the car companies have faced is like-tolike, so in other words a car that would be viewed as competitive, 

a Malibu versus a Camry, which was a typical comparison that 

over time, because of many, many factors, the dealer networks 

among them, the companies were not able to receive the same kind 

of value for their car in the marketplace because of a variety of 

consumer concerns. 

Now, again, pointing to a good thing on GM, the Malibu is selling 

at essentially the same price point as the Camry today. That, unfortunately, is not true for most of the fleet, but it is true for part 

of the fleet. So I think, simply saying, you know a BMW costs more 

than a Chevrolet, I don’t think that is a fair comparison but I think 

you are on to an important point. 

The erosion of brand equity over time was a very significant concern, were like-to-like, both of these companies were not able to receive the same value in the marketplace because the consumer 

wasn’t willing to pay it. 

And in the end, you know, the consumer is the decider. And with 

that problem in mind, again, that to us was a big sign of how significant the restructuring needed to be. 

Mr. COHEN. Compare the salaries of General Motors and Chrysler executives with those at Nissan and Toyota for me. 

Mr. BLOOM. The compensation arrangements regarding the senior executives at the transplants are not as readily available as 

they would be relative to GM. But I would say this, because they 

48 

are a TARP recipient, the companies will be subject to the executive compensation restrictions that are in the law and in the regulation. Special Master Feinberg will be reviewing their compensation. 

Mr. COHEN. Let me draw back a little bit, I was talking about 

the salaries of the old GM. 

Mr. BLOOM. Oh, I don’t have good data on that. 

Mr. COHEN. Would it be fair to say that the chief execs at General Motors and Chrysler earned a lot more than the folks did at 

Toyota and Nissan? 

Mr. BLOOM. I think chief executives, you know, across in different countries generally aren’t paid the same. I think that could 

be true but I don’t honestly have data on that subject. As—— 

Mr. COHEN. It is true, and I don’t think the union—— 

Mr. BLOOM. It certainly could be true but, again, our focus has 

been forward. There is blame to go everywhere and so what we try 

to ask ourselves is what can we do to get these companies profitable going forward. 

And on executive compensation there are going to be very specific 

restrictions that the companies will face and they will abide by the 

law and by the regulations under the guidance of the Special Master. 

Mr. COHEN. Let me, with Mr. Delahunt’s permission, go an extra 

minute. Does—— 

Mr. DELAHUNT. Without objection, got a new system up here. 

Mr. COHEN. General Motors has worked out I believe the situation with the Tort claims, is that correct? 

Mr. BLOOM. I mean, there is an understanding relative to GM 

about product liability claimants going forward, that if you are hurt 

in an accident in a GM car from here forward you would be able 

to—— 

Mr. COHEN. What about Chrysler? 

Mr. BLOOM. The situation with Chrysler is not the same. That 

has not been worked out. 

Mr. COHEN. Why is there a difference? 

Mr. BLOOM. Those were commercial decisions that the companies 

made. And again, we asked ourselves are these reasonable commercial approaches? Chrysler took one approach. GM took another. I 

think there are pluses and minuses to both of the approaches in 

terms of how they will be perceived in the marketplace. 

And again, and just—we chose not to get in and say to GM because Chrysler did it this you got to do it this way. These are very 

different companies. They are in very different circumstances and 

the management came to us, again, with an overall plan that we 

tried to certify whether or not it had a good chance of achieving 

viability. But we did not say, because GM did it this way, or because Chrysler did it this way, GM has to do it that way. 

Mr. COHEN. You don’t think that the task force maybe should 

have some reason to look after the people that are injured in 

Chrysler, if there are, hopefully there will be none, but if there 

are—— 

Mr. BLOOM. No, I think tragically it is impossible to think there 

won’t be. And look, it is a very difficult situation. There are many, 

many people in a bankruptcy situation who are treated badly. 

49 

There is no way to sugar-coat that. Again, our alternative was to 

do nothing and nobody would get anything or to open a checkbook 

that I think everyone would agree would be endless, so very difficult decisions were made. 

It is obviously heart-rending to hear about a product liability victim. It is terrible to hear about a dealer. It is terrible to take an 

auto worker who put 27 years on the line and tell him he is losing 

his job. None of those give anybody involved, at least on our side, 

and I believe the company’s, too, the slightest bit of satisfaction. 

