maintained the strong competitive advantage we have in rural areas, in some cases and@ and have a structured package of transition incentives that intends to benefit them relative to their alternatives. of the 1380 letters that were sent early this year, 647 have been returned already signed. we have had ten who said they are not able to sign it and the

remainder of them, we're working with them every day. we also have an appeal process to consider one by one if we made mistakes because we rightfully recognize we do make mistakes and we deal with each and every one of those individually. yes, consolidations will bring cost savings, a smaller more healthy dealer network reduces gm's cost, primarily related to support we provide for information technology, salesperson incentives, sales service and training, parts and advertising. our total cost of distribution is roughly $1,000 per vehicle or a multi billion dollar expense for the company. but this effort is all about creating a healthy, stronger and profitable dealer network, one that improves a brand image and increases the opportunity for sales and service provided by our high performing dealers. it's about focusing our resources on our top performers and core brands so we can attract and retain more private capital and the best dealer operators and yes, new customers from our competitors. the end result will be between 3500 and 3800 u.s. gm dealers by

tend of 2010 depending on attrition levels with a retail share of a little over 17% and our objective is in 2010 a retail market of just over ten million units with fleet on top of that. that means that the number of units sold per dealer would nearly double. compared to today's levels, and provide a greater return on the investment. even with the cut-backs, gm will still have the biggest, most extensive dealer network in the country, more than any of our competitors, including toyota, honda, nissan, ford and chrysler. to conclude, this is one of the most difficult and painful times in gm's history. but we see a path to a better future, where gm -- where at gm we not only survive but thrive. we want our employees, communities and especially our dealers to thrive with us. we are grateful for your support during this critical time. we understand our responsibility to the american taxpayer and we take that very seriously. a new gm will contribute to america's economic strength and competitiveness and this, of course, starts and ends with great cars and trucks and great dealers. thank you very much.

>> thank you, sir. finally, mr. john mceleney, chairman of the national automobile dealers association. >> thank you, mr. chairman. mr. chairman, senator hutchison, i am chairman of nada and the national automobile dealers association. i am also an automobile dealer. my dealership is mcelenen center in clinton, ohio. we have actually been in business 95 years. we provide jobs for 140 people. my family also held a chrysler franchise between 1984 and 2007. mr. chairman, we commend you and we thank you and senator hutchison for convening this hearing. in three face-to-face meetings with the president's auto task force, and at numerous meetings with the manufacturers, no one has explained why dealer reductions will make chrysler and gm more viable. over 90% of chrysler and gm's revenue comes from the dealer, because the dealer buys the cars, the parts, and even the

dealership signs from the manufacturer. the retail network, the land, the building, the employees, the dealers pay for all of it. dealer cuts won't save any money, because dealers don't cost the manufacturers any money. when a dealership closes, the manufacturers will tell you that they lose market share. where is the objective standard and where is the public accountability for these decisions? 789 chrysler and 1350 general motors dealerships face terminations. these dealerships employ over 100,000 people. these people deserve more. the chrysler dealership terminations are particularly harsh. these 789 dealers were given 26 days to wind down. also, chrysler's refused to buy back vehicles, parts and special equipment. no manufacturer has ever done this. just four days after chrysler dealers received their termination letters, media reports said that chrysler already was planning to re-enter some of the very markets that they were abandoning.

with respect to gm, the effects were actually broader. yesterday, gm delivered to my dealership a quote, participation letter which every gm dealer must sign. even though i am one of the quote, go forward dealers, i will have to make significant changes that could threaten the viability of my dealership and my employees. actually, gm's letter is a 24 page binding legal contract. senator snowe referred to a 12-page agreement. mine is 24. if i sign it, i will be committing my business to spend hundreds of thousands of dollars that i know about today and committing to millions of dollars of potential financial obligations in the future. i will also be subjecting my business to sales performance standards that are not specified in the contract. even worse, gm can alter the terms of these requirements at any time at its sole discretion. the final blow, i must waive any right of protest to any action taken by the manufacturer.

