calling the loan. i think somehow or another, somebody is letting you get away with this. the fact was that the prior administration had set in place a set of procedures that if the companies did not present a viability plan that was appropriate you would call the loan. you have not done that and instead, you are putting in place a plan. i just want to get the record straight on that. let me talk a bit of money about -- a bit about the money that has gone into this. we have $50 billion in gm, $16 billion in chrysler and a $5 billion in the suppliers. my understanding is, and i see some of the other senators moving along around a little bit with section 136 money in the energy bill, how much has gm applied there and how much do you expect to get in another pocket, if you will? it is all our money.

>> first, a small correction, i think the total u.s. government commitment to christ service $12 billion. the remaining funds are from the canadian government. >> $81 billion. you know, we had a guy named mark zande appear who told me that if we put $1 in these companies we would end up between 75,000,000,100 25 billion and obviously we are are blowing past that. -- $75 billion at $125 billion and we are already blowing past that. >> i believe that both of our companies do have applications in 4136 london. it is my understanding -- applications in fort 136 fundin. i have no indication that they will necessarily receive it. i have no indication that they will necessary receive it. it's a competitive process. there are dozens of companies applying for 136 assistance.

if they're deemed worthy they'll get it, if they're not they're won't. >> i just see the policy stuff changing around 136 that they could have a good chance of receiving it. only uawp -- i know there's been a lot said about shared sacrifice. i would just like some yeses, nos. it's my understanding the existing employeeings are making exactly per the new contract per hour what they were making under the old democrat. is that yes, no? >> the answer is no. their base wages -- >> their base wages are exactly the same. >> i'm trying to answer your question. there's a cost of living improvement which they had in their paycheck which has gone away of about a dollar an hour. >> the base wage is exactly the same? the health care businesses are exactly the same. i did notice you did away with the monday after easter holiday,

but my guess is they don't get very fearful when you come into the room to negotiate. how has that been? that negotiation? >> i would likelet them speak whether they're fearful or not. the negotiation has been extremely vigorous and arm's length. i believe they've made very difficult sacrifices. >> i don't want to go into a long dialogue here, but i haven't heard many sacrifices yet. i'm talking active employees. >> about $7 an hour of reduction in their compensation package. to me, that's -- >> things like playing time and a half after 40 hours. >> the company valued the total package of concession at about $7 an hour. >> the thing that troubles me, i know politics are not involved, although i would like to know who -- i know you're not called in politics, but what's the number barney frank called about

keeping the plant open in his district. we've got the same kind of thing happening in tennessee. who is it people do call to get those things changed? >> i can only speak for the administration, senator, and i can tell you what the president has asked us to do and what we're doing, with ch is not meddling in that matters. >> who made those decisions? >> president. >> the president decided not close that plant? >> no, the president advised us not to meddle -- >> who did barney frank call? >> i can't comment on that. >> the great estrogen vags, we all heralded, we have statues and tributes into the great estrogest generati generation. many invested in bonds with gm and thought throughout retirement gm is going to be something that paid them and i imagine there's circumstances where an 80-year-old veteran

expected to get retirement has been basically made toast by the decisions of this task force. and then if you look at the uaw's component, they've come out really, really well from the standpoint of their ownership. i know you and steve rattner, which i really respect and think he answers questions very clearly, as do you. i guess i've been a little discouraged to hear, well, we don't need them anymore. they loaned us money, but we have to have workers. i think there's been an overshert concern if you didn't do anything everything on the w said, they would strike. i was wondering if you might educate us into that thinking and the decision where is in essence bondholders are stuffed who invested in the company. you don't need them anymore, but others are not.

>> well, let me try to answer that, sir. first thing, i don't -- i hope we never would act god-like or anything approaching that. i think there's sacrifice in general motors to go around for everyone. there are enormous victims of the fact that general motors is a failed enterprise. bondholders are clearly among them. the communities that had come to rely on those jobs, the dealers, the list is very, very long. tragically, this company became insolve insolvent. very, very insolvent and it's a failed enterprise. and that meant that the only way to revitalize it, if we wanted to revitalize it, we really had three choices. one is we could have let it liquidate with all the damage that would have caused. second, we could have made good on all promises with taxpayer dollars and that i think would have been many multiples of the investment that's already been made. and third, we could have taken a commercial -- which is what we believe we did -- a commercial