The only thing that gives us satisfaction is a hope and a belief 

that we have saved these companies and given them the chance to 

succeed. But I am not going to try and suggest that there aren’t 

terrible stories about people who thought they had commitments 

that are not going to be able to have them honored. That is a fact. 

Mr. COHEN. Thank you, sir. 

Mr. Franks seeks recognition? 

Mr. FRANKS. Well, thank you, Mr. Chairman. Mr. Chairman, I 

know that we have already touched on the bankruptcy situation 

quite a lot, but let me just point out that you know Ford declined 

the bailout. 

You know some of us, myself included, voted against the bailout 

early on because we could kind of sense from history that whenever 

government gets a hold of things and comes in and tries to run 

things that the disaster that follows is predictable, and certainly I 

think we have only seen the tip of the iceberg here. 

But Ford declined a bailout because it was able to find a $23 billion secured loan and it put all its assets up for that. And if this 

had occurred before Ford did this, there is no way Ford would have 

gotten a loan like that. We would have Ford in bankruptcy as well. 

And we are portending a lot of bankruptcy down the road and 

I am afraid more government takeover. And I am just wondering 

when this all happened, did the auto task force ever consider the 

adverse impacts for labor law and enforcement against the UAW 

when the UAW and U.S. government went partnership in Chrysler? 

I mean, you know, you have got—GM is another example. The 

government owns 60 percent of GM Now, I got to ask you, some 

of this is rhetorical, Mr. Bloom, but the chaos that is going to follow here, is anybody going to buy General Motors’ cars in the 

American public? Are they going to buy Chrysler’s cars when they 

know that government is running the situation? 

Mr. BLOOM. Well,—— 

Mr. FRANKS. I think you are going to see a huge change in the 

market share between Ford if the Obama administration and the 

UAW don’t conspire to wipe them out as well. 

Mr. BLOOM. Just a couple of points. First thing, the UAW is in 

no way, shape or form running either of these companies. These 

trusts hold non-voting shares. They both have the right to select 

one person to sit on the Board of Directors. That is the entire influence that the UAW or the trust has on the management of the 

company. 

Relative to government ownership, again, the alternative was liquidation and our judgment was that liquidation would have been 

far worse. But I certainly appreciate that you think a bailout was 

50 

the wrong idea, and therefore I assume a liquidation you think 

would have been superior—— 

Mr. FRANKS. Well, I would absolutely—— 

Mr. BLOOM. The question of whether or not the American people 

will buy cars from these companies is yet to be known. But so far, 

in the period since Chrysler emerged and since GM emerged, although GM has just been out a few days, but during the pendency 

of their bankruptcy when the American people knew that the plan 

was to have government ownership, GM and Chrysler sales have 

been holding up quite well. But—— 

Mr. FRANKS. I am going to yield just briefly here to Mr. Jordan, 

but let me just go on the record and predict that the market share 

between Chrysler, Ford and GM as it was prior to all of this is 

going to be dramatically different in the future because the American people are going to not think that government is better at 

building cars than Detroit was. 

In fact, a lot of Detroit’s problems were because of government 

policy in a great deal. They told them how to build cars in the first 

place, but time will tell that. There are two kinds of people that 

predict the future, those who don’t know and those who don’t know 

that they don’t know. So I understand and I can’t—but I am going 

to go on record and make my prediction anyway. 

And to suggest that the only ideal, only possible alternative was 

liquidation, I think it flies in the face of history. A lot of the major 

car companies we had including I think two out of the three big 

ones that we have now were at one time in a crisis situation, and 

private sector came in and did something and they survived. 

The private sector always makes these decisions better than government and if we take it in reverse look what happened when the 

government owned the telephone companies, it was a disaster. And 

we went the other way and we passed that off to private sector and 

I can get my Web site on my Blackberry today and it is 3 cents 

a minute instead of what it would be at $3 a minute. 

There are a lot of examples but I don’t have time to go through 

them all. But Mr. Bloom, I don’t envy you, sir. You are in the middle of a mess that God only knows how it will ultimately turn out. 

With that I yield to Mr. Jordan. He is much more eloquent than 

I am. 

