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62–131 2010

INNOVATION, JOBS, AND ENERGY INDEPENDENCE: 

REINVIGORATING THE DOMESTIC AUTO INDUSTRY 

HEARING 

BEFORE THE

SELECT COMMITTEE ON 

ENERGY INDEPENDENCE 

AND GLOBAL WARMING 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

DECEMBER 9, 2008 

Serial No. 110–51 

( 

Printed for the use of the Select Committee on 

Energy Independence and Global Warming 

globalwarming.house.gov 


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SELECT COMMITTEE ON ENERGY INDEPENDENCE 

AND GLOBAL WARMING 

EDWARD J. MARKEY, Massachusetts, Chairman 

EARL BLUMENAUER, Oregon 

JAY INSLEE, Washington 

JOHN B. LARSON, Connecticut 

HILDA L. SOLIS, California 

STEPHANIE HERSETH SANDLIN, 

South Dakota 

EMANUEL CLEAVER, Missouri 

JOHN J. HALL, New York 

JERRY MCNERNEY, California 

F. JAMES SENSENBRENNER, JR., 

Wisconsin, Ranking Member 

JOHN B. SHADEGG, Arizona 

GREG WALDEN, Oregon 

CANDICE S. MILLER, Michigan 

JOHN SULLIVAN, Oklahoma 

MARSHA BLACKBURN, Tennessee 

PROFESSIONAL STAFF

GERARD J. WALDRON, Staff Director 

ALIYA BRODSKY, Chief Clerk 

THOMAS WEIMER, Minority Staff Director 


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C O N T E N T S 

Page 

Hon. Edward J. Markey, a Representative in Congress from the Commonwealth of Massachusetts, opening statement .................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Candice Miller, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 5 

Hon. Jay Inslee, a Representative in Congress from the State of Washington, 

opening statement ................................................................................................ 7 

Hon. Emanuel Cleaver II, a Representative in Congress from the State of 

Missouri, opening statement ............................................................................... 8 

Prepared statement .......................................................................................... 9 

Hon. Jerry McNerney, a Representative in Congress from the State of California, opening statement .................................................................................... 10 

Hon. Marsha Blackburn, a Representative in Congress from the State of 

Tennessee, prepared statement .......................................................................... 11 

WITNESSES

Ms. Joan Claybrook, President, Public Citizen ..................................................... 13 

Prepared Statement ......................................................................................... 16 

Answers to Submitted Questions .................................................................... 92 

Mr. Reuben Munger, Chairman and Co-founder, Bright Automotive ................. 27 

Prepared Statement ......................................................................................... 30 

Answers to Submitted Questions .................................................................... 96 

Dr. Peter Morici, Professor of International Business, Robert H. Smith School 

of Business, University of Maryland .................................................................. 37 

Prepared Statement ......................................................................................... 39 

Answers to Submitted Questions .................................................................... 99 

Mr. Geoff Wardle, Director of Advanced Mobility Research, Art Center College 

of Design ............................................................................................................... 43 

Prepared Statement ......................................................................................... 45 

Mr. Richard Curless, Chief Technical Officer, MAG Industrial Automation 

Systems ................................................................................................................. 58 

Prepared Statement ......................................................................................... 60 

Answers to Submitted Questions .................................................................... 101 


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INNOVATION, JOBS, AND ENERGY INDEPENDENCE: REINVIGORATING THE DOMESTIC 

AUTO INDUSTRY 

TUESDAY, DECEMBER 9, 2008 

HOUSE OF REPRESENTATIVES, 

SELECT COMMITTEE ON ENERGY INDEPENDENCE

AND GLOBAL WARMING, 

Washington, DC. 

The committee met, pursuant to call, at 10:04 a.m., in room 

2175, Rayburn House Office Building, Hon. Edward J. Markey 

(chairman of the committee) presiding. 

Present: Representatives Markey, Solis, Cleaver, McNerney and 

Miller. 

Staff present: Jonathan Phillips. 

The CHAIRMAN. Welcome to the Select Committee on Energy 

Independence and Global Warming. 

This week Congress will vote on whether to extend a lifeline to 

a broken domestic industry teetering on the brink of bankruptcy. 

The same companies that fought seat belt requirements in the 

1960s, air bags in the 1980s, and fuel economy for more than three 

decades have returned, hat in hand, unable to survive the month 

without a taxpayer intervention. Once untouchable symbols of 

American industrial might and ingenuity, it has become clear the 

Detroit Three have ceded leadership to the innovators and are now 

running in fear. 

Consumers and businesses around the world are tightening their 

belts to survive the current economic crisis, and some are being 

driven to bankruptcy. But make no mistake, the fundamental reason the Big Three need life support today is their inability to move 

from Car 1.0 to Car 2.0 over the past half century. A business 

model premised on bigger cars, wider highways, and more oil is a 

failed equation. Any recovery of these companies will require more 

than just fresh cash. It will require a change of culture, a culture 

that answers challenges with innovation rather than lobbying and 

litigation, a culture that tries new ideas rather than crushing 

them. 

I believe Detroit can be reborn. The brainpower and technical 

brilliance are still there. The hardworking men and women in the 

factories are willing to sacrifice and do their part to ensure the 

companies’ survival. The domestic industry needs to pick itself up 

and use this moment as an opportunity to transform, not incremental change, but a total conversion that reorients these companies towards raising the standards of automotive excellence and reVerDate Mar 15 2010 02:48 Nov 17, 2010 Jkt 062131 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HR\OC\A131.XXX A131

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versing decades of decay and complacency. But the deal must be 

a fair one for the taxpayers, and it must be a policy supportive of 

innovation and technological change over the long term. And it 

must destroy forever the industry’s fear of change. 

I have reviewed the pending draft legislation that would make available $15 billion in emergency loans and require the Big Three 

to withdraw pending lawsuits against the States that support 

adopting California’s greenhouse gas emission standards. I commend that provision and strongly believe that Congress must go 

one step further and grant the waiver to California, which would 

allow California, along with 13 other States that want more efficient, less polluting vehicles, to require them. Recent analysis by 

the National Resources Defense Council of the plans submitted to 

Congress by Ford and General Motors shows that these companies 

are likely to achieve the California targets by 2015. It only makes 

sense to put into law what companies have said in their plans they 

are going to do anyway. That is accountability. 

Last year, as part of a landmark energy bill, Congress enacted a $25 billion program to help the auto industry transition to building the efficient, high-tech cars of the future. It is the Green Car 

Factory Fund. That is really what we should call what we are 

doing. However, due to President Bush’s intransigence on using a 

piece of the $700 billion financial bailout to pay for the auto industry package, we are now forced to raid the Green Car Factory 

Fund. This is like borrowing from a kid’s college fund. The program 

represents the technological future of our Nation’s transportation 

sector. This fund must be replenished, and it needs to happen soon. 

Failure to repay it in a timely manner will mean more of the same, 

Car 1.0, and the vehicles of the future will remain distant dreams, 

and our foreign oil dependence will only intensify. 

We are very fortunate to have a panel of experts that understands the problems the industry is facing and has a vision for its 

future. I thank them for being here, and I look forward to hearing 

their views. 

[The statement of Mr. Markey follows:] 


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The CHAIRMAN. I would now like to recognize the gentlelady from 

Michigan Mrs. Miller for an opening statement. 

Mrs. MILLER. Thank you very much, Mr. Chairman. I certainly 

want to thank you for holding this very important hearing on the 

energy independence implications for the proposal to extend emergency bridge loans to the domestic auto industry and really what 

it will mean to the industry as well. I look forward to hearing from 

our distinguished panel very much. 

I appreciate the comments that you made, Mr. Chairman, in your 

opening statement, and I would say that the domestic auto industry will take the challenge that you have laid before us and other 

Members of Congress have laid before our industry as well. And I 

think, to put this in perspective, I would like to just point out and 

ask that we would consider for a moment the entire history of this 

very cornerstone industry and really what it has meant for the 

United States of America. 

Actually, during World War II—and I mean I come from southeast Michigan, and everybody there—everything ratchets off the 

auto industry very much for our State, in full transparency. But 

during World War II, Michigan was known as the arsenal of democracy. People have heard us say that, but it is because when our 

Nation and our freedom were in dire jeopardy, our domestic auto 

industry literally had the manufacturing capability to build the armaments that led the entire world to peace. You had Henry Ford 

churning out B–24 bombers one an hour at Willow Run, which is 

still a functioning airport there in southeast Michigan. We actually 

didn’t even build vehicles for 2 years during the war effort because 

we were so totally engaged in the war effort, whether it was planes 

or tanks or jeeps or everything that our Nation needed really to be 

able to protect and expand freedom and liberty and democracy. I 

think that should be pointed out. 

As well, when you think about the middle class of America, I 

think it would be a very difficult argument to be made that AIG 

or CitiGroup or whatever have created the middle class of America. 

They may have created the upper class, or assisted with the upper 

class, but the middle class was really created by the domestic auto 

industry. When you had millions of Americans who joined the middle class, they got quality health care, earned secure retirements, 

and were able to send their children to college and build a better 

life. 

I think that much of what has happened to the auto industry, 

they have not—obviously, mistakes have been made, but everything that has happened, the problems have not been created by 

them. Many of the problems that they are facing have been in large 

measure because what has happened on Wall Street. 

I would also point out again in this historical look back in history, really, to remember after the absolutely horrific attacks on 

our Nation of 9/11, at a time when the terrorists really wanted to 

bring our economy to collapse. That was a big part of why they attacked our Nation in the way that they did. It was the domestic 

auto industry, led by General Motors, I would point out, who came 

out with the Keep America Rolling Program. They offered zero-interest financing and rebates, et cetera, to keep people working and 


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economic activity going so that we would deny the terrorists one of 

their primary goals, again, crippling our national economy. 

Now, the domestic auto industry is leading the way to new technology and innovations that will build the auto industry of the future; innovations that will provide dramatic leaps in fuel economy 

and which will help reduce greenhouse gas emissions and make 

America much more energy independent. 

General Motors, Ford, and Chrysler have already invested billions of dollars in these technologies. In fact, Ford is estimating by 

2011, 50 percent of all of their vehicles will either be hybrid or flexfuel, which is a wonderful statistic to be able to talk about. Additionally, General Motors is making great progress toward the introduction of the Chevy Volt, which will be the first extended-range, 

electric-powered vehicle that is expected to be in showrooms in 

2010, and the domestic auto industry has already created many 

other revolutionary technologies that will lead us to the auto industry of the future and the energy independence that all Americans 

desire. 

If any one of these companies were allowed to fail, it would not 

only have catastrophic effects on our economy in the loss of American jobs, but those very same technologies that these American 

companies are on the verge of producing that will make America 

the technological leader of the new green automotive technology 

and that will help foster our goal of energy independence will not 

reach the American consumer. We will lose the progress made on 

innovative projects such as the lithium ion battery and other fantastic opportunities; and we will abnegate American leadership positions to foreign competitors. If we truly want energy independence in America, led by American innovation that creates good 

American green-collar jobs, we do need to act on this bridge loan, 

and act now. 

Could I have another minute, Mr. Chairman? 

The CHAIRMAN. Without objection, yes. 

Mrs. MILLER. Thank you. 

We certainly heard from the CEOs of the Big Three auto companies again late last week, and they have submitted quality plans 

to Congress on how they would use these loans and how they are 

progressing toward the technologies that all of us are desirous of. 

There certainly seems to be a consensus building now about the 

bridge loan, and I look at that obviously as a very, very important 

thing. 

I believe that the bridge loans will allow some breathing room 

until the new Congress and the new administration can take office 

next year to work on longer-term solutions that will establish a 

much more vital industrial policy in this Nation that can help our 

entire manufacturing industry to thrive. We all know that doing 

nothing is not an option. We do not want the demise of the Big 

Three automakers, but also many of the suppliers which are leading as well toward the technological innovation that I have just 

talked about. 

We have a great panel here today. I certainly want to in particular welcome Mr. Richard Curless, who joins us. He is the chief 

technical officer of MAG Industrial Automotive Systems, which is 

an international machine tool manufacturer, and has substantial 


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operations in my district as well. They are actually the only remaining U.S. power train supplier to the auto industry, and they 

are the third largest machine supplier in the world as well. 

Again, I look forward to Congress voting affirmatively on the 

bridge loan. Hopefully, that will happen in the next couple of days. 

And I look forward to hearing the testimony of the witnesses. 

Thank you. 

The CHAIRMAN. Great. The gentlelady’s time has expired. 

The Chair recognizes the gentleman from Washington State, Mr. 

Inslee. 

Mr. INSLEE. Thank you. Thanks to the Chair for having this 

hearing. 

We cannot rescue companies today if they are going to die tomorrow. I believe that unless we adopt whole new propulsion systems, 

whole new drive trains, whole new systems of energy and fuel, that 

is what is going to happen to our domestic auto industry. 

I am hopeful that in the next several months, not just this week, 

but several months, the Congress will respond to this magic moment where we will either see the ultimate demise of our domestic 

auto industry if it does not adopt these whole new generations of 

propulsion systems and fuels, or the U.S. assuming again its rightful place as the most innovative industrial engine in the country, 

or in the world. 

I want to point out what it is at stake right here. I am looking 

at a Wall Street Journal article of October announcing that the 

Chinese BYD Company would begin sales in November of their allelectric car with a range of 110 kilometers when fully charged. We 

look at the Renault Company that is signing contracts with the 

Better Place Company, that is now totally electrifying the transportation fleets of Israel, Australia, Denmark, and now San Francisco. 

We have to get in this game nationally or we will be left at the 

starting post with bridges to nowhere. 

So I want to point out that I am hopeful that this Congress will 

adopt the measures that will assure that the United States gets in 

this international game at the last possible moment. 

Let me give you an example why I think it is the last possible 

moment. We have a company that makes lithium ion batteries in 

the Midwest, and right now it is the only potential manufacturer 

domestically of lithium ion batteries. They got an offer for about 

$300 million from China to essentially move their company to 

China. We are in the cusp of trading addiction to Middle Eastern 

oil for addiction to Chinese lithium ion batteries. So we need to 

make sure that this industry responds to this opportunity by going 

to the future, not being tied with the past. 

I sent a letter November 17th, and I will submit it to Chairman 

Frank, suggesting six measures: an open fuel standard; investments in alternative fueling infrastructures; energy efficiency requirements; a Cash for Clunkers program; full funding for plug-in 

hybrid electric vehicles; and the Federal procurement programs. 

Those measures will assure the United States doesn’t get left at 

the post in this international competition. I hope we will get this 

job done. The future of this industry depends on it. 

Thank you. 

The CHAIRMAN. The gentleman’s time has expired. 


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The Chair recognizes the gentleman from Missouri, Mr. Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman. We appreciate your appearance here before this committee. Hopefully, you will provide us 

with information, ideas, and proposals that will help us as we move 

into some very difficult times. 

I am on the Financial Services Committee as well, and we strug- gled before we approved and set on this $700 billion package. Most 

of the people around the country believe that Congress voted on 

AIG and we voted on Bear Stearns. While that troubles me because 

most people are not really looking at the process, I am more troubled because we, as we often do, have begun to major in minors. 