the contract actually says this document shall be null and void if the dealer changes any term or provision or if it is not executed by the dealer on or before june 12th. that's next friday. that's seven days from now. so my choice is this. sign the completely one-sided open-ended legal document, give up all my basic rights as a dealer or face the consequences of cancellation of my franchise during the pending bankruptcy. the other 4,000 go forward dealers have the same choice. this really is no choice at all. it's a classic example of opportunistic and overreaching behavior by the manufacturers. that's exactly what has prompted the enactment by legislatures of all 50 states of franchise laws that govern the relationship between dealers and the manufacturers. no other manufacturer has forced dealers to sign such an onerous agreement. this is not necessary for gm's viability and federal funds are being used to empower gm to do this.

this is a manipulation of the bankruptcy process to eviscerate the state franchise laws. laws that inject balance in the inherently one-sided economic relationship between a dealer and the manufacturer and that also provide consumers with a reliable, convenient and competitive retail auto network. so we urge the following. first, the executive branch should provide sufficient debtor in possession financing to enable chrysler to buy back the parts, the inventory, the manufacturer specific tools from the terminated dealers. this is standard practice in our industry. second, the terminated chrysler dealers need more time to make an orderly transition. no manufacturer has ever imposed such onerous terms on such a tight deadline. third, the terms of gm's go forward agreements must be changed. no manufacturer has ever imposed such outrageous terms in dealer operator agreements. fourth, franchise laws of the 50 states should remain intact and

apply with full force and effect once chrysler and gm emerge from bankruptcy. since this entire bankruptcy has been negotiated by the executive branch, congress should intervene if necessary to make sure these actions are taken. i thank you for holding this important hearing and thank you for the opportunity to testify. >> thank you very much. i will start the questioning and again, we will do it in order of appearance and that's more taxing for some than for others. first of all, i just want to clear something up for the record. i got a note saying that some of the press or some others felt that pete lopez, i have been rude to you by interrupting you. i don't think in view of our relationship, that's a fair thing to say. however, for the record, let me just say that a lot of people come here and testify for the first time and they have a fairly lengthy statement, and i

wasn't sure -- i wanted you to get through the parts you wanted to get through in five minutes. >> that's okay. i didn't take it that way. absolutely not. i'm delighted to be here. >> mr. lopez, both chrysler and gm have terminated their franchise agreements with you, correct? >> yes, they have. >> can you wind down your chrysler dealership in 26 days? >> no way. there's no way. i don't think you can do a personal bankruptcy in that amount of time. i have -- i'm down to probably 48 cars, 24 of each, and by the way, in february, i was called by chrysler and i want to tell you the conversation. the representative calls me and says i need you to take 35 cars, and i said i can't do that, i'm not going to put myself out of business. she said well, you have to, we're in this together. and i said no, we're not in this

together. i will go through my inventory and i will take what i can, i'll try to help. she calls back and she says you need to take 23, we can live with 23. i said well, i can live with nine. i will take nine. i'll do my share. and she said well, i'll have to call detroit. i said well, just give me that number, let me call them. and she calls me back in five minutes, says well, the nine will do. and i wasn't going to let her put me out of business, just like the gentleman beside me. i have employees that i care about, they have been with me from the beginning and it's just -- it's unbelievable how we have been treated. there is no rhyme or reason. in west virginia, there's a dealership that sold 19 cars last year and he has his franchise in his front yard, and he takes -- they take spencer auto group. there's no rhyme or reason. >> mr. press, were you an auto

dealer like mr. lopez, would you know how to close down a dealership in 26 days? can you tell me how you do it? >> well, we are nae the process of working through a bankruptcy of chrysler corporation and not too many more days. it's very difficult, it's strenuous. the fact of the matter is that in our situation, we did not plan or have in our minds the desire to have a bankruptcy. >> i wish you would answer my question. >> okay. >> would you know how to do it? could you do it in 26 days if you had to? >> i would have to find a way to do it, yes, sir, i would. i would have to find a way to achieve the shut-down required within that time period as we are being required within our time period that's given to us. yes. >> mr. lopez, on january 9th, i think it was, of 2009, that being this year, mr. press,