Mr. JORDAN. I don’t know about that, but I thank the gentleman 

for yielding. And I too appreciate the role that Mr. Bloom is trying 

to fill. You know in my first round you went through I think some 

great lengths to talk about how you are not involved in certain decisions about plant closings, dealership closings, et cetera, you 

know, even though you got rid of the previous CEO, even though 

we have a majority ownership in the company and control the majority of the board. 

And I, like Mr. Franks, has been against this whole bailout road 

that this country and this government has traveled down. I think 

it is just wrong. But the question that comes to mind is why not? 

Why weren’t you involved in more of the decisions? 

If in fact the American taxpayer is on the hook, if in fact we control of the majority of the board, if in fact you thought it was appropriate to get rid of the former CEO, if in fact GM had to go in 

51 

to bankruptcy like we know they did, they must have been doing 

something wrong, why in the heck not? 

And to a previous question, you said you don’t assume, I think 

this is a direct quote from you, you don’t assume the companies are 

right on any decision they come to, so it seems to me you are trying 

to have it both ways. On one hand, you want to weigh in on some 

decisions but not on others. 

And so my question to you is which is it and where do you—or 

not where do you—where will you, as the new leader, where will 

you draw the line? Is it going to be the same thing Mr. Sperling 

told me and others on that conference call when it is a quote 

‘‘major event’’ but he can’t define it? 

Mr. BLOOM. Yes, I think—— 

Mr. JORDAN. Where does the line—where do you draw the line 

and what is your definition? 

Mr. BLOOM. The line is that we were involved in helping to finance a restructuring and insisting that the companies come up 

with a business plan to become profitable or to give them the possibility of becoming profitable and we were quite involved in analyzing that, but not dictating the details of it. In terms of our behavior going forward—— 

Mr. JORDAN. Yes, but doesn’t that—— 

Mr. BLOOM. In terms of our—— 

Mr. JORDAN. But let me just say this real quick. Doesn’t that 

seem contradictory, because you know obviously again the company 

did something wrong or they wouldn’t have been in this situation 

to start with. 

So if you are going to step in and fix it, why not step in all the 

way and, in fact, I am reading stuff about your background, Mr. 

Bloom. Your personality seems to be one who likes to step in and 

take charge. I mean, that just seems to be your background, so why 

didn’t you do that? 

Mr. BLOOM. I think we did step in very aggressively. We did not 

step in in terms of dictating which factories would close. What we 

stepped in and did very aggressively was insist that the companies 

position themselves for profitability. 

We acted as if this was essentially as we were the agent of this 

being our money. And so in the context of it being our money, we 

are not managers. We don’t run automobile companies. We know 

our task force, our group knows a lot about investing. We know a 

lot about what it takes to make a company successful, but we are 

not managers. 

And so the role of a manager is to put together a business plan 

and then to take it essentially to the investor and for the investor 

to scrutinize the plan, ask a lot of questions about the plan. But 

at the end of the day it is either support the plan or not support 

the plan and that was the role we played. 

Going forward our role will be to closely monitor the investment. 

There is a huge amount of taxpayer dollars that are in these companies, to closely monitor the investment, to make sure the company is living up to its commitments that it made, but the board 

of directors will be responsible for seeing to it that the management is doing its job. 

52 

And I hope you will agree that the Chrysler board of directors 

has been fully announced. The GM board of directors will be announced shortly. These are independent businessmen and 

women—— 

Mr. JORDAN. I understand that—— 

Mr. BLOOM [continuing]. With impeccable credentials. 

Mr. JORDAN. Is there, answer my question. Is there a definition, 

is there a set of circumstances that you have defined, put on paper 

that indicate when you will step in a say no, you can’t do that or 

yes, that is okay. When do you do that? 

Mr. BLOOM. We will not intervene in the management decisions. 

If the company, if the government believes that the Board of Directors is not doing its job, the government would have the right, as 

the shareholder, to replace the board. 

That would be the only time there would be an intervention. 

Other than that, we will simply be monitoring, obviously we will 

consult with the companies, we will be in dialog with them—— 

Mr. JORDAN. Is it fair—— 

Mr. BLOOM [continuing]. But we will not intervene in their decisions. 