The big talk is not about what is important, which is, I think, 

coming up with alternative forms of energy as it relates to automobiles, but we are talking about how people arrived in Washington. I think it is dumb to fly in, if you are going to ask for 

money, in a private jet, but that is irrelevant. The issues that we 

need to deal with I think we are going to deal with. I mean, after 

all, those of us on this committee usually don’t fly our planes in 

to meetings. We will just take commercial airlines like regular people. But I am concerned about what we need to do to make the 

automobile industry viable. 

I am from Kansas City, Missouri. We have two plants in my district. Seventy-two hundred people work there, not to mention all of 

the people who are connected to the manufacturing arm of General 

Motors and Ford. I am not interested at all in seeing them lose 

their jobs, which I think will impact all kinds of other industry 

there. 

The package should not be limited to only loan emergency credit 

to the Big Three auto manufacturers to get out of this short-term 

crisis. It should also encourage our American companies to further 

retool their plants and produce much more energy-efficient, highermileage cars that are less prone to the volatilities of the oil market. 

Everyone is for progress; it is the change they don’t like. The proposals that we are going to have to embrace will require change. 

Things cannot continue as they have gone. I do think that there 

have been some efforts made, but I think we have clearly not 

moved as quickly as we could have to put on the highways the 

kinds of cars that Americans are buying, with titles like Toyota 

and Datsun. 

And so as we go through this hearing, you will, of course, be 

asked in any number of ways what you would recommend. Closing 

down the automobile industry in this country is not an option. No 

one would burn down their house to get rid of a rat. No one would 

cut off their nose because they are having a bad hair day. 

I think that if we cannot see through this, then this Nation is 

not as great as we all believe it to be. And so we look forward to 

your testimony. Thank you. 

[The information follows:] 


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The CHAIRMAN. The gentleman’s time has expired. 

The Chair recognizes the gentleman from California, Mr. 

McNerney. 

Mr. MCNERNEY. Thank you, Mr. Chairman. 

The situation today is very frustrating because the Big Three 

have fought us tooth and nail against producing the kind of cars 

that we need to make to meet America’s needs. As mentioned by 

the Chairman, they filed lawsuits, they have flooded the Congress 

with lobbyists, and all this is to fight change and innovation, including California’s clean air laws. They filed lawsuits, and they 

prevented us from moving forward on that score. So now, today, 

they are sitting here demanding billions of dollars or else they are 

going to lay off 5 million workers. This is a significant threat. 

Part of my district was the epicenter of the financial crisis we are 

facing. We have had 10 percent unemployment for decades, so we 

know economic pain, and we know that we don’t need any more of 

it. 

Now, before we make decisions we are going to be making this 

week, I want to hear from what the panel has to say, what the alternatives look like, what we can decide to do besides giving billions of dollars to the Big Three, what alternatives are there out 

there that make sense for us. So I am looking to you to answer that 

question. 

And also we heard this morning that the auto industry got some 

credit for keeping the Nation rolling after 9/11, but I can tell you 

what they did was perpetuated our dependence on imported oil. So 

we need to look at this as an opportunity to transform our transportation system in a way that meets the needs of the 21st century. 

So a lot is sitting on your shoulders to inform us what we can 

do. Thank you very much. 

[The prepared statement of Ms. Blackburn follows:] 


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The CHAIRMAN. We will now turn to our very distinguished 

panel. Our first witness this morning is Joan Claybrook. She is the 

president of Public Citizen, where she has a been a consumer advocate and overseer of good government for more than 25 years. Before that, she was the Administrator of the National Highway Traffic Safety Administration in the Carter administration, the period 

during which fuel efficiency and auto industry bailouts were also 

hot issues of the day. 

We are honored to have you here with us, Ms. Claybrook. Whenever you are ready, please begin. 

STATEMENTS OF JOAN CLAYBROOK, PRESIDENT, MASSACHUSETTS PUBLIC CITIZEN; REUBEN MUNGER, CHAIRMAN AND 

CO-FOUNDER, BRIGHT AUTOMOTIVE, ANDERSON, INDIANA; 

PETER MORICI, ROBERT H. SMITH SCHOOL OF BUSINESS 

LOGISTICS, BUSINESS AND PUBLIC POLICY, UNIVERSITY OF 

MARYLAND; GEOFF WARDLE, DIRECTOR, ADVANCED MOBILITY RESEARCH, ART CENTER COLLEGE OF DESIGN, PASADENA, CALIFORNIA; AND RICHARD CURLESS, CHIEF TECHNICAL OFFICER, MAG INDUSTRIAL AUTOMATION SYSTEMS, 

STERLING HEIGHTS, MICHIGAN 

STATEMENT OF JOAN CLAYBROOK 

Ms. CLAYBROOK. Mr. Chairman, I would like my testimony submitted for the record. 

The CHAIRMAN. Without objection. 

Ms. CLAYBROOK. I am going to adjust it a little bit because the 

legislation that is now on the table to be enacted by the Congress 

this week has just come out. I didn’t have a chance to deal with 

that in writing my testimony. 

I would like to say that I have worked on auto industry issues 

since 1966 when I first came to Washington, D.C., and I worked 

for a member of this committee on the legislation creating the National Highway Traffic Safety Administration, and within 3 months 

of getting here, I was nicknamed the Dragon Lady by the auto industry because I was pushing for Federal legislation of safety by 

this industry. 

I was interested to note that just this week General Motors published an ad in Automotive News apologizing to the public for its 

failure to carry out its obligations really to the public for fuel economy and other improvements in their vehicles. 

I think that what I would like to just mention particularly is that 

we do favor having a bailout of this industry, but a bailout with 

lots of conditions, and those conditions are listed in my testimony. 

Most important in those conditions should be that there is strong 

and tough oversight to make sure that this industry uses the 

money well and comes to the conclusions that the American public 

wants. 

We did not favor taking the money out of the 2007 law, section 

136, which is the innovative fund, because we believe that that is 

an extremely important fund to help not only the manufacturers, 

but the suppliers, who are the real innovators in this industry. And 

we talked to Speaker Pelosi’s office, and she said the money would 

be refunded through the stimulus program that is coming forward. 


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So the three areas that we are concerned about are accountability and with a car czar of stature who will oversee this and also 

to make sure that there is a return on the investment to the public 

by the improvements in vehicles, and then, particularly important, 

safety and environmental considerations. 

Now, I looked at the bill, and I would just like to highlight the 

things that are not in the bill that we think should be in the bill. 

And I am sorry they are not in my testimony because we didn’t 

have a chance to read it then. 

The first is there is nothing about safety in here. The auto manufacturers for years have complained that the reason they couldn’t 

make more fuel-efficient vehicles is because it would cause unsafe 

vehicles, and that is malarkey because most of the improvements 

in fuel efficiency come from technology. It is not all smaller vehicles. Plus, the fact that with the safety improvements such as air 

bags and so on and the structure of the vehicles that absorb the 

energy of the crash, safety is about the same for most vehicles 

today that are manufactured today, including the smaller-size vehicles. So safety is a technology issue as well. We think it ought to 

be a piece of this. It ought to be mentioned. 

Secondly, on page 7 of the legislation, subsection 6(a)(1)(b), there 

is a definition of ‘‘interested parties.’’ It has employees and retirees 

and trade unions and creditors and suppliers and auto dealers and 

shareholders, but doesn’t have anything about experts on emissions 

and fuel economy and safety. We think that ought to be in the definition of an interested party because that is what this bill is all 

about is the failure of the manufacturers to really listen to the people who have advocated this for so many years. 

Third, we think that the so-called dual-fuel credit, which is a 1.2 

MPG credit that the manufacturers got stuck in the law many 

years ago for a very discreet, short period of time and then was extended by the Energy Act, should be eliminated because in calculating the fuel economy, if they have a dual-fuel vehicle, they don’t 

have to meet 1.2 MPG of the required standard. In the NRDC calculation, Mr. Chairman, that you used, they presume that they 

didn’t have that 1.2 MPG. 

We believe, as you do, that the waiver should be granted in California. I think in the new administration that they are going to 

grant that waiver at EPA. Why not take care of it now? 

One of the most important things is the auto industry has made 

promises, promises. Promises to have all air bags in all cars by 

1975, the President of General Motors Ed Cole said. Promises to 

have greater fuel efficiency, all the auto manufacturers said in 

2000. By 2005, they would have a 25 percent increase. Then they 

didn’t do it. Then they said they were going to have side head air 

bags. Then they didn’t do it. They did it in some vehicles. Again 

and again promises that have not been carried out. 

Anything we want these manufactures to do should be in the 

law. It has to be in the law, because if it is not done, then organizations like Public Citizen and NRDC and others can sue and force 

this to happen, and there won’t be the delay that there traditionally has been when there have been promises and everyone has relaxed and said, Great, and they don’t do it. 


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Another thing that I think would be really important to put in 

here is a requirement that Federal procurement and encouragement for fleet procurement by private companies purchase the best 

vehicles that these manufacturers make, because I did that when 

I was head of the National Highway Traffic Safety Administration 

to get air bags on the highway. Ford Motor Company agreed to 

make 5,000 air-bag cars before they were generally available to the 

public. It is a good help to the manufacturers to have Federal procurement of their better vehicles. 

I believe that there ought to be a person from the Federal Government on the board of directors of each of these manufacturers 

that gets a bailout loan, because it is on the board of directors that 

you really see as much of the inside of a company as you are ever 

going to see. That was something that the UAW had worked out 

with the Chrysler bailout, and I think it ought to be in this legislation. 

Those are the major things that I think are missing. 

Finally, the last thing is that the requirement for meeting fuel 

economy here is only to meet the 2007 law, which is a meager provision, as the Chairman and I have debated on a prior occasion. It 

is 35 MPG by 2020. That is not enough. We have been talking 

about having 25 percent above that. That is not—at least the way 

I read this bill, it is not in this bill. And it should be in this bill 

that if they are going to get these loans, they have got to go beyond 

the 2007 law and do at least a 25 percent increase. 

Now, that is what they say in their plans they are going to do. 

Right? But that is in their plans. Remember, promises, promises. 

They do promises, promises. We don’t know that that is ever going 

to happen. 

So the other point and the other reason for doing it is that the 

manufacturers—when I first went to see Ford Motor Company, one 

of the vice presidents pulled out a long drawer and had a long list 

of requirements they had to meet, and he said, This is how we 

make our vehicles. We meet these requirements. Well, if it is not 

in the law, it is only a promise, it is not going to be on the list. 

So let us make sure it is on the list and make it a requirement in 

the law. 

Thank you very much, Mr. Chairman, for the opportunity to testify. 

The CHAIRMAN. Thank you, Ms. Claybrook, very much. 

[The statement of Ms. Claybrook follows:] 


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The CHAIRMAN. Our next witness is Mr. Reuben Munger, cofounder and chairman of Bright Automotive. His Indiana-based 

startup company is developing a high-volume, purpose-built, highly 

efficient plug-in hybrid electric vehicle. We look forward to your 

testimony, Mr. Munger. 

STATEMENT OF REUBEN MUNGER 

Mr. MUNGER. Thank you, Mr. Chairman and members of the 

committee. Bright Automotive appreciates the opportunity to testify before you this morning. 

Chairman Markey, I am Reuben Munger. I am chairman of 

Bright Automotive. We are, as you mentioned, a startup automotive company based in Anderson, Indiana. 

I have a written statement and ask that it be submitted for the 

record, and I will summarize that statement here. 

The CHAIRMAN. Without objection. 

Mr. MUNGER. My statement also provides written answers to 

some of the committee’s questions. 

I am joined today by John Waters, chief executive officer of 

Bright, and Lyle Shuey, vice president of marketing and sales. 

Both gentlemen have over 20 years of automotive experience. This 

is a typical situation among our team. It includes experienced 

members with time at Chrysler, General Motors, Delphi, and Johnson Controls. The key aspect of this industry is they are experts 

who understand and know how to deliver on what this country 

needs in the way of advanced vehicles. 

We are at a unique moment of time where there is an alignment 

between the national and industrial interest. The goal here is for 

me to discuss a little bit about what Bright has found to be possible. We are responding to a congressional mandate and to a public challenge to make better vehicles that are more efficient, that 

are cost-effective, and that are greener, and, by building those vehicles, to provide new sustainable jobs in the automobile industry. 

Bright is a startup company whose mission is to bring to market 

advanced vehicles. We were launched as a stand-alone company out 

of the Colorado-based Rocky Mountain Institute, the outcome of a 

longstanding nonprofit-based consortium that included partners 

like Johnson Controls, Alcoa, Google.org, and the Turner Foundation. Our flagship product, the first of several from a common platform, is a plug-in hybrid electric vehicle which will go for up to 100 

miles per gallon. That is a five times improvement over the bestin-class competitor in our class. 

Bright is on track to be in production at an annual rate of 50,000 

vehicles per year by 2012, and to grow from there. As a new startup, Bright will ramp to scale, and do it immediately. Our focus is 

on optimizing platform physics. Beyond just an advanced power 

train, it is a combination of lightweighting, best-in-class aerodynamics, low-rolling resistance tires, sustainable materials, and 

that advanced electric power train that combine to provide truly 

breakthrough opportunities. 


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To make the vehicle of the future, you can’t begin with an existing or normal platform. Retrofitting and adaptation is only part of 

the solution. You need to begin from scratch and build from the 

ground up. This solves some of the economic and efficiency challenges that are presented by advanced batteries and technologies. 

Bright adopted a longstanding ‘‘listen to the customer’’ approach. 

We spoke to numerous vendors, drivers, program managers, users, 

and other customers of our vehicle across more than 20 States so 

that the customer, the user of our vehicle, helped us design our 

first program. We see the future of the auto industry as a smart 

electrified fleet that intelligently communicates with the grid, incorporates heavy renewable sources, and accelerates the decarbonization of two of the largest U.S. energy consumers, transportation 

and electrification/buildings. 

In order to increase efficiency of the U.S. vehicle fleet, industry 

needs to focus on new platforms and materials; develop and bring 

to scale batteries, motors, and power electronics; and prepare for 

the ecosystem of innovation. Bright’s new vehicle platform does 

each of these things. The technologies available and necessary for 

this transformation are here. The path forward is merely one of implementation and execution. 

On December 19, 2007, 10 days short of a year ago, the President 

signed into law the Energy Independence and Security Act of 2007. 

This law recognized it was in the national interest to have a more 

efficient vehicle fleet. Congress, realizing that this presented enormous challenges to the industry, created section 136 of that law, 

which you, Mr. Chairman, refer to as the Green Car Factory Fund. 

This advanced technology program—— 

The CHAIRMAN. I get tired of people calling it 136. It is what it 

is, the Green Car Factory Fund. If people would call it that, then 

the public would understand what the fight is over. 

Mr. MUNGER. This loan program is being administered by the 

Department of Energy. The Green Car Factory Fund is cited in all 

the plans of the Detroit Three as a key component of funding their 

compliance with new efficiency regulations. 