approach to this restructuring. and in a commercial approach to a restructuring, a business owner, a financial investor will look in a pretty hard-nosed way at who's needed to make the company succeed going forward and who's not. and for instance, the decision was made as it was in chrysler, which we supported, to take the suppliers, who supply the company with goods and services and essentially pay them at 100 cents on the dollar, which nobody else got. and the reason was not bleeding hearts of suppliers. it was the commercial decision, if you don't have a steering wheel, you can't make a car. so commercially, taking those unsecured claims of suppliers and leaving them behind did not make commercial sense. there are warranty holders, peep who bought gm cars. worked on its balance sheet, many billions of dollars. the commercial decision was made that those warranty holders, if you made them angry, probably wouldn't buy a new gm car and

your best base of future car buyers is prior car buyers. in all these cases we believed in a very clear-eyed way with the company in the lead and the treasory questioning them every step of the way commercial decisions were made about how to treat each constituent. i believe everyone has made enormous sacrifice and i believe those sacrifices have met two tests. one, in each case, the stakeholder did better than he would have if the government had not intervened and second, he was treated in a fair way, given the commercial realities of the marketplace. as you know, in the chrysler case, a bankruptcy judge heard over 30 hours of testimony on this exact set of questions and ruled completely in our favor in a very detailed 37-page opinion. it was jump held unanimously by the court of appeals and the supreme court just decided not take up the matter. they did not see any issues that rose to them.

i believe this received enormous scrutiny the all levels and we are quite comfortable. we understand there are a lot of disgruntled people, but unfortunately in a failed enterprise, that's inevitable. >> thank you. senator bahy? >> mr. bloom, i assume you could be making a lot more money with a lot less aggravation doing something else. i'm grateful to you and mr. montgomery. it was good being with you in indiana, the town hall meeting while you were in our state. i'm one of those that thought it was not an appropriate thing to run a gamble with the economy. there was sober analysis that if

we let these businesses fail it would be a lot of communities that would have been hurt by this. and if the economy had been grow big leaps and bounds, maybe that's a risk worth running, but given the present state of the economy, i think the better judgment was to not run that risk, as long as there was a credible -- and i emphasize the word credible -- plan in place to maximize a plan that the investors are going to get a return on their money. if you have a reasonable prospect of getting repaid, it was the right thing to do. i would like to focus on that issue. and mr. bloom, i understand you want to maintain maximum flexibility here and there's a lot of imponderables out there we don't know. you're a bright businessman. you've analyzed this, as you were saying in response to several of my colleagues from a hard-nosed business perspective. what do you think the chances are that the taxpayers will ultimately be repaid? >> senator, i appreciate the

question and it's a fair question. the best i can give you, we've looked at scenarios where over time a substantial portion and potentially all the taxpayer investment will be returned. but i certainly by know means would say i'm highly confident that will occur. there are reasonable scenarios where it will occur -- >> the word reasonable in the law normally denominates a probability greater than 50%. >> i wouldn't put that probability on it. you're a lawyer and i'm not. >> a handicap i constantly try to overcome. >> we've looked at a lot of scenarios and obviously that was a key objective to us, to say to the president that there is a reasonable chance that thisan happen. and that was a basis -- that was one of the key basis that we took when we insisted that we

did that the company be aggressive in its business plan. at the enof the day, the ability to pay back the money through the sale of the shares is based on the profitability of the enterprise. profitability of the enterprise is based on -- one aspect is based on how hard nosed they're prepared to be about dealing with their reality. '. >> let me ask you this then. say there's an improvement in market conditions. we're in gm for $50 billion. it looked like their total capital is about $83 billion, we're 60%. what kind of earnings per share at a normal market multiple do they have to achieve to reach that kind of market cap. >> well, i'm sure you and many others can do the arithmetic. the companies will have a trading multiple. it's hard to know exactly what that will be. you know, again, it will depend on a wide variety of factors,

but honestly, i say what i said. i think there's a reasonable chance. it will obviously take a period of time and it will take a recovery in your economy. but obviously it's a key focus for us. >> with the amount of holdings that the tax pairs now have, you said there's no schedule and i understand that. the overhang is going to be substantial. therein lies the problem. perhaps you haven't contemplated this. but would a periodic sale so you're not trying to time the mark and the market can factor that in so we can gradually whittle down our holdings over a period of time. is that something you would contemplate? >> we have looked a variety of exit strategies. there is some history out there. you have the privatizations in eastern europe and western europe and england. we tried to do a pretty wide canvas. i think the conclusion is there's no perfect system. we looked at what bill gates did with microsoft. i think our judgment at this point is that a prearranged time

schedule will create more problems than it solves, but i can assure you that was one of the strategies we examined. >> my last two questions and i think you already answer one of them, i'm just answer them both and loetl lp and loetl let and loetl l you respond. is the supply change in reasonably good health right now? number two, if you're an employee or shareholders of ford what do you make of all this and how do you compete? >> your first -- the supply train is very troubled, but we are monitoring it very carefully. we're very aware of the interrelated as of the supply chain. when the supply chain goes down, you have ford and honda and nissan and connected to the same suppliers. we are deeply aware of the interconnected the of this and we are monitoring it closely. the fourth question is one that,