Mr. JORDAN. Is it fair to say that it is totally subjective? It can 

be what you want it to be—— 

Mr. BLOOM. No, I don’t think it is objective at all. I think it is 

quite a bright line. 

Mr. JORDAN. Okay. Do you think, Mr. Bloom, I am going to 

change directions here. Do you think the energy policy or lack of 

an energy policy as well as CAFE standards that have been passed 

and policies that have been passed by our government have impacted, I mean, led to this situation where GM was in trouble, 

Chrysler was in trouble? Do you attribute any cause there? 

Mr. BLOOM. I don’t happen to believe that CAFE standards are 

the cause for the company’s problems. The company has successful 

competitors who make a lot of money. They all live under the same 

standards. I don’t happen to believe, but I do believe that the efforts that are being made now to create a uniform set of standards, 

so California doesn’t have one set of rules and other places other 

set of rules, is a good step forward. 

Mr. JORDAN. I agree. 

Mr. BLOOM. I think that the companies are fully prepared to 

compete under the revised rules and when we stress tested the 

business plan our assumption is that they will be in full compliance 

with the CAFE standards. 

Mr. JORDAN. What is the timeline for the auto task forces? Is 

there a wind-down for the task force? What is your vision of when 

you will no longer be needed? 

Mr. BLOOM. I can’t say when we will be finally no longer needed, 

but there will be a winding down of our overall activities because, 

as I said, we are moving more to that monitoring phase. So I think 

in the fairly short period ahead, the size will be contracting. We 

will have fewer people we need and many of our members, many 

of the folks who worked on it will be returning to their former 

lives. 

53 

Mr. JORDAN. What is the background of the members of the auto 

task force do? Do any of you have any experience in the auto manufacturing or auto dealerships business? 

Mr. BLOOM. I don’t believe that any of us have been specifically 

involved with auto dealers. Most of the members of the task 

force—— 

Mr. JORDAN. Auto manufacturing? 

Mr. BLOOM. I mean, I have generally been involved in manufacturing situations, but I have—but none of us have been involved 

as an executive of a manufacturing company if that is your question. I think a number of us have had a lot of experience with manufacturing companies dealing with them either as investors, as 

legal advisors or in other roles like—— 

Mr. JORDAN. No experience running auto manufacturing companies or no experience running auto dealerships? 

Mr. BLOOM. None of the members of the task force ran an auto 

dealership or an auto manufacturing company. 

Mr. JORDAN. Thank you, Mr. Chairman. 

Mr. COHEN. Thank you. 

And I now recognize, for our final round of questions for as much 

time as exists in the universe, the distinguished gentleman from 

Michigan, honorable Vice Chairman of this Committee and Mr. 

Congeniality, Mr. Delahunt. 

Mr. DELAHUNT. Thank you, Mr. Chairman. Maybe you can help 

me, Mr. Bloom, because I heard my friend the Ranking Member 

talking about government incapable of running these new companies or anything, any business. Were the government officials that 

were part of the management team in the old General Motors? 

Mr. BLOOM. No. 

Mr. DELAHUNT. Were there any government officials in the old 

Chrysler that were government officials? 

Mr. BLOOM. No. 

Mr. DELAHUNT. In terms of the old management teams in both 

of those automobile manufacturers, was there, were they all private 

sector individuals? 

Mr. BLOOM. To my knowledge largely, yes and certainly nobody 

from the government. 

Mr. DELAHUNT. So there is nobody from the government? 

Mr. BLOOM. No. 

Mr. DELAHUNT. So the government didn’t drive those two auto 

manufacturers into the mess that we have had to deal with? 

Mr. BLOOM. I don’t see how one could ascribe their problems to 

the government. 

Mr. DELAHUNT. Okay. There has also been talking about, you 

know, the bailout and again I think it was my friend from Arizona 

that alluded to the fact that some of these companies had been in 

trouble before and worked their way out of them and that provoked, with me, a memory of that—he was the CEO of Chrysler, 

Lee Iacocca. 

Mr. BLOOM. Name rings a bell. 

Mr. DELAHUNT. Did Chrysler at any point in time receive government loans or government guarantees or, I don’t want to use the 

term but let us call it a bailout. 

