rest from them in excess of those that had been contained in the legislation that didn't pass, largely embodied in loan agreements. patent.. decisions that gm makes whether it's a plant closing, whether it's a downsizing of a plant, whether it's an assembly plant or a stamping plant, or an engineering plant -- what happened with dealers, you do have an ongoing oversight

responsibility, obviously, of this whole restructuring. a lot of us are troubled by some of the decisions. i mean, you can see the frustration on both sides of what happened to dealers and how badly it was handled. i mean, i personally thought the dealers -- the free market could work with dealers and let them figure out -- let them succeed or fail and that would then clear out the number of dealers that we might have gotten to anyway but that's not what chrysler and gm decided. but some other decisions -- i want to talk specifically about one. gm -- gm chose to close the most productive stamping plant they have. they have three stamping plants, mansfield, ohio. a full disclosure my hometown, i don't live there now and then one -- and -- i'm sorry, they have i believe four or five plants. one in indiana, a couple in ohio. the gm stamping plant in mansfield was consistently ranked higher according to the competitive operating agreement

that gm does its own assessment. it has the lowest manufacturing costs per ton. gm chose to close that plant. how does the administration -- i mean, they made that decision. i know it wasn't a political decision. the local congressman said president obama should go and explain to the workers why he closed the plant. that was a political statement to be sure. how does the administration oversee the operations of these companies to make sure they're making objective and transparent decisions? i mean, there were some arguments to close it i assume although they didn't make them very well. there were many more arguments to keep it open. 1100 people work there. it's a devastating for a community that size. we know what a plant closings do to communities. talk about your oversight and the demands for transparency in these companies that federal taxpayers have major investments in? >> senator, certainly any particular plant closing is devastating to a community and

certainly general motors is closing a number of facilities. as i indicated before, we have made a pretty determined -- not a pretty, an absolute determination that we're not going to get into micromanaging their decisions. we certainly have encouraged, however, the companies to be forthcoming. so if a particular community or a local union wants an explanation of how a judgment was made, we would expect the company to talk to them as we'd expect them to talk to dealers. but we're not going to go in on top of them and say why mansfield and why not x? >> will you insist to them that they will be more forthright on questions, will you insist that they disclose to their dealers how they made the decisions and why they made the decisions and disclose to communities how and why they made these decision isn't it so >> recognizing there's a

competitive issue where public disclosure of certain kinds of information can put the company at a competitive disadvantage and so not being able to make a blanket comment like that but i would say, yes, that we would be asking gm and insisting that gm have an open and transparent dialog with all of its stakeholders and to the extent it's not, we're more than happy to facilitate that and insist that it occur. again, i want to be cautious because there can be competitive issues where the public airing of information can be harmful to the company. but certainly as a general matter, we would expect the company to be open, transparent, and responsive to communities, to stakeholders in these sorts of matters, yes >> last question. there was discussion earlier, senator johanns' questions, stockholders getting in line but the dollars never get to them, i guess, in line. what's going to happen with

people that have product liability claims that if somebody drove a chrysler and that chrysler malfunctioned and someone was paralyzed as a result of a defective product? what happens to their claims? >> again, just to be direct with you, that is obviously a very emotional and difficult issue for those people who are victims and nobody takes delight in not seeing them get all that they would like to get. but, unfortunately, again, if one looks at the way bankruptcies are conducted, bankruptcies are about taking liabilities the companies can no longer afford and finding a way to discharge them in an orderly way and we would expect the company would act in accordance with traditional bankruptcy practice and law on how product liability claims are handled. which is to say that largely they would be a matter for the

old estate to be dealt with and, therefore, will not receive the full r recompence they would hope. that is a terrible thing for those individuals but again, but there are a lot of people that general motors made promises to that it can't honor. and we really don't have an alternative as i said other than to essentially write an endless check to deal with that situation. >> there is no -- there was no money set aside by the two big auto companies for claims like that that would have been untouched in bankruptcy proceedings, i assume? >> there is not a separate trust or an insurance policy like that. the companies are self-insured, both of them in this matter and in a chrysler bankruptcy there was objection on that and the judge found it again to be an ordinary course treatment. >> thank you again, mr. bloom. and thank you, dr. montgomery. senator bunning? >> thank you, mr. chairman. last month secretary geithner told this committee the