Section 136 is a critical component of the transformation of the 

industry. It has the potential to be the catalyst for achieving positive change. As an example of that, Bright Automotive last week 

submitted our proposal for a loan under this fund. It is a critical 

component of the path forward for companies like us, as well as the 

Big Three. You have seen numerous applications under the program. 

Our Nation’s small business has a longstanding and proud tradition. It is the financial and economic backbone of this Nation. It is 

also the incubator of new ideas, new challenges, and new industries. 

Bright Automotive is a small business, a startup company that 

accepts the challenges of the day. It is dedicated to the design and 

production of a new cost-efficient, effective, next-generation vehicle 

that has the potential to revitalize the automobile industry, to 

serve our customers, and to put people to work, and in the process 

make our Nation and our world a better and greener place. 

I appreciate your attention and thank you for the opportunity to 

speak to you. 


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The CHAIRMAN. Thank you, Mr. Munger. By actually using that 

phrase, it shows your company gets this. They know what this is 

all about. 

[The statement of Mr. Munger follows:] 


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The CHAIRMAN. Our next witness, Dr. Peter Morici, a professor 

of international business at the University of Maryland. Prior to 

joining the university, he served as Director of Economics at the 

U.S. International Trade Commission. He has years of experience 

overseeing the Trade Commission investigations, and has provided 

useful guidance to Congress along the way. 

We thank you, Dr. Morici, for being here. Whenever you are 

ready, please begin. 

STATEMENT OF PETER MORICI 

Mr. MORICI. Thank you, Mr. Chairman. My university and I are 

deeply honored that you have invited me here to testify before a 

committee with such an important mission and with such a distinguished panel. Three weeks ago, I testified with the CEOs of the 

three largest automakers. It is somewhat refreshing to be among 

people who talk about what can be done, not what can’t be done. 

The automobile industry, despite its various warts, is central to 

the health of the U.S. economy and essential to any effort that we 

might have to accomplish reductions in greenhouse gases; to reduce 

our dependence on foreign oil, which is a very choking dependence; 

and to recover from the recession that now plagues the Nation. The 

tailpipe offers among the greatest opportunities to reduce emissions 

and to also create a vital export industry because of all of the components that will go into the next generation of cars, which you 

called it the 2.0 platform. 

Seemingly exotic forms of propulsion are about to become commonplace on the American highway. Within the next 10 years, we 

will see vehicles that people thought are were very far away very 

close at hand. I have driven the hydrogen vehicle at Ford. It is very 

practical. Its basic problem is it costs too much to make. Hybrid vehicles are much closer, and they will prove to be plug-in hybrids 

that transition to all-electrics, and then hydrogens and so forth. 

And this is very good. 

The United States needs personal transportation. Our patterns of 

settlement and urbanization make mass transportation impractical 

for most commuters, and even more impractical for noncommuting 

travel, which is a much larger component of day-to-day car use 

than we realize. We are going to have these new vehicles one way 

or the other. The question is whether the United States makes 

them, whether they are made here, and whether they are made by 

U.S. car companies or foreign companies either here or abroad. 

The U.S. automobile has two components: the Detroit Three, 

which make almost one-half of the vehicles we use, and the transplants. Both are vital to the regions where they are domiciled. 

However, the Detroit Three, frankly, use many more components 

and embody more technology made in America and more high-quality jobs than when we buy vehicles from the transplants, so their 

future is important to us. 

I would say this to you, that right now as they stand they are 

not competitive. They claim they will be in 3 or 4 years. I do not 

believe that on the basis of what they have shown me. I don’t believe that giving them a bailout will make them competitive no 

matter how many conditions we attach. The Congress is very good 

at writing laws. I don’t know that it is very good at the proceedings 


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of a bankruptcy court. What these companies need to do is go 

through Chapter 11, or at least have the threat of Chapter 11 with 

regard to the stakeholders to bring them into line to get the results 

that they need. They just have too much debt, and a labor agreement that doesn’t work, and, frankly, management that doesn’t see 

the future clearly enough, although there is considerable variability 

among the Detroit Three in that regard. 

My feeling is if you bail them out, they will politicize the process, 

find some way around the restrictions. They will find a way to 

lobby the system. If they don’t do it, the union will do it for them, 

and we will end up over time with an industry that is still less 

cost-competitive; and when we finally, after hundreds of billions of 

dollars, decide to cut them loose and go through Chapter 11, it will 

be a smaller industry than it is now, and we will save fewer jobs 

by reorganizing them. The sooner we give them the cure, the more 

jobs we will save. 

That said, there are a lot of things that the Congress could do 

to improve the competitiveness of making cars in North America 

and in the United States. For one thing, we could do something 

about currency manipulation, not just in Japan and Korea, but 

China and other places where components are being made. 

We can have the clunker subsidy that one of the Members has 

mentioned; that is, when you trade in your clunker, you get a tax 

rebate of some kind. I would make it larger depending on the size 

of the vehicle and the age of the vehicle. If you bring me a brandnew Tahoe, you get a bigger subsidy. If you bring us a 30-year-old 

Chevette, you get the smaller subsidy, as long as it goes through 

the crusher so we never see it on the road again. 

Congress could provide substantial development assistance to 

U.S.-based automakers to make more fuel-efficient cars. I would 

provide this to all the automakers, Toyota, Nissan, Honda, the 

whole bunch; the battery makers, anybody who wants to be involved, under the condition that they share their patents with one 

another for reasonable fees; the Japanese model of the 1970s and 

1980s. You get to participate in the development and research, but 

if you get a new patent, you have to share it with your competitors 

for a reasonable fee so we accelerate the development of these vehicles. The conditions for participating would be that you undertake 

your R&D here, and you do your first round of production here, 

your full-scale mass production, in the United States. 

These kinds of smart industrial policies, along with smart additions to the power grid, which are going to be absolutely necessary 

to plug in this gentleman’s vehicles, I think could give us a fuelefficient export industry for the future. I would suggest to you it 

would probably be run by very different people than are running 

it right now. 

Thank you. 

The CHAIRMAN. Thank you, Dr. Morici, very much. 

Mr. MORICI. Mr. Chairman, could you have my full statement 

put in the record? 

The CHAIRMAN. Your full statement and the full statement of all 

of our witnesses will be included in the record. 

[The statement of Mr. Morici follows:] 


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The CHAIRMAN. Our next witness is Mr. Geoff Wardle, the director of advanced mobility research at the Art Center College of Design in Pasadena, California. The school is one of the world’s leading automotive design schools and has produced the heads of design at BMW, Nissan, Ford, and other companies. Mr. Wardle has 

spent more than 25 years as a professional designer in the industry 

and as a design educator. 

Thank you for joining us, sir. Whenever you are ready, please 

begin. 

STATEMENT OF GEOFF WARDLE 

Mr. WARDLE. Good morning, Mr. Chairman and members of the 

committee. I appreciate this opportunity to talk about these issues 

right at a time when perhaps we are entering a new era of thinking about transportation and energy policy. I think that future 

transportation and energy policy are inextricably entwined. 

I would also like to point out today I am joined by my colleague 

Dave Muyres, who coauthored the written testimony that was circulated to you. Mr. Muyres is the vice president of educational initiatives at Art Center College of Design. 

We have similar but separate backgrounds as professional car 

designers, and now educators, where we are focusing our passion, 

design passion, on research and advocating future sustainable advanced mobility and transportation solutions. And so we would like 

to bring design and its creative processes and big-picture systems 

thinking to these discussions on Detroit. 

In our written testimony we make four major recommendations 

on how to deal with the rescue plan for General Motors, Chrysler, 

and Ford, but we are here to confirm that the business model of 

the traditional American automobile industry is broken. The future 

of personal mobility is no longer just about cars. So insisting that 

the auto industry develops energy-efficient vehicles is, by itself, not 

an adequate prerequisite for financial assistance, in our opinion. 

I think it is fair to say, though, that the legacy auto industry 

does an exceptionally good job of designing, developing, and making 

vehicles that, unfortunately, people no longer really want. Meanwhile, there are startup companies like Tesler; Aptera; Bright 

Automotive, represented here; and Fisker that are financially challenged to get products that Americans do need into manufacture 

and into market. So we would recommend using some of the bailout funds to deploy idle manufacturing capabilities of the legacy 

companies to enable the startups to get their already developed 

products to market sooner rather than later, and on a meaningful 

scale. 

America’s current transportation network is based on the 

Futurama Vision that was showcased at the 1939 New York World 

Fair. We are now well overdue for a brand-new Futurama Vision, 

but a vision that does not rely on cheap energy, vast quantities of 

raw materials, destruction of natural habitats, and disregard for 

climate change, human safety, and quality of life. 

So we also recommend that some of the funding should go towards a far-reaching, nationwide, smart and sustainable network 

of transportation systems. This will also provide much of the new 

business for an overhauled and revitalized Detroit, simultaneously 


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providing a guaranteed customer for these new products that they 

would make. 

Finally, some of the money should go toward setting up a powerful independent commission that will define and develop policy for 

these sustainable transportation systems that America badly needs 

to replace its current outmoded model. We have referred to this 

independent commission in our written testimony as a think tank, 

but, in retrospect, we realize probably that is not the most appropriate term for what we have in mind. What we do have in mind 

is a multidisciplinary group of forward-thinking transportationminded specialists that should include engineers, transportation 

designers, sociologists, urban planners, scientists, architects, environmental designers, manufacturers, and economists, who can 

bring a really broad insight into what our future transportation 

needs really are. 

This multidisciplinary group of forward-thinking transportationminded specialists would enable, as I say, great oversight into what 

our true transportation requirements are. Thus, we would have a 

much clearer picture of the role the automobile industry would play 

in that. The future role of designers in industry will also move just 

beyond designing new vehicles. Designers already understand that 

new transportation solutions are more about complete systems. We 

have to think about complete systems. 

Finally, I would like to conclude by saying that we think that the 

debate nationally currently seems to revolve around a rescue plan 

for the next 100-days. We strongly feel that this discussion needs 

to be centered on the next 100-years. Thank you. 

The CHAIRMAN. Thank you, Mr. Wardle, very much. 

[The statement of Mr. Wardle follows:] 


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The CHAIRMAN. Our final witness is Mr. Richard Curless, the 

chief technological officer at MAG Americas. His company is one of 

the largest component suppliers for the domestic auto industry, 

and he personally brings a lifetime of expertise in the machine tool 

industry to our hearing here today. 

We welcome you, sir. Whenever you are ready, please begin. 

STATEMENT OF RICHARD CURLESS 

Mr. CURLESS. Chairman Markey, Congresswoman Miller, who 

asked me to testify here today, and members of the committee, 

good morning, and thank you for having me participate in this 

hearing. 

My company, MAG Industrial Automation Systems, is the largest 

machine tool company here in the United States. We are the only 

U.S. machine tool company remaining that has the technological 

breadth and skill sets to meet the equipment and process needs of 

our U.S. automotive companies. 

U.S. companies like MAG are critical to automotive, energy, aerospace, and other manufacturing industries. Automotive couldn’t efficiently produce engines and transmissions without MAG processing technology and machinery. 

Today’s equipment is nearly 300-percent more efficient and flexible than just 10 years ago. In aerospace, MAG has served as a pioneer in the supply of composite machines that are producing the 

airplanes of the future for major companies such as Boeing and 

Airbus, as well as many of their suppliers. 

MAG’s machinery and process R&D is a critical enabler for supplying new technologies in manufacturing that will make companies more competitive, create jobs, and assure long-term success. 

Our high-end industries must implement lower-cost, efficient, longterm manufacturing solutions, and the solutions must be green. 

Our United States factories must be healthy and advanced in their 

performance. 

With the continuing rise of the world population and its use of 

energy, fossil fuels will continue to grow in scarcity. In order to 

combat a shortage in fuel, vehicles will have to be designed and 

produced that use alternate fuels and consume less energy. 

MAG wants to take our know-how and develop solutions that will 

help the automotive industry manufacture these new, fuel-efficient 

automobiles at a much lower cost than they are able to do today. 

As best we can, our company tries to offer our manufacturing solutions to the automotive companies. However, it is difficult to work 

with them because they buy cheap parts from the Far East and 

often will source their equipment needs strictly on global price and 

not necessarily to get the best technology for the future. They must 

be cost-competitive, but, with shortsighted goals, will spend money 

for the moment and not for the long run. 

Providing bailout money to the automotive industry is absolutely 

the right thing to do, but it must be done with strong conditions. 

The entire supply chain must be considered. R&D, parts, assemblies, and so on need to be part of a long-term solution involving 

American labor and know-how. Providing the funds and watching 

the funds go overseas is not an effective solution. Today, as an example, if you were to consider the flow of funds, for every $100 


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taken in by the automotive companies, $30 go overseas for purchase of materials. Equipment, R&D, other purchases add additional dollars going overseas. 

The automotive transplants coming to the United States are a 

great benefit to our economy, offering new assembly jobs. However, 

what about the supply of equipment and parts for these transplants? For Japanese transplants, these opportunities go straight 

back to Japan. For example, MAG receives no orders from these 

Japanese companies. On the other hand, MAG does very well working with some of the best automobile companies in the world, including companies out of Germany, France, and Korea, to name a 

few. Every country in the world is offering incentives to their technology provider companies and doing all possible to encourage collaboration. Grants and tax forgiveness are part of those countries’ 

strategy to be sure their manufacturing base will be sustained and 

grow. The U.S. needs the same type government support programs 

to survive. The automobile industry is the place to start. 

Taxpayer funding must require, by means of incentives or guidelines, that the funds be used to buy U.S. technology. U.S. manufacturers and suppliers need to have access to low-interest project 

funding. Funding programs need to be available to these companies 

serving as a catalyst to develop new manufacturing technologies 

and processes, and taxpayer funding to foreign transplants should 

require buying U.S. technology. 

The government’s decision has a serious impact on the creation 

of transportation solutions for the future. Not investing in these 

technologies will cause the U.S. to jeopardize their superpower status and soon become dependent on foreign nations for the technology that defines one of our many freedoms, the automobile. 

The $25 billion in the Department of Energy Green Car Factory 

Fund is required for retooling. GM, Ford, and Chrysler and their 

suppliers will not be able to retool their factories without these 

funds. If the money is used for general cash flow issues, it must 

be replaced, or the alternate energy will be severely compromised. 

The countries that can manage their energy needs will be superpowers of tomorrow. Companies with forward-thinking technologies 

such as lightweight CGI engines, carbon fiber body panels and 

power train components, carbon fiber hydrogen storage tanks, advanced high throughput machining, and so on, will be the automobile companies of the future. Those that do not adapt fast 

enough will fail. 

Mr. Chairman, members of the committee, thank you for having 

me speak here today and to share openly and honestly our company’s views for addressing the proposed automotive bailout and 

what it could mean for more energy-efficient automobiles and other 

transportation vehicles. It is critical that whatever decisions are 

made will be to assure a long-term, sustainable and growing economy for the United States of America. 

Thank you. 