54 

Mr. BLOOM. Yes. I think in the late 1970’s, early 1980’s, Chrysler 

was the recipient of a government bailout. As I recall the fact they 

repaid all that money—— 

Mr. DELAHUNT. Does that—— 

Mr. BLOOM [continuing]. With interest and went on to have a 

fairly successful run for quite some time. 

Mr. DELAHUNT. That was my memory. Maybe that is why I am 

confused that, you know, I guess bailouts don’t work except—— 

Mr. BLOOM. When they work. 

Mr. DELAHUNT [continuing]. When they work. 

Mr. BLOOM. Yes. 

Mr. DELAHUNT. My memory is that there was a senator from my 

home State, which is Massachusetts, Paul Tsongas, who put forth 

this rather, at that point in time, unique idea that the government, 

in particular crisis, carefully and cautiously could intervene. And 

in the case of Chrysler, again this is my memory and contradict me 

if you think I am inaccurate, not only did the taxpayer recover all, 

but my memory is there were millions of dollars in profits? 

Mr. BLOOM. That is true. All the money was repaid with interest 

and some warrants which were granted that actually made the recovery larger than the investment by a meaningful amount. 

Mr. DELAHUNT. And nobody lost their jobs? 

Mr. BLOOM. Well, there were you know, again, shared sacrifice 

as there is in this case. But again, I think the judgment at time, 

which I happen to think was wise one, was a heck of a lot better 

than the alternative. 

Mr. DELAHUNT. And the alternative would have been if as in the 

case that we are dealing with now, the latter-day Chrysler and the 

latter-day GM would have been a disaster in terms of unemployment, in terms of lost jobs, in terms of the impact on the community. 

But the Congress back in the 1970’s saw it differently, offered 

legislation that provided relief for Chrysler and at least until recent times, Chrysler appeared to prosper and the taxpayer made 

some money and people were able to live their lives in a way that 

gave them dignity and security and hope. 

Mr. BLOOM. I think that is a very fair rendering of the facts. 

Like, as in the Chrysler situation, the tragedy we faced today is 

that because the capital markets are not fully functioning there 

simply is not private capital around that can intervene here. 

If there was, I can assure you we would have played an exceedingly different role, but tragically there wasn’t and therefore the 

President decided that we needed to step in. 

Mr. DELAHUNT. Thank you, Mr. Bloom. 

Mr. COHEN. Thank you, sirs. 

Mr. King seeks recognition. 

Mr. KING. Thank you, Mr. Chairman. Appreciate being recognized and appreciate your testimony, Mr. Bloom. I just would take 

off of the questions asked by Mr. Delahunt and the statement that 

there wasn’t enough private capital around to solve this problem. 

Would you consider the union pension funds and the other capital investments that went into this private capital or public capital? 

55 

Mr. BLOOM. I am not sure I know what you mean by the union 

pension fund. 

Mr. KING. Why don’t you then—all union resources that went 

into this to hold this together, would you consider that to be private funds or public funds? 

Mr. BLOOM. Just let me try to answer but I just want to be sure 

I am tracking the facts. The pension fund, the pension plan, the 

General Motors and Chrysler pension plan were not involved in investing in this transaction one way or the other. 

Mr. KING. Could you let this Committee know what union funds 

are involved in the transaction? 

Mr. BLOOM. Well, there is a—something called a VEBA, which 

is a trust that is used to provide retiree health care benefits for the 

retirees. In both cases those VEBAs had substantial claims to cash 

and other consideration that they had achieved as part of a collective bargaining agreement. 

Mr. KING. Were those public or private funds? 

Mr. BLOOM. Those are private funds between the—but those 

were claims. Those were not capitals. Those were not fresh money. 

Those were simply claims and those claims were converted into 

substantially reduced modified claims in the new company. 

Mr. KING. Were they current or future claims? 

Mr. BLOOM. They are essentially claims for future retiree insurance benefits. 

Mr. KING. Thank you. And then from a collateral perspective, 

where would you rank them at—would you consider that to be secured investors or unsecured with regard to all of those impacted 

by Chapter 11. 

Mr. BLOOM. In both cases the VEBA in a Chapter 11 would be 

an unsecured claimant. 

