that's exactly what has prompted the enactment by legislatures of all 50 states of franch%@@@@@@@ as is the manipulation of the bankruptcy process and franchise laws. the one-sided economic relationship to a dealer, a manufacturer, and also provide consumers with reliable, compet 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 company stave off bankruptcy? >> yes, ma'am. we took full allocation every time and i believe it was two months we actually overordered allocation, trying to be a good soldier. >> mr. press, i have heard this from other dealers now, several besides mr. lopez and mr. whatley and if the company called and said help us in this and we need you to take these cars and then we will stave off bankruptcy, and then going

forward, of course, you're in a bankruptcy now and the dealers are not -- they're not getting 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 all aspects of our business but they're not driving this one. >> i'm not asking who's driving it. i'm asking were they aware. >> they're aware of the process, yes. >> did they ask you to do anything different? >> in their finding in march 31st, march 30th, i believe, they indicated that they felt our plans in this area were too slow and that we were not aggressive enough and that was, by the way, one of half a dozen other observations which had a similar pattern that we were not aggressive enough and not moving fast enough. this was one of the areas where they had the same observation, senator. >> that was the auto task force? >> yes. >> okay. now, in terms of the

administration, who within the white house would you have had contact with on this? >> our workings every day with the auto task force would include in my case, steve ratner, ron bloom, harry wilson, and then they have a fairly small group, so we have gotten to know them pretty well but those would be the three principal people. >> they wanted you to be more aggressive than you displayed? >> across the board, the view of our plans was that it was not aggressive enough. >> how much money are you going to save when the dust settles and i guess these people are forced out of business and a whole bunch of people like them? tell me on your books how much money you will book as a savings. >> this is an area as i said before, it's about $1,000 per car of total distribution costs. we need to work that down over time. you can't -- there's no way you can point to one individual dealer. it can't be done that way. you have to look at it and say

if you can take -- if you have $1,000 per car, you can over time economize that to $900 per car. that's a lot of money in our case. finally, this is all about actually then attracting capital to the dealer body over time. >> did you do any cost analysis where you looked at the jobs lost, the pain caused, the impact on local communities, and said boy, dollars and cents, we win on this one. >> i think gm's brands win with the right -- >> no. not asking that. just asking did you do a cost benefit and analysis, an economic analysis of any kind? is there something you can send to me where i can go back to these people and say you know, gm looked at this, they're going to save x dollars? >> individual location by location, no. >> chrysler, did you do that? >> we did not go by location. we have it for the total and the new companies dealer network. >> what's the total? how much is chrysler going to save by shutting down all these

dealerships? >> we are going to save approximately $1.4 billion in development costs, $200 -- per year, $200 million per year in marketing and advertising costs and about $1.5 billion of additional revenue from the substandard market shared dealer representation and about i think it's around $41,000 per dealer affected in terms of cost of actually going out and calling on the dealer and having people come and make records and do all of that support. >> would you be willing to supply that document to the committee? >> sir, it's included in the written testimony that i submitted. >> okay. let me ask a question about kind of the net effect of what you guys are all about. if i had a share of chrysler or general motors stock today, what's its value? >> its value today for general

motors would be almost zero. >> chrysler? >> also, we have no net worth. we're out of business at this time. >> and how many shareholders did chrysler have? >> two. >> and how many shareholders did general motors have? >> we had 550 million shares outstanding so thousands and thousands of shareholders. >> they're just out today? >> yes. >> okay. these dealers, what's their dealership worth without the brand and maybe somebody from the dealership can give me that. >> practically zero. >> practically zero. >> senator, the value of their business would be the franchise value and the real estate, essentially, real estate has been seriously devalued because these are single purpose buildings that will not be reoccupied and the value of the franchise are what we call good will or blue sky is virtually gone. >> let me ask chrysler and gm, what's the value of the bonds today? the indebtedness?

is it ten cents on the dollar, 15 cents on the dollar, five cents on the dollar? >> in the caves our bonds, they have generally traded less than 20 cents on the dollar. in some case less than 10 cents on the dollar. >> chrysler? >> we have no bond. the equity holders will receive approximately 29 cents on the dollar. >> 29 cents on the dollar. okay. here's my question. shareholders basically out of luck. bond holders, pennies on the dollar. dealers, not doing any better. i could go on and on. does it occur to you that in this process, as you were putting this together with the very large investment of tax payer dollars, in chrysler's case, that would be how much? >> well, we have received $3 million and $4 million for debt financing so far. there will be additional funds

coming for the outlaying company. >> don't you think there was some justification for congressional oversight here? >> from our standpoint, the reality is our relationship with treasury has been one of -- as being a bank, being an investor in our company. they have been excellent to work with in terms of assisting us as an equity fund would, and the funds have really been invested in a way that the taxpayers' interests have been looked at very carefully. >> you side-stepped my question. go ahead. >> in our case, it's $50 billion is what we expect to receive in total from the u.s. taxpayer, number one. number two, our primary relationship has been with the automotive task force. number three, as i said in my opening remarks, our commitment to remain very transparent because we need to be, not only because we're a company in bankruptcy but because the u.s. taxpayer is our largest shareholder. >> thankou