government was going to -- and i use his word "try," that's his word, not to interfere in choosing which plants to close or dealers to close or other specifics of bankruptcy plans. i should also note that he said that he would come directly back to this committee once gm filed for bankruptcy. but i don't see him here today. so i'll ask you the question instead. did the government in any way influence the selection of plant or dealerships to close? >> i could answer that question very directly, senator. the answer is no. >> okay. thank you. for the taxpayers' sake in gm, just to break even, the new general motors will have to get up to a market capitalization of

about $70 billion. that is roughly 15% higher than gm's all-time high when there's as a much larger company it was selling high margin suvs as fast as they could make them. it seems pretty clear to me that the taxpayers will never get back their money. so please explain to me how we're going to get our money back if, in fact, general motors' new entity has to get up 15% higher than the highest general motors was in the history of the old general motors? >> let me try to answer that question. i hope i was clear, senator, that there is no guarantee that we would get our money back. but i did say there were

scenarios where i thought it was reasonable where i thought we could. i think the only way i would disagree with your logic is that when gm was worth 15% less than that in its all-time high, piled on top of that equity was a huge amount of debt. so that the total value of the enterprise was, in fact, close to a multiple of that number. one of the things we've done by deleveraging the company is we've given the equity more space in the total capital structure so i think if, in fact, general motors returned to the total enterprise value that it had in that period, in fact, we would get all our money back but i understand those days were reliant on high margin suvs, et cetera. i do not think we would expect that those kind of times would be occurring anytime soon. so our analysis is not based on that. i think what it's really based on, though, is a much more conservative capital structure so the total enterprise value before the shareholders get their ownership, there are fewer

deductions for the debt and other liabilities. >> okay. we all know that the original projections of auto sales was approximately 18 million units at the all-time high. and we know that we're now sitting at about 9 million units. and that's why we're having such major problems. could you give us an estimate on where we would have to get to in sales to at least break even? >> unfortunately, it's not just one number because, obviously, sales matter a lot. and so does market share and so does margin and so does fixed cost so you've got four or five different variables that have an

interplay. if you look at the company's projections they do not project they're publicly filed projections. they do not project an 18 million level or to the market share they enjoyed when they had that 18 million overall industry level. so i think the company has taken a more conservative approach versus that hypothesis. and again, it would be, as i said it would be factoring all those things in together. clearly, it will require some recovery in the economy but i think most of us feel that at least some amount of recovery is pretty likely. >> well, i think you're absolutely right about the economy recovering. it's a question of timing. >> yes, sir. just like when will general motors come out of bankruptcy? that's a question of timing but the fact of the matter is, that's very important, if, in fact, we're going to have an exit strategy for us to reduce

our 60% stake hold. >> yes. >> in general motors. it is certainly important and we're moving quickly as we can recognizing that this is a court-driven process. as the senator indicated earlier, we got chrysler done in 41 days. i think candidly gm could be a little slower because it is a more complicated matter. but we intend to proceed as quickly as we can, recognizing that all the affected stakeholders have rights and they're gun be heard by the judge. and that's a judicial process that we respect. you're absolutely right. the sooner we get out, the sooner we can get to organizing an ipo, the sooner we can begin to dispose of our stake and clearly we intend to do that in as orderly way we can. >> mr. montgomery, i apologize i'm not asking you any questions but my time is limited and i'm sorry. thank you. >> senator kohl. >> thank you very much,

mr. bloom. a month ago mr. ratner appeared before our committee in a closed door meeting and he said it would cost more to retool the chrysler engine plant in wisconsin and he felt that in light of that, they're better off just moving those jobs to mexico. with all of the taxpayer money that chrysler has received, i don't understand in spite of his statement why we would move these jobs to mexico. doesn't it make better sense to utilize the retooling fund that is available for something just such as this to retool that factory in kenosha so that we can keep the jobs here in the united states? >> well, let me try to respond to that, senator. first, i want to deal with the process point. i think clearly the company did

a poor job of communicating with local elected officials and community folks about the kenosha decision and i believe the ceo has apologized for that. it was not proper and i hope we won't have a repeat of that in terms of the communication. in terms of the substance of the decision, again, what i -- what i hope mr. ratner said, 'cause i believe these are the facts, is that chrysler made a decision a couple of years ago to build two new engine plants, one in the u.s. and one in mexico. and by the time of this matter coming before us, hundreds of millions of dollars had already been spent on the plant in mexico. and also hundreds of millions of dollars in a plant in the u.s. so for us to go in and overturn that, number one, it would violated the principle that the president has insisted upon that we not interfere in the

