and i look for to answering questions. >> thank you. we have won the votes and let members know i plan on getting to this testimony of this witness and take a 15 minute break and get right back and finish up this hearing. it is the only vote today so we will get it done. >> mr. chairman, and members of the subcommittee, my name is daniel and i'm the general shareholder of to, dodge an automobile dealership in tacoma, washington. thank you for the opportunity to tell you that too, dodgers store in how the target funds you authorize your being used. two, dodge has been in business since 1972. until this with the dealership was valued at several million dollars and employed 71 people. in the month of april 2009 the last month for which we have a complete report reports prepared by chrysler show that too, dodge

was ranked number one in western washington and number two in the entire set of washington for the sale of a new dodge vehicles. these reports prepared by chrysler also show that add of eight western states covered by the reports we rank 32 out of 313 dealers for the sale of dodge vehicles. other reports prepared by chrysler for the area chrysler turned team washington which covers more than a set of washington shows and then in 2006 to, -- tacoma dodge was ranked seven out of 60 dealerships and in 2007 it was ranked eighth that of 41 dealerships and in 2000 aid to our worst year ever because of the economy and the public's lack of enthusiasm for dodge vehicles we still ranked eighth out of 35 dealerships. the stellar sales rankings were accomplished in competition with other dealers selling multiple

lines of chrysler vehicles were as tacoma dodge only had the opportunity to sell dodge brand vehicles. the dealer performance report prepared by chrysler for year end 2008 comparing tacoma dodge with the dodge dealers in washington state shows we have a net earnings of $1,704,249. or as the group average for the same time was $680. yes, only six saturday dollars average per dealership. we enjoyed the same success with the parts business. the dealer scorecard for december 2008 report prepared by chrysler shows that in to assassinate tacoma dodge purchased $3,895,166 worth of new parts from chrysler. or as the average dealer within the united states purchased a total of only $746,107 worth of

parts. chrysler designates its top 100 dealers for the sales of cars as masters dealers. we were one of the top 100 in fact, we ranked number 76 among all the chrysler dealers in the united states for the sale of parts. in the area of customer satisfaction and retention we consistently outperformed our peers. as of february 2009 to, dodge had it will represent customer production averaged as compared to 17% average for all of the chrysler dealers in the western united states. our problems began when chrysler signed as an unreasonably high minimum sales requirement, requiring us to sell an unrealistically high number of vehicles. we didn't understand why chrysler would assign a session on reasonably high number so we look to the demographics and found that they made several errors in a traffic patterns and other demographics they use for our market area. we then pointed this out to chrysler and ask every computer our minimum skills requirements

based upon the correct demographic all information. unfortunately chrysler refused to even consider our request. in the spring of 2008i attended the only dealer meeting unaware of where by representatives of chrysler's plant project genesis to the dealers in western washington. project genesis is the name of their program to reduce the number of dealers and during that representatives of chrysler stated that under project genesis there will be to chrysler dealerships in pierce county washington and one of those would be the city of to, so that the news across our customers would be adequately addressed. on may 14th 2009i received notification from chrysler that it intended to terminate tacoma dodge as a dealer in the state of washington we have a franchise and to protect dealers from manufacturers unreasonably terminating a dealer. under the washington franchise act chrysler would never have been able to terminate tacoma dodge since tacoma dodge was one of his most outstanding dealers using any yardstick you want to

use to measure our performance. however, the notification from chrysler told us we were being terminated under the u.s. bankruptcy laws which provide no such protection to dealers. the termination of a tacoma dodge and leaves the city which is the second-largest city in western washington with a population of almost two and a thousand without a single chrysler dealership. chrysler's termination of us also leaves pierce county which has a population of almost 800,000 persons and that the second most populous county in the state of washington with only one chrysler dealership. as a result of chrysler's actions tacoma dodge which in april was ranked the number one dodge dealer in western washington can no longer sell any new vehicles nor can we do any warranty work on any new vehicles. we have been reduced to being a used car lot in a neighborhood automobile repair facility. in the process 35 faithful and loyal long term employees have

lost their jobs and pierce county in the state of washington have lost a payroll of approximately 1.3 million per year. again, thank you for the up and city to have given to tell you how the t.a.r.p. funds to authorize your being used. >> thank you for your testimony. we have a vote on the floor, it is only one so i will ask members to recess right now, go down and go and hear from mr.. and the mr. golic and go into questions so please come back in 50 minutes. we will give you a chance to stretch your legs and see you back in 15 minutes. we are in recess. [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> earlier this week on the restructuring of general motors and chrysler the witnesses are two obama administration officials, working with the auto companies. [inaudible conversations] [inaudible conversations]