The CHAIRMAN. Thank you, Mr. Curless, very much. 

[The statement of Mr. Curless follows:] 


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The CHAIRMAN. I will turn to questions from the committee. The 

Chair will recognize himself. 

Ms. Claybrook, what do you think about an idea of tying these 

loans to an interest rate for each one of the companies depending 

upon how successful they are in moving to more efficient vehicles 

that are constructed? For example, if a company beats their efficiency requirement by 1 mile per gallon, they get a quarter of a 

point reduction in interest rate; or if they are making 200,000 allelectric vehicles by a certain date, that they get a half a point or 

a whole point taken off of their interest rate. What do you think 

about that as a positive incentive for companies to move in that direction? 

Ms. CLAYBROOK. I think it is a great idea. I just think that the 

fuel economy number that they have to meet has to be higher than 

what is in the law for 2007 before you would do that. So I hope 

that the bill will be amended to require a 25 percent increase over 

2007, and that be the starting point. 

The CHAIRMAN. What do you think, Mr. Munger, of this idea of 

tying the interest rate to how successful they are so it is a positive 

incentive to exceed whatever the baseline is that we establish for 

them to meet? 

Mr. MUNGER. Mr. Chairman, I think it is an interesting idea. An 

extension of that that I have been talking about with a few people 

is if you set a high enough baseline where there is actually a forgiveness of some of the loans if you achieve a very high level of efficiency, in effect you pay back the industry for some of the national 

savings in reducing oil consumption. The orders of magnitude, 

when you spread it across the size of some of these fleets, of doubling efficiency could cause 100 million barrels of oil of forgotten 

demand in a year, and that could pay back, you know, on the order 

of magnitude something similar. 

The CHAIRMAN. Dr. Morici, what do you think? 

Mr. MORICI. First of all, you have to set it high enough. 

The CHAIRMAN. We agree with that. Assuming that is the case, 

if they exceed that goal. 

Mr. MORICI. What I want to talk about, what’s high enough. 

The CHAIRMAN. Assuming they exceed that goal. 

Mr. MORICI. I want to talk about what is high enough, and that 

is that they just can’t accomplish it by tweaking the internal combustion engine, that they have to be using alternative platforms to 

get it done without specifically requiring it. There is so much that 

can be done just with the engines that we have. We don’t want 

them to retune them a bit and get some money back. We want 

them to start to earnestly make a transformation to hybrids, and 

do it in a way that they get rewarded for it, and that is fine. 

The CHAIRMAN. So that is what I said. If they make a quarter 

million all-electric vehicles. 

Mr. MORICI. Figure out what the number should be. 

The CHAIRMAN. You like that concept though. 

Mr. Wardle. 

Mr. WARDLE. I think we all respond positively to incentives. The 

trick will be to make sure the numbers are right. I would also like 

to point out in the long term it is not just fuel efficiency or energy 

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of sustainable industrial activity. I think those same incentives 

should be applied to that as well. 

The CHAIRMAN. Mr. Curless. 

Mr. CURLESS. Yes, I agree milestones need to be established, and 

the amounts that we talk about need to be considered along with 

those milestones. 

The CHAIRMAN. Mr. Munger, you have testified that your intention is to produce 50,000 of your electric vehicles by the year 2012. 

General Motors is touting the fact that they are going to build 

10,000 Volts in 2010, and maybe 50,000 to 70,000 in 2011. How can 

Bright Motors be on the same exact track almost as General Motors and you don’t even have a factory yet? How can you be so bold 

as to make such a statement? 

Mr. MUNGER. Thank you, Mr. Chairman. I think that the key 

that—Bright has done a very thorough analysis of figuring two 

things: One, really understanding what our customer is interested 

in; and, two, by focusing on the total vehicle platform, we have 

achieved a cost level that is much more attractive than what news 

reports suggest around the Volt. 

The CHAIRMAN. As you look at General Motors and the Volt, does 

that send a chill down your spine in terms of your vehicle’s competitiveness? 

Mr. MUNGER. We are not going to be directly competitive with 

the Volt. 

The CHAIRMAN. What segment are you in? 

Mr. MUNGER. We are a larger-format vehicle. Light trucks. SUVs 

and minivans instead of a passenger car. There is actually a lot of 

opportunity to gain efficiency in those larger vehicles. 

The CHAIRMAN. Is there, Mr. Wardle, a company that is going to 

directly compete with the Volt, that you know of, that we should 

have some confidence will be there in the marketplace? 

Mr. WARDLE. I suspect there is competition from overseas companies close to the Volt. Some of the companies have products that 

I think would be extremely competitive with the Volt, if they can 

get them into production soon enough. 

Mr. MORICI. Both Toyota and Ford have plug-ins in the pipeline 

as well. It is the same concept. 

The CHAIRMAN. You don’t seem very optimistic about the Big 

Three in the long run. Do you really believe any amount of money 

that we can give to them is going to be sufficient to allow them to 

be competitive in the long run? Right now General Motors only has 

85,000 hourly workers. How many hourly workers, using your analysis, do you think they will have in 3 years? 

Mr. MORICI. I don’t have that number, but I know that it will 

continually decline even if they are productive, even if they become 

competitive, because it requires fewer hourly workers to make an 

automobile each year. 

It is an inexorable process. It is like your personal computer. My 

feeling is that the technology is there to be competitive, and the 

products are in the pipeline there to be competitive. If you look at 

Ford and you ask them, well, why didn’t you have these products 

2 years sooner if you look at their plan, and they have a very good 

answer. They have a very different management team than they 

had 3 or 4 years ago. And the management team they had 3 or 4 


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years ago very much looks like the management team that General 

Motors and Chrysler has right now, wedded to the SUV and the 

truck and all the rest of that. 

But my feeling is the technology is there. If you could take them 

through the Chapter 11 process and shake them down and shake 

them out and restructure their debt and all the rest that they could 

get it done. And I don’t think the Congress can simulate that. And 

I think Rick Wagoner’s scare tactics are unfortunate, but I think 

it is possible to do. 

The CHAIRMAN. Thank you. 

Mr. Munger, if the Green Car Factory Fund is empty or closed 

to you and your company and companies like your company, how 

would that affect your timeline and overall viability? 

Mr. MUNGER. It would certainly delay our process. We were pursuing a pretty aggressive and attractive private capital path. The 

credit disruptions that have hit everyone, we are having struggles 

around that just like all the other innovative companies that have 

been referenced here today. So the Green Car Factory Fund is an 

accelerator. You know, the amount of money required to push 

quickly certainly get enabled by that fund to get things done faster. 

The CHAIRMAN. And, Mr. Curless, could you answer that question in terms of how you think it affects the competitors to the Big 

Three? 

Mr. CURLESS. Well, I think it is definitely a requirement. Because capital is very difficult to come by, and these loans are going 

to be really critical for just not the Big Three but the others as 

well. 

The CHAIRMAN. If the others can’t have access to that money—— 

Mr. CURLESS. Then it is going to create a difficult situation for 

them. That is for sure. 

The CHAIRMAN. And how many companies do you think that 

would affect? 

Mr. CURLESS. Maybe four or five. 

The CHAIRMAN. Four or five companies? 

Mr. CURLESS. Yeah. 

The CHAIRMAN. And in a lot of ways that could ultimately represent a hundred thousand new jobs in a relatively brief period of 

time, huh? 

Mr. CURLESS. Right. Correct. 

The CHAIRMAN. When you are making 150,000 of these vehicles, 

sir, how many employees do you anticipate that you will have? 

Mr. MUNGER. We have a direct employee base of about a thousand employees between the factory and the headquarters and development staff. And then, because it is a largely outsourced model 

for a number of your supply partners, that is probably another 

2,000 employees working on the body or the engine or various components of the vehicle. 

The CHAIRMAN. Okay. Thank you. 

My time has expired. The Chair recognizes the gentleman from 

Washington State, Mr. Inslee. 

Mr. INSLEE. Thank you. 

Mr. Munger, in this bailout plan, as far as you have seen it, is 

there any benefits to your organization at all? The one that is being 

proposed? 


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Mr. MUNGER. As far as I have seen on the draft legislation that 

came out last night there isn’t anything. You know, I think particularly the money that is in the green factory fund needs to be returned to it. It would be really beneficial I think to the smaller 

companies to make it clear that, you know, the legislation already 

reads that there is an opportunity for them to apply, but if the 

Congress found it in their wisdom to actually create a set-aside for 

those small companies that would be very beneficial. 

Mr. INSLEE. Right. By the way, I would love to yield to Mrs. Miller if she is prepared. 

Mrs. MILLER. That is fine. 

Mr. INSLEE. That is fine. Thank you. 

So if we deplete the Green Car Factory Fund and send it to those 

who are in this dire financial strait and not assist you who have 

a—what many of us hope to be a very viable product, how would 

we defend that? 

That is a rhetorical question, but—— 

Mr. MUNGER. I am interested in how you will, sir. 

Mr. INSLEE. So is there a proposal and should we consider a proposal to accelerate some assistance to what we will say are the little guys in the race, yourself included with Tesla and some of the 

other companies that have been mentioned? Has that group, the 

little guys in the race, have they made any proposal that they be 

part of this tranche, if you will, that is going out the door in the 

next 30 days? 

Mr. MUNGER. I don’t believe a proposal around that has been 

made, but I think there have been proposals to create that allocation to small companies and to encourage the Department of Energy to act quickly. If there are funds in the program, they could 

allocate loans immediately. 

Mr. INSLEE. Given the relatively small scale, it would seem to me 

that would be doable, would it not? I mean, you are talking about 

small percentages of the amounts that would go to the Big Three 

that would still have a large impact with your capital needs in the 

next 6 months, would it not? 

Mr. MUNGER. Yes, it would. Ten or twenty percent would certainly fund five to ten Brights. 

Mr. INSLEE. So is this group making any proposal in this regard? 

Mr. MUNGER. We will pursue that. 

Mr. INSLEE. Well, to me—I mean, you look at there is the Chevy 

Volt, there is the Bright product, there is Tesla, there is several 

others, there is a guy on Bainbridge Island making an all-electric 

car named Bob Fraik, who is a neighbor of mine who lives two 

miles from where I am. Okay? Why isn’t he involved, have some 

option to get capital from the Federal Government? He is paying 

his taxes, too, frankly. 

And I think your options for success may be as great as the Big 

Three’s. So, to me, it is a little troublesome to take care of only the 

larger players here when we know that innovation can come from 

two bike makers in Dayton, Ohio, who built the first airplane. I 

have to tell you that troubles me, and I would encourage you to at 

least think in those terms. 

I actually talked to Tesla last week about some ideas in this regard, because I think America wants to go forward here, and we 


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want to take care of the employees of these existing companies. But 

we want to see growth as well. 

Anyway, I just encourage you. I think it is worth thinking about. 

Ms. Claybrook, can I ask you about the idea of increased requirements for increased mileage for access of this? What do you do 

about the argument of the Big Three that if we had an increased 

mileage condition to get these receipts of these funds that that 

would put them at a competitive disadvantage, and they are already in a weakened position? And is a response to simply increase 

the mileage standards for everyone, whether you take the money 

or not? 

Ms. CLAYBROOK. Well, of course, we would love to see that. We 

have urged increased fuel economy requirements for a long time. 

In this bill, though, I think that the plans that the manufacturers 

submitted, which do show an increased capacity for fuel economy, 

should be mandated. Their plans should not just be their plans, but 

they could change—they get the money today and they change 

their plans tomorrow. 

So that is the first and foremost most important thing. And so 

we would certainly like to see the increase, you know, for everybody. But it is not going to put them at a competitive disadvantage. 

Because they are now at a competitive disadvantage because they 

have not invested in technology and innovation, and they have 

taken the cash cow SUV and used all the money, and they still 

have a debt at General Motors of $66 billion. So they need to have 

products that people want to buy. That is what we have been talking about today. 

So I think that it only helps them to have these tough requirements, because they don’t want to miss the bet here. And they are 

scared to death—and they should be—that they are not going to be 

a manufacturer 2 years from now. 

So to say, okay, you are going to make this a priority, I would 

put safety in that number as well, because they have been fighting 

the same kinds of safety requirements for roof crush and rollover 

and children, protecting children and side head impact and other 

things. 

Just the other day the Department of Transportation delayed the 

implementation of a standard that was issued a couple of years ago 

on side impact protection. So when they are redesigning these vehicles they should do the whole job as one piece. 

When I was NHTSA Administrator, we designed an experimental 

safety vehicle. And it was in 1977. It met the 1985 fuel economy 

standards, and they were tough. And it also had improved safety. 

When you redesign a vehicle you should do the whole thing at 

once. So I believe this will only help the manufacturers, not hurt 

them. And I would be happy to see those standards adopted for all 

cars, all vehicles. 

Mr. INSLEE. Thank you. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentlelady from Michigan, Mrs. Miller, is recognized. 

Mrs. MILLER. Thank you very much, Mr. Chairman. 

You know, we feel a little defensive being from Michigan. I can’t 

even get my microphone to work. I guess that is sort of indicative 

here. 


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But we feel a little defensive, obviously, in Michigan. And we look at what has happened with the bailouts, the $700 billion 

TARP bailout. And I will also say for the record that we feel that 

it would have been optimal to have any loans for the domestic auto 

industry coming out of that bailout fund, rather than coming out 

of the Green Car Factory Fund, which I also agree section 136 is 

not very descriptive of it. 

Unfortunately, the optimal was not possible. And as we look at 

this now—and I also say we feel as though there has been a double 

standard. I recognize that there have been mistakes made. However, we on the Hill here, you have the domestic auto industry that 

is almost in a capacity of abject groveling, it seems like to us. And 

that is why I went through my litany of some of the historical significance of this industry to our Nation and why I think it is so important and why we want to be a critical component of our Nation 

going forward in every way. 

But perhaps the Big Three shouldn’t have—you know, it wasn’t 

a very good PR move to be flying here on their corporate jets. The 

good thing for the guys from Wall Street that got all this money, 

they never had to come to Washington to ask the money. You 

know, those guys that helicopter in from the Hamptons every day, 

you know, they didn’t even have to come here and ask for any 

money because it was hand-delivered to them. 

And I hear people saying, you know, Wagoner has got to resign 

and so on and so forth. I don’t hear anybody talking about the 

president of Citigroup that got in the neighborhood of $40 billion 

so far, I think, that maybe he ought to resign. There is no talk of 

any of that. 

And I also think that in some ways because of what has happened here in our Nation and the response of Congress with the 

bailouts, et cetera, that the industry, the domestic auto industry 

has gotten caught up a bit in bailout fatigue. That is very apparent 

here on the Hill. 

But, at any rate, hopefully there is a deal and a compromise that 

has been agreed to. We hope there is going to be enough votes. I 

think you are going to see a restructuring, and I think the country 

is going to have a high degree of confidence as we go forward that 

we have gotten the message, and things are going to change, and 

all the stakeholders are going to do what we need to do to make 

this a competitive industry. 