according to all reports, including newspapers, within the business, did indicate what you said. that is, got a lot of people on the telephone, said you got to buy 78,000 cars. >> absolutely. >> to keep us going. >> absolutely. >> you've already said that you got that, but what kind of pressure does that put on you? >> well, of course, you know, i said to her at the time, our chrysler representative, i said you know, i am not, right now i'm sitting on six months' worth of inventory. for me to take the kind of cars she wants me to take, i'm not going to put myself out of business. i think i'm a better businessman than that. i know how to run my store. i know what my store can sell and what we will sell, and i just didn't want to put that kind of money on my floor plan and i did help.

we're a small dealer, like i said. i went through the inconvenieved told her i would take nine. i didn't have to take any. she demanded we take 35, then the 23 and then the nine and that's what we did. then the same thing the next month. >> did gm threaten any action if you did not sign their so-called wind-down agreement? did you feel coerced or threatened in any way? >> no, sir. gm, we did not have that. in fact, gm has a gentleman that i've dealt with, tony napoleon, who has just done a great job with us. the letter you're talking about as far as signing by the 12th of this month, we just got that yesterday and i have not had a chance to look at it. my understanding, if we don't sign it, we automatically are gone. and by the way, gm sent us paperwork that said we had an

appeal process. and i called mr. napoleon, who is our district manager, and he told me exactly what to do and how to do it, and i've done it. now, my understanding, there is no appeal. there is no appeal whatsoever. so we're all left, you know, from what i hear about the letter, if we sign it, we sign all our rights away. at one time we had a thing in west virginia where consumers, we wanted to video the closing so everything was above board, and i think the attorney general ruled on it that we took away our consumers' rights and i don't think you can do that. that's what they're doing to us. they're taking our rights away. >> thank you, sir. senator hutchison? >> thank you, mr. chairman. mr. whatley, did you get a call from chrysler earlier this year

asking you to buy inventory to help the cpanm@ rrarrrrk%á@ @ ' the assurance that you have given to me and you have said that you plan to give. it's not forthcoming to them. so could you explain how it is that you are going to take this inventory from the dealers, you

have mentioned 89% or 90%, but that isn't happening, at least they don't see it. so could you help me with that? >> yes, i will. thank you. >> and perhaps help them. >> of course. we have established a program after we learned of the bankr t bankruptcy that would allow us to redistribute the cars from the affected dealers to those dealers that are going forward. as well as parts and their special tools. the process will begin when two things occur. number one, the terminations take effect, because they're not terminations -- the effective date has not occurred yet. the cars are not ready to be taken from the inventory of the affected dealers. and second, a floor plan source has to be put in place for the incoming new dealers. again, we started that process within ten days and established a relationship with gmac.

they're putting a floor plan position as we speak. over 80% of the affected dealers have a floor plan available now to take these vehicles. >> do they know that, because i'm not hearing that from one dealer that they understand that there is a plan in place that this inventory will be taken. >> the dealers do know that. it's been -- they've been called. we have a log, a phone log confirming the discussion with every dealer. e-mails have been sent. the dealers who have agreed to have the redistribution occur are getting a daily status and we have now 97% of the vehicles committed by the dealers going forward to relieve these dealers of this inventory and about 51% of the parts. >> mr. whatley or mr. lopez, does that meet with your understanding? >> we have had no contact with the business center whatsoever until monday, june 1, after your office had called them and kind

of rattled them. i did get a call then that said rest assured, we will try to come up with a plan to remove your inventory after june the 9th. i have seen no reports. i have seen -- i have not talked to anyone except with one phone call at your office did seem to generate from them. i've had no other contact whatsoever. i also have the official terms here of the agreement. it says that chrysler will assist in selling cars, they will request new dealers to buy cars and that chrysler is only facilitating the sale of the inventories by attempting to identify potential buyers. on the contract that we sign and send in, it says dealer understands and acknowledges chrysler has no obligation and is not responsible for any action or agreement. >> there's a disconnect here, mr. press. let me add one thing to this.