day-to-day management decisions and number two, just as a business matter, it would -- it would require walking away from hundreds of millions of dollars of invested capital. so i think the reality is for reasons of both principle and practical business, this simply isn't a decision that can be revisited. that is certainly a terrible event for the folks in kenosha and there's no way to make it a good event. the only thing i can say is i think in fairness, the alternative was a liquidation of chrysler that would have been far worse for everybody concerned but certainly we appreciate the difficult situation, whether it's mansfield or kenosha that these closings bring upon communities. >> mr. bloom, last week it was announced that a general motors plant in jamesville, that it was going to make cars and if 1400

workers would be put back to work. is the auto task force working with general motors and the department of energy to help retool that plant in jamesville? >> what we are -- what we are doing, sir, is trying to ensure that general motors has a fair process where the three communities have a chance to have an open dialog with it. where they make -- where they make a fair and reasoned decision and are transparent with folks about the way they're doing it. but we are not insisting that general motors locate that factory in janesville any more than we are in the other potential locations. as i said in reference to -- i think a question of senator brown's we are insisting that the company be forthright and that it -- and that it deal fairly with janesville as well as the other facilities but we're not intervening and insisting that janesville or any other place get any special consideration.

>> thank you. mr. bloom, as you know there have been verifications of profitable dealerships that were doing a good job, making money, employing people, doing exactly what general motors or chrysler would want them to do. being notified that they have to close. now, what's the point? >> sir, the companies the companies had determined that they -- their dealer network was not over the long term maximizing value for the company. the company has a far greater number of dealers than their competitors per car sold. and analysts throughout the industry, i think, of every stripe have indicated that the companies are overdealered. that causes over time the brands to degrade. it causes pressures for

price-cutting. it causes the dealerships to not be as attractive in terms of their physical makeup, et cetera. and the company is determined that to be successful they needed to realign their dealer networks. in that context, they persuaded us that that was a generally sound business decision. that to do it quickly, relatively quickly was, in fact, appropriate and would get to the good result as quickly as possible. from there it was the company's decision how to do it, which dealers to choose. and that was the decision they made. we believe -- we insisted and i think they did do it using fair and objective criteria of what were the dealers that were selling the most cars, had the best through-put, had the best other metrics that were objective metrics and on that basis, the company has determined that it cannot bring all its dealers forward and be successful. this is, obviously, again a difficult sacrifice for those dealers but without these sorts

of difficult changes we're not going to have a successful general motors. >> well, i thank you. i'm still uncomfortable with your willingness to accept in this case dealerships being forced to close who may have been in business, for example, 20, 30, 40 years and are profitable. we're running a business and the point of running businesses is to make and that's why chrysler and general motors are going out of business. so here you have dealerships that have a history of profitability and yet they're still being told that they have to close, and you come before us and simply say, well, you know, they made those decisions and we go along with it. i don't think that's a good enough answer, sir, but perhaps it's the best you can do. >> thank you, senator kohl. do you want an answer there? >> i'm happy if you'd like me to take another minute. i mean, i appreciate, sir, that

you're not satisfied. a dealer's profitability is not the only measure of whether or not that dealer network is best serving the long-term interests of the company and all of its stakeholders. if there are too many dealers in a particular area, while it may be that an individual dealer is making money, you still have the issue of whether or not he's sufficiently investing in the showroom to get returning customers. whether or not he's pricing the product in a way that is m maximizing value for all concerned and offering the kind of service that brings people back. again, these are difficult, difficult individual decisions but if we get in there and start telling the company you can do this and you can't do that, then we might as well make them an arm of the u.s. government and i don't think anybody thinks that's the right thing to do. what we have to do is we have to give general motors the kind of discipline to come up with a business plan that makes sense

where they can make money. we have to put a first class of board of directors in place and again, i want to point you to ed whitiker and bob kidder two first class businessmen who agreed to chair the boards of these two companies. guys who have run big complicated companies, done it well, done it effectively. and i think they give you a good sense of how the obama administration intends to treat this matter. >> thank you, senator kohl before turning to senator hutchison, one comment about that i think all of us frustration -- i mean, on the one hand we're telling you we don't want the government to run these businesses and we wish you would step in and make chrysler and gm do this. we've all done that. but i think none of us has really heard -- and i know the dealer -- a lot of the dealers think this. i know a lot of the public think this and i know a lot of senator congressmen and women. we've never heard the economic argument made by chrysler or gm to close those dealers unilaterally the way they have.

understanding they pick off those who might be the weakest in terms of profits and sales but as senator kohl have said they've been around 20, 30, 40 years. i have some in ohio who have been around 75 years and it's tragic because the dealers do so much for the communities and all that. i just wish that the two major companies would explain better sort of the economics of it why they did it. the other point i want to make and i apologize, senator hutchison, you mentioned -- you mentioned janesville, if you made public the three communities, if there are, in fact, three, you seem to sound like -- that gm is looking at for the small cars there. would you like to make that announcement right now, mr. bloom? >> i know there's three and one in michigan in janesville but to be perfectly honest i don't know whether it's been made public but we'll get back to you on that. >> well done, herb. >> i'm not telling you.