I guess my first question would be for Mr. Munger, and you mentioned that your company had actually made a—submitted a proposal for some funds. Could you flesh that out a bit for me? I am 

just curious, if you could, how much did you apply for and how 

would you utilize those funds? 

I believe the batteries that you are using right now are made in 

China. I only mention that because we see all of these other countries that have an auto industry are bailing out or loaning money 

to their industry. It was mentioned about the lithium ion batteries. 

I think last year the nation of Japan spent over a billion dollars 

on R&D for lithium ion batteries, not just for their vehicles but for 

their electronics, et cetera. And in our country we have expected 

the auto industry to do all of this themselves. But how would you 

actually spend some of the money out of that fund? 


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Mr. MUNGER. Certainly. Thank you for the question. We applied for a $450 million loan under the Department of Energy loan program. Those funds are as purposed for OEMs to finalize vehicle engineering and fund, you know, sort of engineering validation work as well as pay for tooling and construction of our facility. And, you know, to your question regarding the battery, we actually are discussing options with multiple battery suppliers. 

Mrs. MILLER. In America? 

Mr. MUNGER. We have encouraged some of the people we are 

talking to to actually apply under that program to make sure they 

get a facility built here in America. 

Unfortunately, section 135, which is a battery focused fund, 

wasn’t funded. But the battery companies that have worked here 

in the United States are focused on section 136 as component suppliers to vehicles to try to get their facilities built here in America. 

I think the Congressman from Washington made a good point 

that we don’t want to transition our dependence on foreign oil to 

foreign batteries, and Bright Automotives is open to economically 

buying from domestic suppliers. 

Mrs. MILLER. Okay. Dr. Morici, as an economist, let me just follow up a little bit on this, on the concept of whether or not any of 

the Big Three would go through bankruptcy, whether that be 

Chapter 11 or Chapter 7 or liquidation that may follow with some 

of those kinds of things and what the cost actually would be to the 

Nation for such a thing. 

We feel as though bankruptcy is a bit different—I mean, I have 

no problem getting on an airline that has declared bankruptcy and 

is in the process of reorganization, et cetera. However, I might 

have a different concept of purchasing a $40,000 vehicle from a 

company that may be in bankruptcy or close to bankruptcy if I 

have consternation about warranty and service work and all these 

kinds of things. We think it is a bit of a different animal. 

But we have had economists that have theorized that the costs 

to the country of bankruptcy could be as much as four times what 

we are talking about here for loans when you think about unemployment costs, when you think about the cost to the PBGC, some 

of these kinds of things. And I guess my question would be, as an 

economist, have you looked at any other previous situation? Is 

there any analogy that we could use with some historical benchmarks of an industry like this where there has been governmental 

intervention, now all of this oversight, everybody is an expert on 

the industry now? I mean, I know there has got to be changes 

made, but all of these various things, and how did it work out, and 

how do you think this is going to work out? 

Mr. MORICI. Well, I wonder whether you have answered your 

own question to some degree. 

When we talk about bankruptcy, it could be many different concepts. A prepackaged Chapter 11 would ensure that suppliers are 

paid, so there wouldn’t be that breakdown, so the industry essentially wouldn’t shut down. 

The transplants by themselves cannot produce enough vehicles to 

satisfy U.S. demand even at 10 million vehicles a year. So these 

factories are not going to go out of existence. They are going to be 

used. The question is, who uses them and how? 


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In Chapter 7, the factories are worth much less to the existing 

creditors than if they continue in production. So the logical sources 

of credit for a Chapter 11 debtor-in-possession bankruptcy are the 

existing banks who have already received considerable largesse 

from the U.S. Government and could likely finance it. After all, we 

have given them $8 trillion in loan guarantees when the problem 

was caused by $2 trillion worth of collateralized debt obligations; 

and I am still trying to find the other $6 trillion. 

In terms of governments becoming so heavily involved in the 

management of industries, we, to my knowledge, don’t have peacetime analogs. However, I would ask you to look at the experience 

they had in Britain and France with nationalized industries of various kinds in the ’50s, ’60s and ’70s and ended in tears. Essentially, 

if you try to manage an industry with all of those experts involved, 

you become involved in management by committee; and you don’t 

get a good outcome. 

I am not in favor of shuttering the industry. After I testified, I 

called up Ford and I said, no reasonable person wants you guys to 

shut down. However, the question is not whether we reorganize 

them but how do we reorganize them to ensure that we get the outcomes that we need? 

I think there is a very grave danger, I think, of what was suggested here this morning. If we impose mileage requirements on 

the Detroit Three that are not imposed on the Japanese and the 

price of gasoline falls to $1.50 a gallon and stays there, we put 

them at a competitive disadvantage. So we have to apply it to everybody. That may or may not be politically possible. But it is one 

example of the kinds of complications that we could become engaged in. 

And there is the other issue of the politicization. You asked a 

very rhetorical question. Why is no one calling for John Thain’s 

ouster this morning? I would suggest you might ask serious questions about campaign contributions and things of that nature for 

the committees involved in overseeing them. I know that is—I don’t 

want to cross the line and become impolite, but I find it remarkable 

that members of the United States Congress called for Rick Wagoner’s resignation—and I have not been known to be a big fan of 

Rick Wagoner—but they have called for his resignation after he 

asks for $12 billion, and Merrill Lynch has gotten how many hundreds of—you know, and there is John Thain arguing yesterday in 

front of his board for $10 million subsidies. You know, I suggest 

the easiest way to solve this problem is for Ford to make themselves a bank, take some deposits, pay themselves too much money, 

and go over to the Senate Banking Committee and ask for help. 

Mrs. MILLER. Thank you. 

I know my time has expired, and I appreciate the Chair’s indulgence. 

The CHAIRMAN. The gentlelady’s time has expired. 

The Chair recognizes the gentleman from Missouri, Mr. Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

Dr. Morici—well, first of all, let me associate myself with the 

comments of the gentlelady from Michigan. I do think we have a 

double standard. I do think, you know, the people who go to work 


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with lunch buckets are not receiving the kind of respect as the people who drive to Broad Street in New York City. 

But to go back to Chapter 11, the issues that I am concerned 

about, as I believe the gentlelady was, just the stigma of Chapter 

11, no matter what other components are put in place, I think 

would do damage to the—whichever of the Big Three, whether it 

is Ford, GM and Chrysler or not, people are going to back away 

from those automobiles. Don’t you think that? I mean, we are backing away from them already. 

Mr. MORICI. If we repeat it over and over again, it becomes a 

self-fulfilling prophecy. If Rick Wagoner tells everybody they 

shouldn’t buy his own cars and you tell them they shouldn’t buy 

his own cars because there is a stigma, then they won’t. 

Please hear what I am saying. The country cannot get along with 

those factories closed. We cannot produce enough vehicles. So if 

they are in Chapter 11 reorganization with debtor-in-possession financing and the suppliers are being paid, there is reasonable expectation established that they will continue in operation. Not only 

that, we can provide third-party warranties. 

When you go down to Circuit City this Christmas season and buy 

a stereo or whatever it is that you want for your kids and you buy 

a store warranty, it is not being guaranteed by Circuit City. It is 

being guaranteed by a third party. These warranties can be insured. And if we explain that to people, then that will change the 

psychology. 

But Rick Wagoner saying that Chapter 11 is not possible, even 

though his board says he should consider it; and running around 

the country saying my warranties will be no good if I am chapter 

11 creates that environment. 

So, you know, I guess what I am getting back to, the real question is, how do we do this? Because they are going to have to be 

reorganized. So the question is, how do we do this? And I would 

suggest that the bankruptcy courts have a comparative advantage 

in imposing the conditions that are necessary to get us from here 

to there, that the Congress is very good at many things, but running a car company it is not. And the lessons of Europe when they 

tried to run car companies and steel companies and coal companies 

is it didn’t work out very well there either. 

Mr. CLEAVER. So would you support the car czar, which is apparently the direction—— 

Mr. MORICI. If you are going to give them the money, how could 

I not support the oversight? What I am suggesting is it is not prudent to give them the money based on what they have said to you 

so far. You give them this first $15 billion and you better draw two 

lines on the budget right above HUD for Ford and General Motors, 

because they are going to be back year after year looking for 

money. They are not competitive now, and they will not become 

competitive if you give them that cash. You cannot spend $1.25— 

spend $1.25 on lemons, sugar, and water and sell lemonade for a 

dollar a glass and make money. And that is what they are trying 

to do right now. Their costs are simply too high. 

Mr. CLEAVER. Now do all of you agree that the Big Three will 

attempt to avoid complying with the letter of the law that is in the 

language that will be considered later this week, hopefully? I mean, 


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do all of you believe that they will do everything in their power, 

in spite of agreeing now, but at a later date will begin to try to 

backtrack? 

Ms. CLAYBROOK. I use the term ‘‘promises, promises’’ in terms of 

fuel economy and other things. I have seen auto industry plans 

come before the Congress and before the regulatory agency with 

promises; and when it wasn’t locked into either law or regulation, 

they changed their mind. 

I think that the situation today is somewhat different because 

their life is on the line now, and they know that, and it is not just 

this year, it is this year and next year and the next 5 to 10 years. 

And also they know there is going to be extreme oversight of how 

they spend that money and what products they produce. So I think 

it is more likely that they are going to do everything that they can 

and to comply, but I still think that they ought to have the clarity 

about what it is that they are supposed to do in terms of meeting 

fuel economy. And that is why I think it ought to be in the law. 

But I don’t think they are going to set about to undermine this. 

And I wouldn’t be at all surprised if, after the money is granted, 

which I believe it will be now, that Rick Wagoner will step down 

and there will be somebody else there so that this issue about the 

leadership will change. 

And the other two companies—well, particularly Ford—does have 

younger and more innovative management now than they have had 

in the past. So whether or not we tell them to change, the government tells them to change, I don’t think that that is a good idea. 

And I think that if there is a concern about a particular manager 

there ought to be negotiations and expressions of concern. 

Mr. CLEAVER. I think all three of them are troglodytic in their 

management style. 

Ms. CLAYBROOK. Right. 

Mr. CLEAVER. But my question I guess is, if this is a unique moment, which I think all of us would agree, then why not go all the 

way? Why not—would all of you agree to raise the CAFE standards 

in the legislation? 

Mr. MORICI. If it applies to everyone, sir. 

Mr. CLEAVER. I am sorry? 

Mr. MORICI. If it applies to everyone, not just them. 

Ms. CLAYBROOK. Yes. 

Mr. MORICI. I would also say to you we have had other unique 

moments in history. For example, when we had the Asian currency 

bailout, we imposed all kinds of conditions on Thailand and Korea 

and all those. But after they got their money and got healthy 

again, they went on their merry way and manipulated their currencies. 

I would suggest to you that you can get all the promises you 

want out of General Motors, but you are dealing with an enormous 

entity with an enormous cultural resistance to change and that you 

are going to have a lot of trouble writing it all down. I know you 

have the best of intentions. I really do. But I just don’t think you 

can change General Motors from here. And if you give them the 

cash, they will do what they have to to get it from you, and you 

will find they will be back over and over again. This is going to cost 

you hundreds of billions of dollars. Get ready for it. 


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Ms. CLAYBROOK. I would just like to disagree and say, when the 

fuel economy standards were issued in 1977, that these companies 

made major changes; and they knew they had to or they were going 

to pay huge penalties. So another issue is that there are very significant penalties in the law if they don’t meet these higher fuel 

economy standards, in addition to everything else that is in this 

legislation. And they did—General Motors did a major, major 

change in their fuel economy. They doubled their fuel economy. 

And from 1977 to 1985 they doubled the fuel economy of their vehicles. 

Now, they started with a low number, but there are still lots of 

opportunities for innovation here, and there are some fabulous engineers in this industry. And I do agree that the management 

needs to change, but I think that there is capacity to do it. 

Mr. CLEAVER. One final question, though. I mean, I agree that 

we need strong penalty provisions in the law. The problem is you 

can’t penalize people who are broke. You know, can we pass legislation to put—— 

Ms. CLAYBROOK. It is already in the law. It is already in the law. 

Mr. MORICI. Joan, just because something is in the law doesn’t 

mean someone is going to do it. If you have a financial penalty and 

they have no money to pay, you can’t get money from a man with 

empty pockets. If they are going to go out of business if you don’t 

give them the cash and you say, well, I want you to do X, Y, and 

Z or I will take the cash away, they are coming here to make up 

the difference between what their revenues and their costs are. You 

are right. It doesn’t make sense. 

Ms. CLAYBROOK. But I think that you have to argue, as has been 

argued here, that it is going to really hurt the purchasing of these 

vehicles if they go into bankruptcy. 

Mr. CLEAVER. The only thing that would probably trouble them 

is we say if you violate the letter of the law in this legislation you 

will have to play football for the Detroit Lions. I mean, that would 

probably be the worst thing we could do. They are broke. I mean, 

there is nothing else to do. 

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

The CHAIRMAN. I thank the gentleman. 

And it was nothing personal there, Ms. Miller. The Patriots are 

hurting this year, too. We are struggling with the loss of our quarterback. Without good leadership, it is difficult to make it to the 

Super Bowl. 

The gentleman from California, Mr. McNerney. 

Mr. MCNERNEY. Thank you, Mr. Chairman. 

I want to reiterate that I think this is a great opportunity for us 

as a Nation to look at our transportation system and start planning 

how we can make it better for the next century. Now, is Detroit 

capable of participating in this change? That is the question that 

is in front of us. I like to think that it is, and I hope that we can 

find a way to make that happen. But it is not a given in my mind, 

by any means. They have this culture that we have talked about, 

but, on the other hand, we have a big stick here. So I think we 

have an opportunity to do what is needed. 

Your inputs have been appreciated. I am kind of intrigued by 

your technology, Mr. Munger. Could you tell me a little bit about 


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what you mean when you say 100 miles per gallon? Is that sort of 

a hard figure or is that sort of a squishy plug-in figure? 

Mr. MUNGER. You have highlighted one of the issues around electrification. You know, you have a choice in deciding what kind of 

propulsion you want. You can have an internal combustion gasfueled engine, you can have a pure electric vehicle, or you can have 

a plug-in hybrid. And the issue is one of range. And a pure electric 

has range constraints. So when you run out of battery, you need 

to find a place to recharge it. 

To solve that, we have proceeded with a plug-in hybrid. Because 

the cheapest way to get range is actually through an internal combustion engine. Because the average vehicle drives 40 miles or less 

a day, we tried to optimize with the minimum amount of battery 

to achieve the most efficiency. 

We have a 30-mile pure electric range, and then the vehicle proceeds to drive in hybrid mode and would be about 40 miles per gallon. So on a 50-mile day, as an example, you would use a half a 

gallon of gas, getting to that hundred mile per gallon number. That 

is a calculation that is similar to what GM has been using around 

the Volt. And that is—— 

Mr. MCNERNEY. So there is a standard way to make that calculation? 

Mr. MUNGER. The industry is working towards it, yes. 

Mr. MCNERNEY. Okay. What is the limitation in terms of you 

getting to where you need to be by 2014 or 2012, the number—the 

year that you gave for the production of your vehicle? 