in waco, texas, a town of 122,000, all three chrysler dealerships are being closed. now, the view is that another dealer is going to come in from out of state, not someone who is a part of that community, and new dealerships are going to be created in waco because there would be no dealers for chrysler in this town of 122,000. help me understand what appears to be an effort to change the contracts with the dealers that are in place to make better contracts with new dealers coming in. that's what it appears. am i wrong? >> well, actually, first of all, i would like to address mr. whatley afterwards. i am sure we can take care of his issues and as i told you, we

will be redistributing the vehicles. i can't understand why he did not receive a phone call. we have a proof of log that he did. we will work through that. i apologize. second, we are not changing the contracts of dealers. this is a case where we are trying to bring first of all, all three brands under one roof, because by trying to run three separate brands and channels and dealer bodies, we have gone broke. we can't do that any longer. second, there are other reasons for the dealer actions that have been taken. within that, bringing the three brands under one roof. we want to do it in a way that we bring the performers along that will allow us the best return on all of our investment. there are some dealers whose performance is substandard. in this case, we have set and the dealers realize there's a minimum sales responsibility based on market share, that they should receive in their town. in the case of the dealers that

have been -- that have not been taken forward, we will lose -- last year we lost 55,000 units of sales in the deficient sales positions. that's about $1.5 billion in revenue. it's better in the short term for us where we have dealers that may not be able to perform to the market standard to replace them at some point with a stronger dealer. the dealer is our customer in that market. we realize that. but they're our only customer. if they're not able to sell to the level that we need to generate our revenue, then obviously, and they're substandard from average, obviously we need to make a stronger dealer body. >> my time is up. >> may i respond to something? >> mr. chairman, my time is up. would you like for him to answer that question? mr. lopez. >> please, but briefly. >> okay. they were talking about the two

parts of the dodge and the chrysler, the vans. one is a dodge and one is a town and country. you've got a dodge version that is less expensive than the town and country. we're all under the same roof. we didn't ask them to build those two different vehicles. it doesn't make any difference what they build, we sell them. >> thank you, sir. senator clobuchar? >> thank you very much, mr. chairman. i want to make clear, everyone here wants you to succeed. they want general motors to succeed. they want chrysler to succeed. the dealers want you to succeed and one of my focuses here is just to make this process as fair as possible. some of our dealers want more time and then some of our dealers feel that they should be able to stay in business because they're profitable. mr. henderson, i do appreciate that general motors has this appeals process and that you have been taking it seriously. i know that some decisions have

been reversed. is that correct? and what i don't understand with the interrelationship here with the letters that are june 12th, because some of our dealers have appealed, they have done everything right. they want to go through this process. they think the facts are on their side but then if they get this letter that says they have to be done by june 12th, are they out then? can they appeal? >> thank you, senator. let me see if i can't explain both the process for winding down as well as the process for continuing. the reasons for the dates, in this case june 12th, has to do with the fact that we're a company in bankruptcy as well, and that means that we march to a timetable, and i will try to make it clear in a moment why there's an aggressive timetable, but we march to a timetable to try to make sure we understand which dealers come with us to the new general motors and which dealers are not able to. let me talk about the process of the wind-down. we have gone out to our dealers, as i said, almost half the

dealers signed it the day they received the wind-down agreement and i respect the fact, it's 12 pages but many dealers said we accept it because we structured it with a set of benefits that were overwhelmingly better than they had if they did not sign it. that's the reason why -- we had 85% of our dealers, for example, sign up for it in canada within five days. >> i want to get to chrysler. my real question here on behalf of my dealers is can they still appeal? >> yes. yes, ma'am. >> how will they be able to do that when it' june 12th? >> we are actually working around the clock. we have a team of people dedicated -- >> they should appeal before june 12? >> absolutely, every day. we are dealing with these every single day. >> the other question i had, we have just to give one example, we have examples everywhere, but we have been told this is one dealer that is located, location, location, location, which when we talked to you, that is key. they are located between toyota and nissan on the road near the mall of america, 150,000 cars a