again, we have looked at carefully. we have -- we believe that ford is a good and competitive company. we believe that they will be able to survive and thrive as the economy turns around, but obviously, we are in constant dialogue with them during i have also -- i would also say that they have chosen affirmatively not to participate in this program and that is their choice, but that was their choice. >> the center johns. >> thank you, mr. chairman. mr. bloom, reference was made in a previous question about barney frank. you can see why that leads to some much suspicion back home and even amongst members of this panel. i do not have that kind of power, and yet, dealerships were closed in the state of nebraska. were you aware of that? did the ceo or somebody call you and say, wow, what do i do

with this?(%ñbarney frank has ce this facility left open? >> no, sir, i have not. >> did you learn about it after the fact? >> i have learned about it pretty much the same way you have learned about it. not. >> do you know of any other deals that have been made? >> i only know what we've been admonished to do and what i believe we've done. i assure you we're going to do what he continued to ask us to do. >> so when you say you haven't participated does that mean you don't know of any other special deals that were struck. >> i don't know what i don't know, sir. what i can tell you is the auto task force has been explicitly and very clearly discussed with them, and i have -- and we have regular discussions internally about this, and i can assure you that nobody from the administration has been involved

in trying to pressure these companies to make specific decisions regarding dealers or regarding plants. and i know that we've been instructed not to do so in the future and we will not. >> let me, if i might, focus for a minute or two here. and talk to you about the rights of people. i didn't do a lot of bankruptcy when i practiced law, but i did do some. is my understanding correct that if you're a shareholder and you just go through a regular old bankruptcy that on the other end of that bankruptcy, you're going to basically end up with nothing? >> i would say the overwhelming majority with shareholders at bottom, i think they should expect not to see anything.

yes, that's a fair description. >> shareholders have a stock certificate that's a worthless piece of paper. >> the company's plan does not provide for any recovery for share hollers. as you know, general motors is an ongoing case and so i can't predict with certainty the jut come but yes, the plan that's been filed does not contemplate recovery for shareholders. >> dealers who have been notified they won't be dealers for general motors anymore, same deal. they're out of luck? >> i think the dealers would be expected to have an unsecured claim and they will recover what other unsecured creditors recover. >> so dealers, shareholders, they come out of this basically with nothing, if the plan is adopted. >> i think they come out of it as they would in a traditional bankruptcy. which is either as unsecured creditors or as shareholders, even below that.

>> yep. now every once in a while an employee will come to my office and say, you know, i'm an employee of xyz company, they just filed bankruptcy. they owe me two weeks worth of wages. i say well, let's file a claim. i hope you don't need that money to buy groceries because i don't think you're going to see it. and i was always right. describe the rights of the employees like you've described for me the rights of dealers, the rights of shareholders in just a regular bankruptcy. >> the treatment of employees in regular bankruptcy varies all over the lot. largely because the entity trying to reorganize, say, 363 sale going on in the case of general motors. the entity providing, being the sponsor of the new entity is

going to make determinations about what the proper treatment is for employees. and in the case of general motor, the decision was by the management that keeping both salaried and hourly workers working and on the payroll was an important part of maintaining the continuity of the business and having a successful enterprise going forward. so the determination was made to continue to pay wages in the ordinary course, as i indicated it was for suppliers and warranty holders. these are business judgments that are made by companies and bankruptcies all the time. and i've been involved in many america bankruptcies where employees did receive continuity of wages. i've been in bankruptcy where is they didn't. and honestly, it's been all over the lot . >> what influence did the administration have on that iss issue? >> to work with the company to try to come up with, as i described it before, a commercial approach to this question, which is to say, how

do we best maximize the value of the government's investment? because the government is putting a huge amount of money into these enterprises, and the only way we get it back is if there's a viable enterprise going forward. and so the question we asked the company in each case is what's the smallest amount you have to give? because obviously you would like the smallest burden you could have. what's the smallest amount you have to give consistent with building a successful enterprise. and every single stakeholder, we challenged the company to make that kind of determination. and that is the role we played, essentially as i said, i said to an earlier question, we're not the management, we're not running the company, but we are the provider of capital, and so i think we had an obligation to challenge them to make sure they were acting in a thoughtful and commercial fashion. and that's what we tried to do. >> let me ask one last question. i'm over time here. but let me ask one last question. during any of these discussions as shareholder being