Mr. MUNGER. The primary limitation for us moving forward is 

capital. 

Mr. MCNERNEY. Capital. 

Mr. MUNGER. The availability of funds for a $550 million program. 

Mr. MCNERNEY. So the battery technology is not a limitation in 

your mind? 

Mr. MUNGER. You know, we have a very deep team in battery 

technology. John Waters behind me was one of the first builders of 

a plant to provide lithium ion batteries to the transportation sector 

in North America. They sold lithium ion batteries into the Segway 

program out of Delphi. He has been an executive in the industry. 

So we are pretty well aware of what batteries are able to do. We 

do also have a fallback to be able to provide a nickel cadmium solution. 

Mr. MCNERNEY. Sure. 

Dr. Morici. 

Mr. MORICI. I don’t know those guys. I never met them before. 

But 3 years ago about I worked on a project for the Defense Department concerning, you know, alternative vehicle technologies; 

and I went through the Rocky Mountain Institute stuff and all the 

rest. The difference between this man and Rick Wagoner is no one 

told him he can’t do it. You are looking at the future if you let him 

happen. 

Mr. MCNERNEY. Not bad. Not bad. 

Mr. MORICI. It is all there, sir. It is all there. This guy is real. 

Ms. CLAYBROOK. What you should do is send a note to the Department of Energy and ask them to hurry up. 


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Mr. MORICI. Exactly. Get the money to this man as quick as you 

can. 

Mr. MCNERNEY. Well, we don’t want to go that far in promoting 

a business, but I certainly want to encourage new innovation. And 

one of the things that the gentleman from Washington raised a 

question is, are we going to be dependent on batteries from overseas? And that is where we don’t want to go either. So do you have 

a comment on that? 

Mr. MUNGER. You know, I think there are battery technologies 

here in the U.S. that are working to build facilities. They have a 

similar constraint. You know, there is a chicken-and-the-egg problem in the industry where capital providers want to see them on 

a program, and program developers want them to have a facility. 

I think maybe you should speak to some of the people that were 

involved in GM’s process. I know—I believe they are going to be applying for section 136 funds. 

Ms. CLAYBROOK. Green Car Factory Funds. 

Mr. MUNGER. Maybe we should submit for the record that we 

change that name of that program to the Green Car Factory Fund. 

The CHAIRMAN. Thank you. 

Mr. MUNGER. But there are efforts under way to get that capacity and technology here into the U.S. You know, people realize that 

building them here is important. 

Mr. MCNERNEY. One other question. In what ways do the future 

of the auto industry require the resources of the Big Three? So you 

are proposing that you ramp up production and so on. What do we 

need from the Big Three if we were to move toward smaller businesses? I mean, there must be some part of that infrastructure that 

is needed to carry out the transportation needs of our country. 

Mr. MUNGER. In our specific case, we have been working actually 

and talking to all three of the Detroit Three. We have an interest 

in procuring some of the parts that they use. We have talked to 

them about buying efficient engines. We are not trying to innovate 

with a new internal combustion engine. They buy and build lots of 

them. They have excess capacity in some of their parts. And so we 

found them to be very productive partners in some of those dialogues. 

I think you have to recognize that they do have really good engineers, really good designers. There is a lot of skill set within those 

companies that is critically important to the industry as a whole. 

You know, I don’t want to get into what the structure of deploying those resources should be. But, you know, I don’t think we 

should lose sight of the amount of capacity, knowledge, and understanding that exists within those companies because they are important in that light. 

Mr. MCNERNEY. Thank you. 

With that, I yield back. 

The CHAIRMAN. Great. 

The gentleman’s time has expired. The Chair recognizes the 

gentlelady from California, Ms. Solis. 

Ms. SOLIS. Thank you, Mr. Chairman. 

I am really excited to be here to hear this discussion with all of 

you having your various opinions. I represent a very interesting 

part of the State in California, Southern California, which is just 


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a catastrophe right now in terms of air pollution and congestion; 

and we desperately need help in terms of our fleet vehicles. 

I want to just pose a question. No one here has talked about the 

infrastructure. In California right now, we have an initiative by 

our governor, Republican Governor Arnold Schwarzenegger, who 

says he wants us to turn to fuel-efficient vehicles, but we don’t 

have enough stations there to provide that capacity. There hasn’t 

been enough moneys made available to allow for these sorts of traditional stations that need to be set up in appropriate places. So 

it is beyond me that we can talk about new cars and what have 

you, but if we don’t have an infrastructure that is ready, available, 

and willing to make themselves available and accessible to our 

public, then what incentive is there for people in Los Angeles to 

move in that direction? 

That is one question. 

The other one, I represent a very poor working class district; and 

auto parts resonates with me in terms of where people have to get 

their parts. I hear that a lot. They have to go overseas, and then 

the reliability of those parts is not very good. They are not very efficient. They break down. You have to spend more money. I would 

hope that we can somehow begin to address that portion, that we 

begin to refocus our energies and maybe look at how we can develop those parts here and keep those jobs here. 

And then the green collar jobs aspect of it all. I know in South 

Central Los Angeles there was an experiment that is still going on 

with Toyota. Toyota wasn’t told by the Federal Government to 

come in and help train workers. They did it on their own; and I 

think they put in maybe a couple of million, $7 million I think, to 

help restart and provide free training for individuals in low-income, 

depressed areas. The Green Collar Job Act was really an idea also 

to try to get people into these new industries, not just in putting 

pieces together but also learning the technology. 

I have not heard anything from the Big Three about, you know, 

reinventing themselves in that manner. Because that is where I 

think the market has focused on in the last few years. I know they 

target the Latino community very heavily, the Big Three in terms 

of their SUVs and their pickups. Now we need to change that kind 

of behavior amongst our community as well. 

Toyota has done a great job. They do advertising. They do all 

kinds of things. They give incentives. They do charitable work. I 

don’t know that the Big Three have done enough to really include 

communities of color. So those are my issues. And I will let you 

speak. 

And Mr. Munger, one question for you, though. Of the 50,000 

cars that you are going to develop, what is the price, what is the 

unit price for one car, just right off the top? 

Mr. MUNGER. We have been talking to our customers about a 

price in the high 40,000s. In the high 40,000s, and they would save 

over $5,000 a year in fuel costs. 

Ms. SOLIS. That is still relatively high for an average community 

like mine, where the gross—well, their annual salaries range from 

20 to 30,000. So that is not affordable for people that I represent. 

Mr. CURLESS. Let me comment on that, too, about volumes. We 

have been hearing about the 50,000, and that is wonderful. And 


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what is going to happen is we need the Big Three to handle volume, and we need their understanding of manufacturing and technology to get to this volume. Because we are talking about millions 

of cars here, folks, millions of cars, not a hundred thousand. So 

when we talk about, for example, looking at automation, just to 

automate a factory, we don’t even want to start looking at it until 

we are talking about a hundred thousand parts. And, more typically, I hear about 800,000 parts. This is the kind of volumes that 

we are talking about to be affordable. 

And if we keep trying to buy this overseas, what do you think 

the foreign companies that our automobile company is sitting right 

next to those parts makers are doing? They are getting those parts 

at a lot less price than we are going to pay here in the United 

States. So we need to bring it here to the United States, and we 

have got to use our technology for volumes and for automation and 

for production. 

Mr. MUNGER. I just want to jump back on the pricing point a little bit. Because I think the question isn’t—you know, very few of 

the people you are referring to and customers globally actually buy 

a car in a single lump sum. So what we are talking about is actually a transition of paying a high fixed—you know, a high price for 

your gasoline and a lease payment for a fixed price more or less 

that is actually lower on a combined basis. 

So there is an education process that needs to take place to help 

people understand what it means to buy these vehicles. Because 

you are essentially paying for your gasoline up front. And there are 

policies that, you know, we have gotten pretty clear confidence 

from our customers that they will pay that price, because we do 

have a different demographic target, but also it is really important 

that, you know, things like feebates that transition or charge a fee 

for inefficient vehicles and provide a rebate for the most efficient 

vehicles can help bridge that gap to the consumer to understand 

it is actually an NPV-positive calculation. So they save money over 

the time they own the vehicle, but it is hard for consumers to understand that. 

Ms. SOLIS. Is that mostly for commercial, though? 

Mr. MORICI. He is not selling compact cars, though. He is selling a much larger commercial vehicle. So we are not pricing a $45,000 

vehicle against a Mazda Three or a Ford Focus. We are pricing it 

against a much larger vehicle. 

The other thing to remember is that when the Tandy personal computer first came out at Radio Shack it cost about $8,000. You 

have to have an opportunity to go down the commercialization 

curve of this technology. If we can start making them, then we will 

make them cheaper. So, you know, some patience is required. The 

automobile started out being a vehicle for the very wealthy or a 

commercial vehicle and then it got commercialized. Well, the same 

thing will happen here. 

As for parts factories that your constituents might work in or 

people that compete with might work in, the single most significant 

thing this body could do to assist them would be to fix the Chinese 

currency problem. That is what is moving all these factories over 

there. It creates a 45 percent subsidy on Chinese exports to this 

country. What is more, in order to sell cars in China you have to 


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make them there; and then they make you move your parts factories there. That is what we have to fix. We don’t have a free 

trade policy with China; we have a dumb trade policy. That has to 

be fixed, or none of this can be fixed. 

Mr. WARDLE. I would quickly like to respond, if I may, to your 

three questions about infrastructure, spare parts, and green collar 

training. 

I would like to remind the committee that when the Model T 

Ford was introduced in 1908, there were no filling stations. You 

had to buy your gasoline at a pharmacy. So I think it a chickenand-egg situation. As these new kinds of vehicles do come into the 

market, the infrastructure to support them will follow. 

When it comes to spare parts, a lot of these new generations of 

vehicles which are predominantly electric drive will require less 

spare parts. Electric motors and the drive trains associated with 

them are a lot less complicated, a lot more reliable than the traditional internal combustion engine. So your constituents in a few 

years’ time won’t be looking for spare water pumps and all of the 

other things that typically go wrong with older cars. 

Also, at the beginning of my career—when it comes to green collar training, you talked about how Toyota has been training and 

being good stewards. At the beginning of my career, I watched the 

British car industry crumble as the Japanese car manufacturers 

moved into Great Britain; and I saw a sea change in management 

attitudes as these companies came in. They took far more care to 

make sure that their new, often green in another sense of the word, 

vehicle workers, factory workers were trained properly. And it 

brought a completely different dynamic. So it is very, very important that the industry takes care of training its work forces. 

The CHAIRMAN. The gentlelady’s time has expired. 

We just have a few members here. I am going to, as a result, recognize members for a second round of questions. 

This is a very important and, actually, an historic panel in terms 

of what this discussion represents in terms of what our expectations should be for 15 billion, 34 billion, or, as Dr. Morici is saying, 

an infinity sign next to the amount of money which the automotive 

industry is going to request from us. Excuse me? 

Mr. MORICI. It is very big. 

The CHAIRMAN. A big, big number. 

So let me go down and ask each of you this question. In testimony last week, Mr. Mulally at Ford and Mr. Wagoner at General 

Motors submitted plans to the Congress. Here is what the plans 

said. 

For Ford, they said that they would make a 26 percent fleet improvement by 2012. They would make a 36 percent improvement 

in their fleet by 2015. 

Here is what Mr. Wagoner said that General Motors would do for 

the money, that they would average 37.3 miles per gallon in their 

cars by 2012 and 27.5 miles per gallon for their trucks by 2012. 

Now, some very smart people at the Natural Resources Defense 

Council translated these standards into grams of CO2 per mile. 

When they did that, they found that these plans actually meet the 

California standard, which is being debated over whether or not 

there should be a waiver for California to impose these standards. 


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So that actually translates into an equivalent of 36 miles per gallon 

by 2015. 

So the question is, going back to Ms. Claybrook, if they are testifying to the effect that they can meet that standard and they want 

money from us, and that is what their promise is to us, even if as 

Dr. Morici or others might say they might try to wiggle out of it, 

doesn’t it make sense to put their promises technologically into the 

law as the condition of getting the money so that at least Ms. 

Claybrook and others can sue them, the NRDC, the Sierra Club 

and others, if they don’t meet that standard, so that they know 

that there will be some accountability? 

Let’s go down quickly and have each one of you answer that 

question. President Bush is saying he really doesn’t want to go in 

that direction. But we are going to have a big debate about this in 

the next 24 hours. That is the question of whether or not we should 

have these conditions or some type of conditions attached in terms 

of what the goals should be of these industries from a mandated 

perspective, given the fact that they are saying that they can meet 

these standards. 

Ms. Claybrook. 

Ms. CLAYBROOK. They should be in the law. 

The CHAIRMAN. They should be in the law. 

Mr. Munger, in the law, not in the law? 

Ms. CLAYBROOK. In the law for all companies, by the way. 

The CHAIRMAN. In the law for all companies. Good. 

In the law. 

Mr. MUNGER. In the law for all companies. 

The CHAIRMAN. In the law for all companies. Dr. Morici. 

Mr. MORICI. In the law for all companies, including the transplants. Make sure that ‘‘all’’ means including the transplants. 

The CHAIRMAN. ‘‘Transplants’’ means? 

Mr. MORICI. The Japanese car manufacturers that operate here, 

the Germans, the Koreans, all those people that make cars here. 

The CHAIRMAN. Okay. Good. 

Mr. Wardle. 

Mr. WARDLE. Yes, I think they should be included in the law. 

However, I think that the standards, the figures that you have just 

described are woefully unimaginative for the future. There are companies already that can deliver cars with that corporate average 

fleet. 

The CHAIRMAN. Mr. Wardle, you and Ms. Claybrook have already 

made this point; and that is why we have you testify. You are 

idealists who are testifying. But President Kennedy said to people 

who looked like me when I was 14 years old that our job in politics 

was to be idealists without illusions, and that is what that 15-foot 

gap between the witness table and those of us who are sitting up 

there represents. And so we try to do the best we can, given the 

incredible political opposition that is presented by very powerful institutions, including someone who sits in the Oval Office of the 

United States of America right now. 

So I agree with your vision. I thank you for it, and I thank Ms. 

Claybrook. We are trying here to take advantage of a political opportunity as idealists without illusions. And so, yes, I would do 

more myself if I could, wearing my idealist cap, but I don’t have 


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that luxury right now. I have to try to figure out what we might 

be able to get done in the next 24 hours or the next 24 days or so 

when we come back and revisit the issue. 

Mr. Curless. 

Mr. CURLESS. Yes. You need to put performance measures in. Absolutely. 

The CHAIRMAN. And would you take the performance measures 

that the industry—— 

Mr. CURLESS. Absolutely. That is the way to do it. Now, you may 

want to go back and double-check them one more time, but it 

should be there. 

And, technologically speaking, they are going to be able to do 

this. It is a question of just exactly what vehicles they are talking 

about and how the mix looks. But, in the end, they can achieve 

this; and those measures need to be in the law. 

Ms. CLAYBROOK. Mr. Chairman? 