day. one of the most profitable dealers in minnesota. yet this is one, they're appealing, that has been decided to be closed down. i just want to have you remember that image in your mind. my second question really is of you, mr. press. you don't have any kind of appeals process. is there any way you can institute an appeals process? at chrysler? >> our case may be different. i'm not familiar with general motors. what we've done is created a new company that will be formed at the end of this process and the dealers that will be in that new company have been identified from all of the dealers that were with the old company. in regards to that, we have a limited period of time from when the bankruptcy was filed to when the new company has to be finalized. if we do not have a finalized dealer organization, the new company will not be formed and the company will have to liquidate. we also, in terms of the process, the strategic market representation actions, the consolidation of single brands,

were done from a point of view not as a mistake or what a dealer has or hasn't done. it isn't up to an appeal from a dealer. it's a strategic market decision of what the new company wants their dealer body to look like. >> we have many dealers who invested $5 million, who got the cars when you guys asked them to get the cars. they clearly feel they haven't been treated fairly here. one of the things, as i look at what can we do to help them right now, clearly the time would help them. some type of an appeals process would help them. and i would say the other thing is that i understand that you agreed to purchase these vehicles. is that right? and to repurchase them to put them out on the networks but one of their concerns is that while you're going to take possession, the dealership will still have to pay interest on the loans used to purchase the vehicles and in short, they are going to continue to hold most of the risk. i wondered what assurances that you can give to the dealers that

chrysler will actively market these vehicles and what's going to happen to them. that's what they're concerned, they're left really holding the risk. >> of course. i understand that. i hope at some point i will get a question i can defend my comment about buying cars but i will do that later. i respect the time of the committee. with regard to this repurchase, the redistribution agreement, obviously it's in our best interest to control these cars so they don't get in the used car markets, they don't deteriorate, used car values. we want very much. second, we have stopped making cars for the last 30 days, for 30 days and probably for the next 15 days. our inventories are the lowest they have ever been since we kept records in our company. we have plenty of homes of dealers who want to buy these cars and 97% of them have been committed for. after june 9th, the new -- the position of our new gmac relationship we'll be able to take the cars, by the middle of june, we'll have the cars for those dealers who have signed

the agreement to allow us to take them, they'll be gone. for the dealers that haven't signed an agreement, as soon as they do, those cars will be gone by the first weefk july. we have to control these cars and that's a commitment that we have made and we said we could continue -- >> the parts? the parts? >> we already have 51% of the parts committed. we continue to work on those parts. by the same time period, we plan to have those accomplished as well. >> thank you. >> thank you. senator? >> thank you, mr. chairman. we spent a fair amount of time understanding process. i want to dig a little deeper there. let me start with mr. henderson. mr. henderson, just in terms of how you got to this list of dealers survive, this list of dealers don't, how did you get to that list? did you form a committee at general motors or something like

that? >> we went back and looked at history, senator, of both sales effectiveness as well as customer service and a series of other matrix as well but those two would be the most important in terms of evaluating it, not just simply one year but going back multiple years. >> who headed that up at general motors? give me a name. >> his name was ben marklinave. >> what relationship did you have then with the auto task force, the administration, as you were working your way through this process? >> the auto task force was not involved in the process at all. >> were they made aware of your process or did you surprise them like you surprised the dealers? >> they were aware of the process but they were not involved in it. no. >> did they ever see any of the documents that were produced? >> we have not shared a list, for example. we don't have a list of which dealers we have both agreed -- we have decided to wind down, nor have they seen a list of those dealers that would go forward. so, you know, they're involved in