Mr. KING. Okay, and I imagine this panel has already examined 

the secured creditors who lost a significant position in this negotiation. I would rather, Mr. Bloom, as I have watched what has unfolded during this Administration, and I understand you haven’t 

had an opportunity to play in on this thing from the beginning. 

But I am looking at at least eight huge formerly private sector 

entities that have been nationalized by the Obama administration 

in a few months and three large investment bank firms, AIG, 

Fannie and Freddie, who were private and now a government-sponsored enterprise, now solely owned by the taxpayers of America, 

and then General Motors and Chrysler. 

That is eight huge entities and it is hard to fathom that if one 

rolls back in their mind’s eye 6 months or a year ago that if that 

prediction had been made, I think that most Americans would have 

shook their heads and said that can’t happen in the United States 

of America. 

Also I recall a President, who was elected at least in part because he took on President Bush and challenged President Bush for 

going into Iraq without an exit strategy and so I think it is ironic 

that President Bush had an exit strategy. It was victory. 

It was negotiated with the SOFA agreement, the Status of Forces 

Agreement and the exit strategy in Iraq is being followed to the letter by President Obama, but I know of no exit strategy to get the 

56 

public investor, the taxpayers divested of these private sector entities. 

Is there something that you are familiar with that you could tell 

this panel that would give us some hope that Americans might end 

up with less nationalization in the future in a way that they might 

be divested at least of a automaker’s investment? That is really the 

central question I am interested in. 

Mr. BLOOM. Okay. I will try to answer that and I may have my 

history wrong. I think that, to the extent the government became 

an owner of AIG and Fannie and Freddie. It was done under the 

prior Administration. 

In terms of the exit strategy for the car companies which I am 

more directly knowledgeable about, the strategy is that our expectation is that next year, as early in the year as feasible, but the 

precise timing remains in discussion, we would expect General Motors to undertake an initial public offering where they will sell 

shares into public markets so the company will then be freely traded on one of the stock exchanges. 

And then at that point, over a period of time, and we don’t have 

a defined set period but the President has said that he wants this 

stock sold as soon as is practicable. So the objective will be without 

disrupting the market, without diluting the value or degrading the 

value of our remaining stake, we will be undertaking a program to 

sell these shares out into the public capital markets which is why 

it is so important that these companies be run in a private sector—— 

Mr. KING. I appreciate that statement and to the record. That 

gives some hope and something to watch. And so my final question 

then would be your predecessor was involved in day-to-day operations of the automakers to the extent of multiple phone calls a day 

some days and has said so. I guess Chris Henderson said so publically about the discussion with your predecessor. 

And so I would ask if you could describe for this panel what you 

expect that day-to-day involvement to be with the automakers? 

Mr. BLOOM. I mean, it is obviously still evolving but what I said 

was and what I expect we will be doing is we will be and continue 

to be in regular contact. There is obviously a lot of government 

money at stake here. But it will be largely in the form of monitoring to understand what is going on at the company and to assure ourselves that the commitments they have made in the various documents that they have agreed to with us, the loan agreements and other things are being adhered to. 

So that will be our principal role. We will also I would expect be 

involved in facilitating consultations with Members of Congress, 

with effective stakeholders, with anyone else because we obviously 

believe, while we believe it is generally good practice, in this particular case we will insist that the companies be open and transparent be it with Congress, Committees or other communities, effective stakeholders generally and we will be also ensuring that as 

well. 

Mr. KING. Mr. Bloom, thank you for this dialog. I appreciate it. 

Mr. Chairman, thank you, and I yield back. 

Mr. COHEN. Thank you, Mr. King, thank you. 

57 

I would like to thank Mr. Bloom for his testimony today. Without 

objection Members will have 5 legislative days to submit any additional written questions forward to the witnesses and ask to be answered as promptly as you can to be part of the record. 

Without objection the record will remain open for 5 legislative 

days for the submission of any other materials. Again, I thank everyone for their time and patience. The hearing of the Subcommittee on Commercial Administrative Law is adjourned. 

[Whereupon, at 1:32 p.m., the Subcommittee was adjourned.] 

59 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

RESPONSE TO POST-HEARING QUESTIONS FROM RON BLOOM, SENIOR ADVISOR, U.S. 

DEPARTMENT OF THE TREASURY


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