[inaudible conversations] well the house committee takes a break we will show you a portion of a senate hearing earlier this week on the government's role in the restructuring of general motors and chrysler. the witnesses are two obama administration officials who are working with the auto companies. >> treasury has proposed equity stakes in gm and chrysler giving people great pause, as you have heard just in the to opening statements that senator shelby and i have made. why the treasury take such large equity stakes rather than providing the company's with more loans? number two, explain if you would have a treasury determine the size of the stakes and in to be taken and given the treasury's large stakes in these companies particularly gm, how will the u.s. government quickly extricate itself? as i said, i would like us to be out of this business yesterday.

obviously that's something to happen but the point is i think a lot of us would like to see as to be on this, get out of it and get the business is function on their own. given the stakes we have how easy is that going to be to achieve and for you dr. montgomery i admire you taking on this job, the president has a lot of confidence in you. as i understand you have no budget to operate with other than what exists around. so we need to know if we can do anything to help. obviously all of us, some more than others, our colleagues from detroit and michigan and ohio, senator brown, senator bayh, i presume all of us here are being adversely affected by job losses. some more than others and obviously we want to help our committees during times of readjustment like this. so what additional tools are you going to be asking us of the administration asked of us and the congress to be helpful for you to perform your job holding town meetings are great, listening to people are wonderful things to do, but i suspect the people who show up

at those meetings want to know what if any kind of help is going to be there for them as they try to find a new economic path for themselves and their families in this economic hardships on any to get some additional specificity as to what you'll be asking us and how we can help minimize the time of economic blows the committee will be facing. response to the questions. >> thank you, let me try to address you're three questions if i can hear it in terms of the equity stake and why equity and why not debt, let me answer that this way. the size of the stake in the determination was sent to the following process. the first thing that happened was the company's put forward a business plan which we it very vigorously reviewed and challenge them on but it eventually came to a business plan and to that business plan really a financial need it was determined because we saw how much money they needed to right size of their business, take the necessary steps in the case of general motors and the bankruptcy to pay off some of

the secured debt so there were a whole variety of news that the company had. that really determine the sort of starting point for the discussion. the second step was directly on your point which was how you determine how much of it to be done and how much should be equity. and obviously as i said in my opening comment the president did not start out with wanting to be a shareholder but the dilemma we faced was that one of this company's core problems for a lot of years was that it was too highly leveraged. so for us to try to fix general motors with more debt would simply have not fix the problem. general motors key contenders among them companies like toyota and volkswagen have a very minimal levels of debt. dad approximately equal either to the amount of cash they have on the balance sheet or one year's profit. so we were very mindful of trying to set up general motors to have a competitive balance sheet because that is one of the competitive weapons in the marketplace. and so that really left us that if we were not going to

overburden the company with debt and the only remaining security we can have with it the equity and certainly we did not want to give this money away, this is the taxpayers' hard-earned money and so the determination was to take equity. in terms of the size of the stake and how that was determined, that was determined in arms length dealings with the other key stakeholders to the company who wanted two also be owners. that included the bondholders where we had a vigorous debate and the uaw on behalf of the retiree trust and they obviously wanted more equity than we wanted to give them and we wanted to give them less because on behalf of the taxpayer the objective should be to get as much as you can to get as much value as you can add of the enterprise. so it was really determined to a arm's-length negotiation and the other equity shareholder in general motors is canadian government who is also making a very sizable investment but in that case there investing side by side with us so there are proportionally getting the same amount of equity as we are per

dollar invested. so that part of it was just right up, but to the others it was simply arms length bargaining. on the question of how we get out. obviously this is a key issue. the president has been quite clear that he is a reluctant shareholder and wants to exit as soon as practical. now as practical in this company is not going to mean to our morning. with this company comes out of bankruptcy is going to be a private company, the new general motors is not going to be publicly listed, it will take some time for it to achieve a listing on the stock exchange. two what is called an ipo and begin to trade its shares publicly. we would expect that would likely happen sometime in 2010 and that would be our goal and then after that there will be an orderly process where these shares will be disposed of but it is -- '80s to be orderly because again these are taxpayers' dollars and while the president didn't want to be a shareholder once we have become a shareholder we certainly want

to achieve fair value for those shares so the taxpayers can get back to investment. >> thank you, quickly dr. montgomery. >> yes the initiative that we are undertaking is using the current resources of providing the recovery act which really provides unprecedented level of dollars that we can use either to support as mr. bloom has pointed out some for the industry, make sure the companies are viable, step one, to talk about how we support the suppliers and the treasury through its supplier support program, the small business administration, through its seven a loan program and through its dealer program all have been made efforts to support the suppliers and keep that part of this sector viable. as far as the workers are concerned, there are over a billion dollars in additional funding from a multiple billions in additional funding for job retraining assistance and on top of which, of course, extended expanded unemployment insurance. as we think about going into the

longer term and a new growth potential, there are in the recovery act funds within the department of energy to make new investments and defense sectors to grow different areas of the economy. everything from smart cards to alternative energy, modern feel it is in cars and next generation vehicle so there are a variety of different currently available resources to make investments and my job at this point is to make sure the people in these regions havel access to those dollars. as we go for the may turn out an additional investments are necessary but now we want to make sure the current investments are being fully utilized. >> i appreciate that, i'm sure my colleagues have questions on that line but let me turn to senator shelby to met mr. bloom, following up on senator dodd's question a minute ago. how many years using the government will be involved in general motors and chrysler as far as their investment? would it be your judgment three years, five years, 10 years, 12 years or what? give us some kind of judgment.