extinguished, as dealer rights were being extinguished, as people were sacrificing and our communities were being affected, et cetera, et cetera, did anybody with the administration, with the task force, ever say you know, it seems like buying 60% of general motors is a big enough decision where we should go to congress and ask them what they think of this. >> i think the president was proceeding under the authority that was created through the creation of the t.a.r.p. and the prior administration made loans under that, and the president determined that these investments were appropriate and proper under that legislation. >> you agree with me, i would hope, that loans by the prior administration are a vastly different creature than ending up with ownership of 60% of general motors. >> i would certainly say what i

said which is the administration believes it was proceeding under statutory authority that it was granted and doing the best it could in a very difficult circumstance. >> last question -- >> go ahead, take a last question. this is your third last question. this is really your last question. go ahead. >> i'll stick around. thank you. >> go ahead. we may not do a second round. go ahead. >> just in your role, does that make you uncomfortable? >> in my what? >> in your role. >> does it make me uncomfortable? >> that we never got an opportunity to say yes or no on this? >> senator, i'm working as hard as i can under the direction of the president to try to save these companies and minimize the taxpayer dollars required to do it. it's obviously an exceedingly challenging task. we're all doing the best we can. >> thank you, mr. chairman. >> thank you both. i will take my five minutes now. i appreciate very much both of your being here. i know the personal sacrifices you both make in taking these very difficult jobs hours away

from home with small children. mr. bloom, i appreciate your driving from pittsburgh every week. thank you for that. i particularly appreciate that you took this commercial approach, that both the bush administration and the obama administration want gm and chrysler to move forward, not to liquidate those companies. there almost seems to be a perception in this room and among some, not just in this body but elsewhere perhaps that the employees of -- the employees took no hits but everybody else did, the dealers, the bond holders, the executives, the communities, and god knows when you represent a state like i do, you see what kind of hits communities take and you see what kind of hits workers take. there are tens of thousands of workers that are losing their jobs, not just at chrysler and gm but tier one suppliers or tier two suppliers and beyond. many of them small family-owned nonunion companies that pay $12,

$15 an hour or more in many cases but not more in many other cases. so i see the $7 an hour term -- $7 an hour assessment you made plus the lost jobs plus what it's meant to the communities. so a lot of us and i think the country appreciates that you have done this in a way that keeps these companies alive and we hope growing in the years ahead. i appreciate your generally optimistic assessment for the future. i want to talk a little bit about last year, what happened and kind of where we're going now, then i want to be more specific on one question about a community that's really -- another community in ohio that's been hit hard by all of this. last year, some of our committee members worked with the bush administration to provide non-t.a.r.p. loans to the auto makers or legislation would have required the companies to achieve concessions from various stake holders within a strict time frame, as you recall before you were on the board. as my colleagues recall the effort was -- legislation was

filibustered, the bill died in the senate. today, many of the same critics calling for specific concessions from workers and from bond holders are now saying the government backed plans unfairly advantage one stake holder over another. you have touched on that in response to questions from senator corker and senator bayh and others. compare concessions in last year's legislation to those in the current restructuring plans being considered in bankruptcy court in both cases. >> i think in all cases, the stake holders and certainly including the uaw, the concessions wrested from them were in excess of those that had been contained in the legislation that didn't pass but were largely embodied in the loan agreements. so in fact, and i think that is appropriate because as it worked out from december until april, the market got worse. the economy got worse. car sales were even lower than they had been projected to be. so in light of that, we did

insist that everybody give more and that certainly includes the uaw. it does include the bond holders but it includes all the key stake holders. >> understanding your response on questions on decisions that gm makes on whether it's a plant closing, whether it's downsizing of a plant, whether it's assembly plant or stamping plant or whatever, engine plant, whether it's -- 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 when you can see the frustration on both sides here with what happened to dealers and how badly it was handled and 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 that way, but that's not what chrysler and gm decided. but some other decisions, i want to talk specifically about one. gm chose to close the most productive stamping plant they have. they have three stamping plants, mansfield, ohio, full disclosure, my hometown, i don't live there now. then one -- i'm sorry, they believe i have four or five plants. one in indiana, couple in michigan, other places. one in parma, ohio, too. the stamping plant in mansfield was consistently ranked higher according to the competitive operating agreement that gm does its own assessment, 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 -- there were some closing arguments, i assume, although they did not make them very well, there were many more arguments to keep it open to a it is devastating and we all know what these plant closings due to a community. talk about your oversight and the demands to -- the demand for transparency in these companies that federal taxpayers have major investor tments in. >> certainly, these are devastating and general motors is closing many plant. we have made an absolute determination we are not going to get into micromanaging their decisions. we certainly have encouraged, however, the companies to be forthcoming cured so, if a particular