Panel II of a Hearing of the House Financial Services Committee - Stabilizing the Financial Condition of the American Automobile Industry

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REP. GREGORY MEEKS (D-NY): Thank you, Mr. Chair.

I was listening to some of the questions by Mr. Watt, and I'm trying to be clear on the utilization of the money. I'm one who believes that, you know, given the close to 5 million jobs, you know, whether direct or related, that we could lose, that this industry is tremendously important.

But I am concerned about how the money is going to be spent. And I know that, for example, in some places or areas in the country where there's no manufacturing but there are dealerships which employ a substantial amount of people and listening to some of the responses, it is that dealerships are going to shrink substantially. And I don't know whether or not there are any plans with reference to the dollars that the taxpayers will be lending you to help stabilize dealerships and others because that becomes part of the local community on both sides, where they go buy their cars and also employment for them.

And so I'm trying to think, is there any plan, with this taxpayer money, to keep and to preserve dealerships or to strengthen dealerships? That's my first question.

MR. WAGONER: Maybe I could offer some perspective on it. I think, generally, people who look at the industry as that those of us who have been around a long time have probably more dealers than we can support the current volume. The economics of the dealership business now require a higher scale than it did a few years ago, technical training and technical equipment they have to have.

So what we've been doing is working with our dealers. But I highlight, each dealer makes their call whether they want to stay in business or not. We do have a number of dealers who, with the economic downturn, with the change in generations, who have said, hey, I would like to get out of the business. What we try to do in that case is have them work with another local dealer, for example, to try to take over their business, take over their customer responsibilities, although it has to be done in cooperation with individual dealers. So we do need to try to do that on an orderly and constructive way.

REP. MEEKS: And encourage mergers. I mean, this is the day and age of mergers.

MR. WAGONER: And we do provide, in some cases, support for that to be done. But I can assure you, in virtually every significant community in the United States, we have and will continue to have dealer representation in some cases. Rather than three Pontiac or standalone Pontiac, Buick and GMC stores, there might be one store that has all three franchises so the retailer has a chance to make a business profit.

So you know, as part of our normal business, we have some budget to facilitate those kind of things happening.

REP. MEEKS: Yesterday at the Senate committee hearing, I think I heard a number of senators reference Honda made in Indiana as a benchmark for the most-efficient cost to produce and for profitability. How, with this taxpayer money, will our three major industries be able to compete with Honda made in Indiana? Because you know, part of what we haven't discussed is the American consumer, nowadays, a lot of time they're buying what they believe is the best vehicles cost-wise as well as the liability-wise, and that's why others got into our market. How will this $25 billion help you compete so that we're not back here again with Honda made in Indiana?

MR. NARDELLI: Sir, if you're familiar with the Harber Report -- and I think Mr. Gettelfinger has it -- the Chrysler team, long before I got there, had been on a path to improve the overall efficiencies of our manufacturing plants as measured in hours to assemble. This year, I'm proud to say that we are spot on Toyota relative to the hours required to produce a vehicle. If you look at our contract that was just negotiated with the forward-looking rate times those hours, we think we can be extremely competitive.

I would tell you, sir, to your other question, the dealer council that's here with me in the room would say the most important thing we can do for them is to have a financially sound business with a continuous flow of products and the kinds of investments we're making in the quality, reliability, durability (finish ?) of our products where some of that money you questioned would go into 3(00 dollars), 4(00 dollars), 500 dollars per vehicle to enhance the overall aspirational aspects for our consumers.

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