you say it is not going to be quick to get out. >> yes senator derrin as i indicated the legal framework in which we are which is a private company in an ipo with a certain amount of runway time, senator, at this point we do not have the specific targets in terms of years. the factors that will influence that will be many. how the market is doing, how the capital market is doing. we are going to be a very large shareholder in a company and so as you know for a large shareholder to be selling shares can be disruptive to the other shareholders so we want to be mindful of that. at this point the president's direction is to get out and his order is as soon as practicable. but beyond that we do not have at this point a defined time frame. >> will you put together a plan though? that you can operate a blueprint, some architecture. you got in, the question is how

long will the government be involved in running a huge manufacturing or owning a huge manufacturing plant? >> i think that is a fair question. >> i want to appreciate your point. we are owning and managing it and that is important and the president has been clear on that, but your question -- can i put you are involved as a stockholder. >> there will be a very limited involvement as a shareholder, the president has issued a series of guidelines and how he intends us to act as a shareholder. we do not intend to involve ourselves in day-to-day management and those sorts of decisions. the shares will only be voted on what we called for governance issues which is to say the election of directors or a change of control transaction so yes there will be some involvement but it will not be onerous or overbearing involvement. but back to your question, there will be a strategy to get out. will be to access the public markets and to sell when it is

determined and that the market is a appropriate for selling, but i do not anticipate there will be a detailed blueprint. again because of the mere issuance of that blueprint we believe would be marked disruptive and would cause an overhang in the stock which again would defeat the very purpose we are trying to achieve which is to get out quickly what to do it in a way that maximizes the shares for the benefit of the taxpayers. >> do you believe that government has put as much money in gm and chrysler as there ever going to put in or do you anticipate more down the road as mr. montgomery, i did not say anticipated, but could be more money? >> yes, sir. >> in all fairness can that is a very fair question. it is our absolute intense that this be the last assistance provided to these two companies. we have spent a tremendous amount of time diligently the companies and we have worked very hard to assure ourselves

that this is their last visit. you never say never in this world, but our whole work basis of our analysis has been a that this is a one-shot affair. we are going to do this and that we are going to construct an orderly exit and then it will be back to business as usual. >> what if gm and chrysler -- what if it doesn't work that is an anticipated? were you then recommend more money and just keep it going to keep a few people employed in? may be more than a few -- a lot of people employed. >> it is very hard to speculate about a hypothetical, senator, but i can tell you -- >> back to be more than a hypothetical. >> i believe it is a hypothetical because we constructed a conservative plan. what we call stress tested it, we have looked in cases where the recovery is slower than most economists believe it will be, with the company is not fully capable of executing its turnaround. so we have looked hard at this

question and it is our belief and are confident belief that this will be the last trip to the well. >> let me just in a few seconds, what i mean conflicts of interest, the federal government is now the principal labor, environmental, and safety regulator. a customer, tax collector, finance year, and pension guarantor of two of the three domestic auto manufacturers. unprecedented. it also holds considerable equity positions we are talking about any tendency in managing these buried responsibilities will engender conflicts everywhere. in other conflicts will rise by way of the government's investment into competing entities. what process have you put in place if you have to help identify to manage and then reports such conflicts to the congress especially this committee? >> let me talk generally about the president's admonitions in

this area. he has been very clear that the policy directives regarding things like the environment or cafe or health and safety are not within our purview. we have no authority to deal with the companies on those matters and do not expect to have any authority. whatever the congress passes and the president signs that becomes the law of the land we would expect would apply to all companies who do business absolutely similarly and the president has been crystal clear that he expects no special accommodation to either of these two companies in any of those areas. we intend to be essentially a passive shareholder who is trying to get our money back so we can give it back to the american people and be will leave to others to determine what the proper policies are regarding other matters. >> thank you, senator shelby. senator bennett of colorado. >> thank you mr. chairman come i think mr. bush and mr. m murray -- month average. i wanted to start by thank you