The CHAIRMAN. Yes, Ms. Claybrook. 

Ms. CLAYBROOK. So that is through 2015. But the existing standards go through 2020. So what are you going to do now? The existing standards through 2020 are 35 MPG. They say 36 by 2015. So 

what are you going to do between 2015 and 2020 in the law? 

The CHAIRMAN. I agree with you, Ms. Claybrook. We will try to 

figure that out. But, as President Kennedy used to say, the fact 

that we can’t make progress on all fronts doesn’t mean that we 

shouldn’t make progress on any fronts. So let’s look at 2015 right 

now. If we get them to this standard by 2015, they are going to be 

hard pressed to say they can’t go further than that by 2020. 

Right now, you are saying that 35 miles per gallon by 2020 is 

not a good enough goal. How about 36 by 2015? You know, we 

should be having some consensus that if they say they can do it 

that we will hold them to do that. But we know 36 won’t be the 

standard in 2020. We know it will be 38; it will be 39; it will be 

40, 41, 42. So we start at 36. And I think that is probably a good 

way of having this discussion. 

Mr. MUNGER. Or—I am sorry, Dr. Morici. 

Mr. MORICI. Please forgive me for reversing roles with you, but 

then that brings me to the next question, is what do we do when 

these guys 2 years from now are saying we are making all these 

efforts and all these bad things have happened to us and we need 

yet even more money than you have given us so we can meet these 

goals that you are requiring of us? Because you know the reason 

they wouldn’t want to meet them was not because they would— 

they are not inherently evil people. 

The CHAIRMAN. No. 

Mr. MORICI. But the reality is if the price of gasoline sinks and 

stays at a buck and a half a gallon, then all of a sudden those big 

pickup trucks start looking good again, and they can make a lot of 

money at them. 

The CHAIRMAN. Can I say this, Dr. Morici? And again Ms. 

Claybrook already made this point. I will restate it. 

Which is that, in 1975, over the objection of the auto industry, 

we doubled the fuel economy standards from 13 to 27 miles per gallon. Now, at that point, we had an oil crisis. We had another one 

in 1979, 1980. However, as she pointed out, beginning in 1977, 


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when the rules began to be implemented, by the time we reached 

1985–1986 we had gone from 13 to 27 miles per gallon. Now, a lot 

of that in the 1980s was as the price of gasoline and a barrel of 

oil went down to $12 a barrel. But they were under a mandate, a 

Federal mandate. 

Now, you say, well, what penalties are they going to have imposed if they don’t have any money? All of that, I understand everything you are saying, Dr. Morici. But it happened once. And 

then successfully they blocked any further increase in the fuel 

economy standards from 1986–1987, all the way until December of 

2007 when my amendment passed raising it to 35 miles per gallon. 

Now, believe it or not, it had gone backwards to 25 miles per gallon by 2007. So that 10-mile per gallon increase was the best we 

could do. Okay? Now, if there is a problem in the subsequent years, 

at least we will have the law on the books. 

Mr. MORICI. I agree with you. What I am saying is watch out for 

them to come back and say that we need more money to do this, 

you know. 

The CHAIRMAN. I understand what you are saying, Dr. Morici. 

Okay? The recidivism rate is very high in the auto industry. Okay. 

If that is your point, I have served in Congress. This is my 33rd 

year sitting on the very same committee, the Energy Committee. 

Okay? So I am aware. I am actually an eyewitness to each one of 

the hearings that has been held on the subject for 33 years. I don’t 

think anyone else in the room, with the exception of Ms. Claybrook, 

can say that. Okay? So that gives me, you know, a perspective that 

understands that I could very much look like Charlie Brown with 

Lucy pulling the football. 

But that is why you need a law. Okay? You don’t need a promise. 

That is her point. And you are helping us to say let’s turn the 

promise into legislative language that we then attach, and we 

might not do it this round, but they are coming back again real 

soon, okay? 

Mr. MORICI. You watch. 

The CHAIRMAN. No, again, I have watched over and over and 

over again. Okay. The law actually called for—— 

Mr. MORICI. Like a kid with an allowance. 

The CHAIRMAN. You need to attach conditions. That is what we 

are talking about. And then I think that empowers, Dr. Morici, the 

technologists in the companies, that empowers the younger generation, that empowers the people who thus far have been walled out 

by the people who went to Harvard Business School. And, by the 

way, I love Harvard Business School. I love the Sloan School up in 

my district. I love them. They are great people. I prefer, 

though—— 

Mr. MORICI. Don’t you love the Maryland Business School? 

The CHAIRMAN. Excuse me? 

Mr. MORICI. Don’t you love the University of Maryland Business 

School? 

The CHAIRMAN. I love the University of Maryland Business 

School. 

Mr. MORICI. I want to make sure you get that in. 

The CHAIRMAN. But each of them pretty much gets a three-byfive card that shows you how you make money. We are trying to 


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empower the people that go to MIT or the University of Maryland, 

okay—that is the Google boy’s father over here at the University 

of Maryland, who is not in the financial sector but over here in the 

technological sector, okay—Sergey Brin’s father—and say to the 

technological people at the University of Maryland or at MIT or at 

Harvard, now you are in control, you know. Because they are going 

to have to talk to you, the people over at the B school or the Sloan 

school, huh, as to what you are going to have to now talk about 

in terms of improving the technology, right? 

Right now, they just straight-arm them. They are out of the 

room. They are not listening to you. You know, we don’t have to 

improve anything. Okay? 

So that is really what we are talking about. How do we create 

a formula that accomplishes that goal? 

So my—you know, my goal here is just to find a way of holding 

them to what they are saying right now they are going to do, like 

an allowance, okay? There has got to be some penalty. There has 

got to be something you are going to take away. You are grounded. 

If you don’t perform on the allowance, okay, you are grounded for 

2 weeks. And then you have to make it stick, right? So we need 

to find a way of doing that. When we move forward, you know, we 

just have to accomplish that goal. 

I am just going to ask one more quick question right now. And 

that is that, Dr. Morici, you proposed that when we provide the assistance to the companies that they perform the R&D and their 

first large production runs in the United States. The condition 

would be that beneficiaries share their patents at reasonable costs 

with other companies who will be here in the United States making 

vehicles. You suggest that this could attract producers from around 

the world and rejuvenate the U.S. auto supply chain. Do you think 

that people would continue to develop these new technologies if the 

large profit margin disappeared? 

And I would like you to just answer that question, so that we 

don’t kind of create something that actually doesn’t attract anyone 

to that fund. 

Mr. MORICI. I think that the reasonable has to be reasonable. If 

you come up with a great idea and it is worth something, the other 

car companies have access to it, but they have to pay for it as well. 

And that worked in Japan. It worked just fine. That is what they 

did in the 1970s and 1980s with their technology program. 

If we require that Americans drive vehicles with high mileage 

standards and we provide R&D incentives to develop the products 

here, I don’t think we are going to have much trouble—the reason 

I want to do that is I want to get Toyota, Nissan, and Honda involved because we want access to their technology. We want to encourage them to locate more of what they do here. 

The CHAIRMAN. Okay. And one of the suggestions on the panel 

was that these factories that General Motors and Ford and Chrysler have right now that they might not be using in the future 

might be made available—I think I heard someone say that—to 

people like Mr. Munger and others. Okay? So it just doesn’t get 

shut down, but we move it over to the new companies. Was that 

you, Mr. Wardle? Somebody made that proposal. 

Mr. WARDLE. Yes, I certainly believe that. 


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The CHAIRMAN. So talk about that concept in the context of Mr. 

Munger and Tesla and these other companies. 

Mr. WARDLE. There is no doubt that these new companies have 

already worked out the products that we need; and, at the same 

time, the legacy auto industry certainly has a lot of expertise and 

capability of turning products into high-volume manufactured vehicles. And so I think it would be a missed opportunity if some way 

was not found of harnessing those idle capabilities in the legacy industry to the benefit of the start-up companies so long as none of 

the defensive attitudes, if you like, of the legacy industry would dilute in any way the innovation of the start-up companies. So it has 

to be the right relationship so that the best parts of the current 

auto industry are made available to the innovative aspects of entrepreneurial start-up companies. 

The CHAIRMAN. Great. And I will just give you the quote from 

the White House press spokesperson Perino today. As opposed to 

building the kind of the promise of the industry into the law, she 

said, quote, today, if the viability advisor says that they are not 

making progress, then that company, the automaker, would have 

to pay the taxpayer back right away. So there is the incentive for 

everybody to work hard to make this work. 

Good enough for you, Ms. Claybrook? 

Ms. CLAYBROOK. No. 

The CHAIRMAN. Good enough for you, Mr. Munger? 

Mr. MUNGER. It is not obvious how you repay a loan when it is 

a loan you require. 

The CHAIRMAN. Dr. Morici, good enough for you? 

Mr. MORICI. No, it is not good enough for me. I want more than 

that. 

The CHAIRMAN. Okay. Thank you. 

Mr. Wardle. Good enough for you? 

Mr. WARDLE. No. 

The CHAIRMAN. No. 

Mr. WARDLE. No. 

The CHAIRMAN. Thank you. 

Mr. Curless was shaking his head vigorously sideways. So you 

know what his answer was. 

Let me now turn and recognize the gentlelady from Michigan, 

Mrs. Miller. 

Mrs. MILLER. Thank you, Mr. Chairman; and I appreciate all of 

the witnesses and some of the testimony that has been given here. 

And to my colleague, Mr. Cleaver from Missouri, the Detroit 

Lions are having a rather tough season this year along with the 

domestic auto industry, but, hey, how about those Red Wings? 

You know, there has been some talk about the CAFE standards. 

I think uniformity is key. It was interesting for us to note—I realize I sound a little defensive here again—interesting to note that 

Nissan got a loophole in the CAFE standards last time. I am not 

quite sure how all of that worked out. But I do think uniformity 

is a key. 

And I appreciate and we are going to see how all of this is going 

to work when you have various States coming up with their own 

emission standards, and as part of the law it will be—it will preclude the auto industry from any litigation trying to stop that. 


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I do wonder sometimes—I mean, for instance, if you took a— 

maybe an industry from California, from Hollywood, I mean, if you 

were a movie maker and every single State in the Union could 

have their own determination of what the rating was on a movie, 

how would you market that movie? PG in some States and R in 

others and these kind of things. So I do think uniformity is a key, 

but I recognize that there is a bit of a double standard here. 

But my question would be—and I appreciated some of the comments Mr. Wardle was making about in Britain and the experience 

that you had there when some of the transplants, as we call them 

here, came into your country. 

But it seems to me that our Nation has not—and our Congress 

has not done as good a job as we should have of having a manufacturing policy, really, or a comprehensive, cohesive industrial policy. 

For instance, in Britain now we see Ford manufacturing there a 

diesel engine which is apparently getting—can get 65 miles per gallon there, but yet there was a concerted effort to incent people— 

deincent them to purchase gasoline and to incent them to purchase 

diesel as part of sort of the country’s policy and through the EU 

as well. 

I am just not quite sure who I am asking this question of, but 

it does seem to be that if our Nation had a more comprehensive 

industrial policy and a manufacturing policy, we could advantage 

ourselves in many ways because of this crisis that we are finding 

ourselves faced with now as we are busy putting all of these laws 

an oversight and et cetera. I think we all want the same thing at 

the end. Maybe we could look at it in a little broader vision of how 

we can help our country go forward with such a policy. 

Mr. MORICI. Mrs. Miller, we have a manufacturing policy in the 

United States. We have an anti-industrial policy. It is that simple. 

Whether we have a Democratic administration or a Republican administration, we get the same Treasury Secretary. We get Bob 

Rubin in one form or another. The guys from Wharton on up 

through the Charles River don’t know much about factories, aren’t 

much interested in them, and don’t really care very much. Okay. 

As a consequence, I have watched this body, I have urged, I have 

written op ed articles, I have sent you press releases over and over 

again about our toleration of the Chinese currency policy and how 

it is devastating your part of the country. You know, nothing ever 

happens. 

The inability to move on trade policy has done more damage to 

the manufacturing base in the United States than can possibly be 

managed by one man or woman. But we have tolerated. When Wall 

Street gets in trouble, you guys passed a $700 billion bailout, which 

gave them essentially all the money they wanted, and then some, 

and whatever you don’t give them, the Federal Reserve gives them, 

with virtually no strings. They haven’t done any of the responsible 

things to speak of necessary to reopen credit markets, such as reopening the securitization pipeline from good, sound regional banks 

to fixed-income investors. That goes on and on and on. 

So we have a policy. Somebody said to me, People don’t want to 

study engineering in this country. They are too lazy. They are not 

too lazy. There is a reason the finance department is full. The same 

math that is in an engineering textbook or physics textbook is in 


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a finance textbook. I know. I have studied it. But we have lots of 

kids who want to study finance because that is where the rewards 

are in our society and, to a large measure, that is a product of public policy. Engineering doesn’t pay out because manufacturing 

doesn’t pay out. Manufacturing doesn’t pay out because we have a 

dumb trade policy. 

Mrs. MILLER. Mr. Wardle. 

Mr. WARDLE. Yes. I see a lot of parallels, as I mentioned before, 

between what happened in the UK and what is happening in Detroit now, largely because of inept management in the British car 

industry that refused to acknowledge that overseas companies were 

developing products that UK consumers actually needed bad. But 

one of the mistakes I think that was made in Britain, which hopefully can be avoided in the U.S., was that the government intervention in the British car industry was of the wrong kind. What we 

really need here is clear direction and policy from government, 

which I believe is something that is always needed, which industry 

can respond to, which is why I think that, first of all, we need to 

set up what I would say is a mobility czar to look at this situation 

rather than an auto czar, so that it is quite clear what kind of 

transportation future that we have so that we know—and from 

that, to direct policy so that everybody knows what the hurdles are 

that they have to jump over or what the parameters are that they 

have to operate their businesses in. 

And so it would be wrong to directly intervene with the existing 

car industry through too much internal messing around, but the 

parameters need to be very clear through government legislation 

and policy. That needs to come from very clear oversight as to what 

are the right answers. That is something that was never established in Britain in the 1970s. Nobody actually stated what the 

clear objectives were for the rebirth of the British car industry. So 

it didn’t happen. 

Ms. CLAYBROOK. Mrs. Miller, I would like to associate myself 

with both of those remarks and say that I do hope that this committee and, Mr. Chairman, this committee will have a hearing on 

transportation policy. Because we actually don’t have a transportation policy in this system, in this country, and the President-elect 

has just announced that he wants to have a huge infrastructure expenditure. If you are going to spend a huge amount of more money 

on infrastructure, you better figure out what infrastructure you 

want and what really makes a difference. We have bridges and 

roads that are in disrepair, admittedly, but we don’t have mass 

transit systems that go to the airport, for example. 

One of the provisions in this legislation that you are going to be 

voting on, section 13, requires the auto manufacturers to study 

whether or not they should get involved in producing mass transittype vehicles, whether it is rail or whether it is urban transit as 

a way to expand the scope and the view of their manufacturing activities. 