[laughter] >> senator hutchison? >> mr. bloom, i have heard what you said to mr. kohl, mr. brown, mr. johanns, and it's not coming together for me either. and i'm going to refer to the march 30th white house determination of viability summary for the general motors corporation in response to their viability plan of february 17 in which the document states the company is currently burdened with underperforming brands, name plates and an excess of dealers. the plan does not aggressively enough act to curb these problems. it goes on to say that gm has been successfully pruning unprofitable or underperforming dealers for several years, however, its current pace will leave it with too many such dealers. these underperforming dealers create a drag on the overall brand equity of gm and hurt the

prospects of the many stronger dealers who could help gm drive in cremental sales. and on main 18th the treasury department says that as with the case with chrysler dealer consolidation plans, the task force was not involved in deciding which dealers or how many dealers were part of gm's announcement. so it seems to me that the task force is and the treasury is saying you didn't act aggressively enough you haven't cut back on enough dealers but you're saying to the public, gee, we're not involved in those decisions. and, in fact, now that we know what dealers are being closed in both chrysler and gm, there are profitable dealers that are being closed. not just underperforming.

and i still don't understand when the dealer buys the car, the dealer provides the real estate. the dealer provides the showroom and the repairs and rents the signs, how is it a drag on the company and why is the white house saying that an excess of dealers is a problem even profitable dealers. it's a disconnect for me as well as many of my colleagues. >> let me see if i can answer that. i think you certainly accurately quoted the president's statement on the fact sheet from the 30th that's certainly an accurate quote. i think what we said in addition, however, is we said that overall, general motors is burdened by excess capacity in many areas. we said that their plant footprint has excess capacity. their dealer network has excess capacity. their white and blue collar ranks -- all of these things are not commensurate with the current size and prospects of

the company. and so what we told general motors when we rejected their february 17th submission, is you need to go back and you need to take a more aggressive approach. and, yes, that included dealers but it included plants. it included white collar head count and it included every aspect of the company from the top to the bottom and the company came back with a more aggressive plan to rationalize its dealer network. i think what we said on the 15th was also true, which is we did give them a numerical target but we certainly did say regarding plants, regarding dealers, regarding white and blue collar head count that you need to be more aggressive because our judgment was on the february 17th plan that they were not going to achieve the kind of profitability that would make them long-term viable. it was their determination that this level of consolidation of the dealers was consistent with the path to long-term viability.

and we did not -- we did not say why not five more or ten more or five or ten less? we scrutinized the analysis in all areas and concluded that over all it was a proper plan and reflected a good business judgment and, therefore, was worth investing taxpayer resources into it. again, i know you find this answer not satisfactory but the simple fact that a dealer is making money does not indicate that the dealer network in that community is maximizing revenue and repeat customers and satisfied customers and the things you need to be a successful car company. the company's large competitors are selling cars that -- excuse me, are using dealers that have more than twice as many cars per dealer sold than gm or chrysler do. now, some of that is due to the geographic makeup of where the sales take place.

where gm and chrysler are selling in more rural areas but even when you compare urban area to urban areas, the through-put of these companies is far higher and our judgment and the judgment of many, many outside experts we consulted this is one certainly not the only but this is one of the reasons why the companies have not been successful. >> you know, i think what makes it so hard is because there are other points where there are competing explanations, for instance, in one case every dealer, four dealers, in one town of over 100,000 people are being closed. and it's clear that a new dealer is going to be brought in. one new dealer, not one of the four that's being closed. and yet all of those dealers were doing fine.

so rather than giving the nod to one of the four that have been with you for years and years and years, i don't mean you, i mean, general motors or chrysler, but there just seems to be a loyalty disconnect here and also what you have just said is you -- okay, you want bigger dealerships that can do more volume sales and, yet, you are -- sorry. so you are doing bigger dealerships that -- sorry. you are doing bigger dealerships more volume and yet in the contract that is being put forward by gm, you are -- if they sign it, they take away their right to protest. now any dealer that would come in within four to six miles. there's so much disconnection which is why i think