for the speed at which the crisis situation was dealt with in bankruptcy. as somebody who used to make his living restructuring companies in bankruptcy, nothing as complicated. it this has been a lightning quick and there are a lot of people who said it could have been done. you weren't going to come in and 30 days and you didn't budget came in pretty close to its and i think at least in my view that is a major step forward to try to create some credibility on these matters. i want to say congratulations on that. with all of that said, i wanted to echo the chairman's view that the american taxpayers want to be out of this company as soon as possible, as soon as practicable as a language that you have use and all i can say is i hope you are successful at that as you have been getting this bankruptcy accomplished. i guess mr. bloom and my first question for you is whether or not you'd be willing or could

shed some light i'm sure is in the bankruptcy documents on some of the underlying assumptions that underlay the arm's-length negotiation you're talking about. what were some of the assumptions relating to the sales of automobiles in the united states to cash flow of company's? how did you and the other party is think about how to value first in the enterprise itself and then to distributed to constituencies and the bankruptcy estate? >> yes, sir, let me first thank you for those kind words relative to this been. at the benjamin franklin said in a hanging tends to concentrate the mind. i think that is what we had in the case of chrysler and i think it was a good tonic. relative to how we went about our business in this bargain, essentially the process was the following but companies in each case came up with the business plan and it is the management obviously who is responsible for

putting forth a business plan. we view ourselves essentially as a potential investor of the taxpayers' money and so as an investor we went and then diligently with that plan criticized it, what ever they said we ask did you consider this and consider that so whenever assumption they made we can afflicted on its head nasa the reverse. and obviously we use are on assumptions two. if they believed that this was going to be x we added it was .84.2 x. we did not pass on any single point estimate but rather as a lender an investor what we really did is simply acted i think as traditional investors were which is to say we looked at a variety of scenarios, we ask ourselves if saar is higher or execution is better or worse than plan, how did these things look and that brought us to an enterprise value using relatively traditional financial techniques.

multiples of earnings come a discounted cash flows. i think the things you expect any third-party investor to look at. obviously we are the government and we are doing this because of the president has directed that this is a critical industry but nevertheless we tried in every aspect of this to be commercial. to ask ourselves what is the cash flow capability, what is the likely earnings capacity of the country to etc. from that we created models of potential enterprise value and from there we engage in the kind of bargaining that i describe to which is to say arm's-length bargaining between a lender/investor and the various other stakeholders in the case. >> attention the ranking member talked about between not the government involving itself in the day to day management decisions of the company which i think is certainly the right approach, but sitting here thinking about it is a projection doesn't come true, if

you have quarter upon quarter of growth or lack of growth -- >> we're going to leave this hearing and take you live to the house hearing with executives from general motors and chrysler and a number of auto dealers on the impact of the bankruptcy. it chairman stupak, resuming the coverage live on c-span 2. >> can you hear me now? chairman stupak, ranking member walden, a distinguished members of the subcommittee, i want to thank you for the honor of appearing here today. i would especially like to thank congresswoman sutton for her role in providing this opportunity to represent my fellow dealers. and we are losing seven dealerships because chrysler, the bank and the executive branch of our government and acted precipitously to deny us our economic rights. this is a public policy issue

worthy of your time and worthy of congressional legislation since without you're prompt intervention to restore our right to franchise under state law to thousand small businesses and across million have a thousand jobs will be lost. as a nation can we really afford to let this take place? i urge congress to enact a juror 2743, the bipartisan automobile dealer economic rights restoration act next week. we have a long and proud history with chrysler and gm. the majority of our stores sell these brands and these brands only. none of our stores are dual of other brands. we have a combined 374 years of business relations with chrysler alone. we are passing both chrysler and gm and we want both companies to succeed, we are committed to helping them do so. that is why we are both

disappointed and perplexed by their recent actions to terminate us and over 2,000 other dealers. we are not perfect. during those three and 74 years of operations we have made mistakes. like chrysler's managers are managers are perfect either. nevertheless we have stood shoulder to shoulder with chrysler during good times and bad and, in fact, michael dell as the president of the dodge national dealer council lobbied this very congress for funds to belloc russell the first time. we never put on them. and they shouldn't put on us in the hundreds of others dealers who have remained committed to chrysler. this issue is not about the spitzer family. or are seven dealerships that are being terminated or even the 300 plus employees to work in them. it is about destroying the entire net worth and life's work of hundreds of a thousands employed. and i fear that these actions by chrysler and gm will lead to

their demise. and all of it is unnecessary. first, our dealerships do not cost manufacturers one dime. all products and services which chrysler and gm provide are charged back to the dealership had a profit. whether it is special tools, training, or even those colorful up brochures, we pay for all of it. we build our own facilities. we provide our own and operating capital. we hire our own people and if we lose money comes out of our pockets. second, chrysler has argued the 789 dealerships terminated or for performance reasons or to put all brands under one roof. as demonstrated by this one testimony of myself and dozens of other dealers in the bankruptcy court, many of the terminated dealerships or high performing or genesis stores or both.