I would urge that this committee hold some very soon hearings 

because the infrastructure committee—one of the problems with 

the Congress, it is divided up. The public works crowd is a different 

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structure Committee to look at transportation policy and what is 

it that we really want. What makes a difference. 

People in this country are really frustrated with the changes that 

have been made by the airline industry because they are in financial trouble. Now you can’t get from here to there without going 

through three different cities in an airplane and changing planes. 

So there is a lot of opportunity here in the middle of this crisis as 

well for looking at overall transportation policy. 

I would like to make one last comment, Mrs. Miller, about something you said about the States setting standards. The reason that 

advocates like myself have favored that is because the lobbies have 

overtaken the Congress and stopped any improvement in fuel economy from 1990 when we lost a bill in a filibuster by two votes that 

would have by 2001 have required 40 miles per gallon fuel economy, which would have—— 

Mrs. MILLER. Thank you. 

Ms. CLAYBROOK. If I could just say, the way that you can get 

around having it be variable is the manufacturers meet the highest 

standard. So if California sets the highest standard, then there are 

not a lot of different standards you have to meet. It is the one 

standard. 

Mrs. MILLER. Just one more question, with the Chair’s indulgence. I want to pick up on what has been talked about with the 

trade policies and some of the disadvantages that our manufacturing companies have run into as a result of that. I want to mention about MAG again. My question is to Mr. Curless. I think it 

is important to note MAG really was Cross and a number of other 

various other manufacturers that you have consolidated with. As 

you mentioned, you are the only remaining U.S. powertrain supplier to the automotive industry and the third largest machine supplier in the world. Yet, if you go into some of the auto plants of 

the transplants here, the machinery that they use there, do you 

find any American-produced machinery in those plants, or are they 

produced in their native nations? If there are no American-produced machinery in those plants, why not? 

Mr. CURLESS. That is true. From Japan, the Japanese transplants come here, will not buy MAG equipment. That is our facilities here in the States, in Europe, around the world. We do supply 

the equipment though to people like the Korean transplants here. 

So, like the Hyundai engine, that is all MAG equipment, and they 

are produced in that engine, which is great. That shows that we 

can do it. We have the affordability factor to go with putting that 

equipment in there. But it is very clear the Japanese will not work 

with us. 

Now China is going to be a different picture again. That is yet 

to be decided, what is going to come up there. But at this point I 

would say there is a good chance we won’t get some of that business. On the other hand, we get a great deal of business out of Europe, we get strong business through all the other ones in the 

United States, and then there are the other companies, the heavy 

equipment suppliers, the big diesel engines for Caterpillar and 

Cummins and other companies. We get all that business as well. 

It is just a matter of what country you are really talking about 

when you are dealing with these transplants. 


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Mrs. MILLER. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentlelady’s time has expired. 

The Chair recognizes the gentleman from Missouri, Mr. Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman. I want to express real 

appreciation for you today. This has been very helpful to me, although I think Dr. Morici should come here with a bit more passion 

when you are testifying before Congress. 

Mr. MORICI. You should have seen me when I was 35. 

The CHAIRMAN. Would the gentleman yield? I have the third 

most Italian district, so imagine a whole district of people like that. 

Mr. MORICI. You don’t know how much more I just decided to 

like you. 

The CHAIRMAN. I am used to this. 

Mr. CLEAVER. A friend of mine, Hosea Haywood, said to me yesterday, and he is in the automobile industry and he sells automobiles, and he said that a year ago he could take 12 applications 

to one of the financing arms and he would get two or three approved. Today, he takes 12 and he gets none approved. 

The crisis that we are in now is a credit crisis. One of my complaints with the Big Three is that even if we give them money, 

even if we make this bridge loan, they are still going to have a 

problem because GMAC, Chrysler financing and Ford financing are 

all three requiring a credit score of 700. You know where I am 

going. 

If there is a credit crisis with the Big Three, and they all have 

financing arms, Mr. Munger, how in the world are you going to be 

able to make it without a financing arm? If we don’t figure out a 

way to put money into the financing arms, maybe the industry can 

manufacture more cars but the public still won’t be able to buy 

them because there is no credit, and if you are producing trucks 

with a unit price of $25,000, you are still going to have difficulty, 

and you will have a much more difficult time than the Big Three. 

Am I right? 

Mr. MUNGER. I hope that by 2012 our credit crisis has passed. 

But I think you are very accurate in highlighting the issue. Chrysler was actually explicit about the need for TARP funds for Chrysler Financial. There is a differentiation where essentially the auto 

industry funds itself out of those affiliated lending arms and they 

aren’t able to lend because they don’t have access to capital. They 

have been hurt by the same things. That is why you are seeing 

them apply to become bank holding companies or do other actions 

to activate their access to credit to facilitate the flow of vehicles. 

You do have the manufacturing businesses losing money, but 

there is need for assistance on the financial side. The risk profile 

is very different for a financing entity. That is much more of a 

TARP situation. 

Mr. CLEAVER. Where will the potential customers come from? I 

mean, where will they get financing for your vehicles? 

Mr. MUNGER. We have a commercial offering so it is a totally different financing situation. 

Mr. CLEAVER. So they will go to depository banks. 

Mr. MUNGER. They have their own lines of credit and there are 

some other entities that provide credit to that market. It will still 


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benefit from a smoother, more operating credit market, but we 

have some time to get there. 

Mr. CLEAVER. All right. 

Mr. WARDLE. At the risk of sounding like an idealist, I would 

point out that we see that there are aspects of future mobility systems where direct ownership of vehicles and access to mobility systems is not as necessary as it is today. I think there is a good case 

for looking at in the longer term how people can access personal 

mobility without having to make a large loan in the first place 

through leasing programs or other forms of shared ownership. 

Mr. CLEAVER. Dr. Morici. 

Mr. MORICI. The securitization problem is really at the root of 

the automobile financing issue, and that is that historically the finance companies associated with the Detroit Three made the better 

loans. They are raising their credit scores because they have less 

money to lend so they are giving it to their best customers. But if 

we don’t solve the securitization problem, we simply will not solve 

the problem of the automobile industry or the student loan issue, 

or what have you, and that has to be solved if we are going to pull 

out of this recession. 

It is really not, I know, the scope of this committee, but we need 

to put conditions on the money we are giving the banks. For example, the banks buying smaller banks does not increase the deposit 

base. And the deposit base in the United States is insufficient to 

finance all the auto loans, home mortgages, and what have you, 

business loans. It has to be financed by accessing fixed-income investors. We haven’t imposed those conditions, the Federal Reserve 

hasn’t imposed those conditions, and until it is prepared to do so, 

we are not going to solve anybody’s problems. It is that simple. 

I am hopeful that by 2010—if we haven’t solved this problem by 

2012, we are in the soup in a much bigger way than we discussed 

today. 

Mr. CLEAVER. Thank you very much. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman’s time has expired. 

I am going to give each one of you 1 minute to summarize to the 

Select Committee and to the Nation as to what you think should 

happen in terms of automotive industry and its relationship with 

the Federal Government, the taxpayers of our country, and their 

justifiable expectations if they are going to become partners with 

the Big Three financially. We will go in reverse order of our opening statements. We will begin with you, Mr. Curless. 

Mr. CURLESS. Thank you. First off, I want to reiterate that bailout funds need to be made available to the Big Three. Certainly for 

the short term, we have an economic crisis going on here, and a 

lot of the discussions we have had here today have been about the 

next generation vehicle and the standards and the laws and where 

do we go for the future and can we get our milestones in and all 

that. We need to strive for those things but, let’s face it, if we keep 

producing automobiles and there is no one out there to buy them, 

we are just going to watch that money go down the tubes, not because the automotive companies did a bad thing, it is because our 

whole economy did a bad thing. 

And so we need to look at both aspects of it and maybe do some 

separation there and make sure that we look at both the short 


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term and the long term. So from MAG’s viewpoint or from a manufacturing company’s viewpoint we need those companies there. We 

need the Big Three. We need the volume. We need to see these millions of automobiles being produced, not just 50,000 or 80,000 or 

something like that. 

So I want to encourage us to try to put more tax incentives in, 

encourage us to provide other types of incentives to the entire supply chain that is working with the automotive industry, and let’s 

see if we can get this off the ground as far as looking at the next 

generation while we solve our economic crisis here. Thank you. 

The CHAIRMAN. Thank you, Mr. Curless, very much. 

Mr. Wardle. 

Mr. WARDLE. Yes. I recommend funding for a powerful visionary 

multidisciplinary commission to define an innovative and far-reaching vision for America over the next few decades; funding in investment in building a far-reaching integrated transportation network 

across the Nation, which a revitalized American car industry could 

participate in; and financial assistance to help the innovative startup companies get their products to market. 

When these three things are achieved, then we can talk about 

the necessary financial assistance for the current auto industry as 

it adapts to a new business model that will support this overall vision. 

I would also like to say my colleagues and I would be very happy 

to work with the committee to try and define what those requests 

or initiatives would be to help the so-called little guys in the automotive industry right now. 

The CHAIRMAN. We thank you, Mr. Wardle, very much, and your 

Art Center College of Design in Pasadena, California. Back in 

1962, when the Beach Boys were singing The Little Old Lady from 

Pasadena: ‘‘go, granny, go granny, go, granny, go,’’ no one could 

catch her vehicle, hopefully out of Pasadena will come that new vehicle that we keep selling around the world that is a model for our 

future, our 21st century, not 100 days, as Dr. Morici said, but 100 

years. 

Dr. Morici. 

Mr. MORICI. As a realist and not an idealist, whether we are 

talking about a bailout or a structured chapter 11, it is important 

to provide the industry with the right incentives to create a market 

here for high-mileage vehicles through higher mileage requirements for cars; to encourage the rapid deployment of higher mileage vehicles with the clunker subsidy to make it possible for people 

to trade in and get rid of the low mileage vehicles as quickly as 

possible; to provide development assistance for both vehicle manufacturers and component makers, and require them to share their 

knowledge with one another at a good return so that they are encouraged to continue developing technology, and to require vehicles 

and components benefiting from such incentives to be made here, 

at least in their first commercial runs so that we have an industrial policy that is positive. Finally, we do something about currency manipulation and Asian trade policies that hurt our industries. 

The CHAIRMAN. Thank you, Dr. Morici. 

Mr. Munger. 


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Mr. MUNGER. We are at a unique time where industrial need is 

aligning with the national interest. It is in our interest to have an 

industry that builds more efficient vehicles to lead to cleaner air, 

reduce carbon emissions, freedom from imported oil, and an industry that leads in innovation. 

It is important to link accelerating efficiency with any bailout 

that goes along to the Detroit Three. The industry has the skills 

and the knowledge to do things beyond what they have done to 

date. There are also existing funding mechanisms in place to help 

the industry and to help smaller companies achieve those goals. 

Companies like Bright Automotive are prepared to accelerate this 

process independently of what is happening in Detroit. But it is important for the Nation that we work together, come up with a solution and achieve a more independent and oil-free country. 

The CHAIRMAN. Thank you, Mr. Munger. 

Ms. Claybrook. 

Ms. CLAYBROOK. Thank you very much, Mr. Chairman, for the 

opportunity to testify. In the short term, I think that this legislation ought to pass as rapidly as possible, but I would urge the inclusion of a goal for fuel economies we have discussed and also that 

the citizens be more involved in this process by being defined as 

interested parties. We are the ones that are supposed to buy the 

vehicles, right? That is the one group that has been left out of this 

legislation and also left out are any requirements for them to take 

into consideration when they do this, redesign the safety rules that 

are pending in the Department of Transportation. 

The longer term issue, I think, is huge. I think you have got 

some great recommendations today. I agree with preserving the 

Green Car Factory Fund so that it is the full measure of the $25 

billion so that it can support innovative companies such as those 

we have heard from today. And that the stimulus package include 

refunding that money so that it is available. And that a transportation policy be looked at in the course of discussing the infrastructure future of this Nation in terms of transportation, and I think 

that can only help the U.S. auto industry, particularly if it gets 

into some of the mass transit issues. 

Finally, I would say that we need more innovation as well about 

what we do in terms of personal transportation. There have been 

proposals on the table, for example, to not allow cars into the inner 

city and have people jump into free, available, you put a couple 

quarters in the box and get into an electric car and that is all that 

can come into the city, and get rid of some of the pollution. So it 

is an encouragement for people to think themselves differently 

about what kind of car they want and how they use their car. That 

is certainly going to influence the industry as well. 

The CHAIRMAN. Thank you. We thank each of you. 

Now some people are saying, Can we do this? Are we being unrealistic? I remember back as the chairman of the Telecommunications Committee back in 1991, 1992, 1993, 1994, when I was introducing legislation to move from narrow band to broadband. The 

telephone companies, the bigger companies said, We can’t do it. 

The cable companies, Going to be very difficult. Now, mind you, the 

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nologies 15 years before and had won awards in basic research for 

their invention, but they had not deployed them yet. 

And so when finally that law passed in 1996, the Telecommunications Act of 1996, it gave a lot of power to people who wanted 

to innovate because there was a brand new competitive paradigm 

created in the telecommunications sector. If someone told you that 

10 years later the new language would be Google, eBay, Amazon, 

YouTube, and that a younger generation wouldn’t know anything 

but that language just 10 years later, you would have said that is 

completely unrealistic. But what had happened there was because 

of that law an unleashing of innovation, of competitiveness, that 

created between 2 and 4 million new jobs in our country. I am very 

proud of that. 

I think the same thing is going to happen here in the energy and 

the transportation sector. I think if we get the model correct, we 

are not going to be trying to put a man on the moon, as Mr. 

Munger said. The technology is largely there. We are talking about 

batteries. We are talking about technologies that are much more 

available than that which President Kennedy challenged us to invent in the 1960s to put a man on the moon, and to return them. 

So I think that this is a great opportunity for our country disguised as a crisis. Because if we don’t meet this challenge in a 

timely fashion, we will be importing all of these vehicles from 

India, from China, from Japan, and from Europe. And that would 

be the tragedy. 

So we actually have this warning hopefully in time for us to 

change the way in which we view our manufacturing sector and 

what we can do in order to meet this marketplace of 6 billion people who look at us as the innovators. We are 4 percent of the population in the world. The 96 percent of the rest of the world sees us 

as the technological giant. That is why they want their children to 

go to our colleges and our graduate schools, because they think we 

are the best. We must now meet those expectations. If we do so, 

then I believe that 10 years from now we will look back and we 

will have actually put us on a path to solve the global warming and 

energy independence issues that we have ignored for an entire generation. 

It is the kind of advice that you have been giving our Select 

Committee today, however, that the leaders of our country must 

listen to if we are to accomplish that goal. But if they do, I am confident, like we did in the telecommunications sector, that we can 

empower the Sergey Brins, the sons of professors at the University 

of Maryland, to go out and to reinvent the way in which we communicate. 

With that final compliment to the University of Maryland, I 

thank you all for testifying. This hearing is adjourned. Thank you. 

[Whereupon, at 12:30 p.m., the committee was adjourned.] 


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