excrement -- explanation of how it is working, we would expect them to talk to dealers. but we are not going to go in on top of them and say, why mansfield and out why not -- why mansfield and why not? >> would you insist to them that they disclose to their dealers how they made the decisions, why they made the decisions? >> recognizing that there is a competitive issue where public disclosure of certain kinds of information can put the company at a competitive disadvantage, so, not being able to make a blanket, like that, but i would say, yes, we would be asking and insisting that gm have an open and transparent dialogue with all of its stakeholders. and to the extent is not, we are more than happy to facilitate

that and insist that it occur. again, i want to be cautious because there can be competitive issues were the public airing of information can be harmful to the company. . . matter, we would expect the company to be open, transparent and responsive to communities, to stake holders in these sorts of matters, yes. >> one last question. there was discussion earlier, senator johanns' questions about senator johanns' questions about stockholders, creditors, others 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 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 that companies can no longer afford and finding a way to discharge them in an orderly way. we would expect the company will 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 recompense they would hope. that is clearly a terrible thing for those individuals but again, 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 insurce policy or anything like that. the companies are largely self-insured, both of them, on this matter. and in the chrysler bankruptcy, there was objection on that and the judge found it to be, again, an ordinary course treatment. >> thank you again, mr. bloom. 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 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 can 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 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 tax payers 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 that 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 have done by deleveraging the company is we have 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 any time 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. >> we all know 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 nine million units. 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. 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. what i can say is if you look at the company's projection, they do not project their publicly filed projections, they do not project a return to the 18 million level, nor to the market share that 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 recover -- 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 in general motors -- >> it is certainly important and we are moving quickly as we can, recognizing that this is a court-driven process. as 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 stake holders have rights and they're going to be heard by the judge, and that's a judicial process that we certainly respect. but 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 a way as we can. >> mr. montgomery, i apologize for not asking you any questions but my time is limited. i'm sorry. thank you. >> thank you, senator bunning. senator cole? >> 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 kenosha, wisconsin, and he felt that in light of that, they're better off just moving those jobs to mexico.

with all 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 keshnosha so we can keep those jobs here in the united states? >> let me try to respond to that, senator. first, i want to deal with a 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 hope mr.

ratner said because i believe these are the facts, is that chrysler made a decision a couple 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 violate the basic principle that i indicated the president has insisted upon which is we not interfere in the day-to-day management decisions and number two, just as a business matter, 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, it 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 general motors plant in jamesville, wisconsin was one of three plants in the running to make small cars and if that occurred, 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 doing, sir, is trying to ensure that general motors has a fair process where the three communities have a chance to have an open dialogue

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 jamesville 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 deal fairly with jamesville as well as the other facilities, but we're not intervening and insisting that jamesville 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 had determined that their dealer network was not over the long term maximizing value for the company. the company have 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 over-dealered. that causes over time the brands to degrade, it causes pressure for price cutting, it causes the dealerships to not in that context, they persuaded us that that was a generally sound business decision. they had to do it quickly, relatively quickly. it would be appropriate and get to the good results as quickly

as possible. from there, it was the company posted decision on how to do it and which dealers to choose. that was the decision made. 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 throughput, and on that basis, the company has determined it cannot bring all of its dealers force and be successful. this is obviously a difficult sacrifice for those dealers. without those sorts of difficult changes, we're not going to have a successful general motors. >> i think you're still uncomfortable with your willingness to accept, in this case, dealerships been forced to close a may have been in business 20, 30, or 40 years. they were profitable.

you have dealerships that history of profitability. you come before us and said, they made those decisions, we go along with it. i do not think that is a good enough answer, sir. perhaps it is the best you can do. >> de want an answer there? >> if i can take another minute. i appreciate your not satisfied. a dealer's profitability is not the only measure as to whether or not it is best serving the long-term interests of the community. long-term interests of the company and all of its stake holders. if there are too many dealers in a particular area, while it may be that an individual dealer's 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 maximizing value for all concerned, whether or not he's 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 board of directors in place and again, i want to point you to ed whitaker and bob kiter, two first class businessmen who agreed to chair the boards of these companies, two guys who have run large 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. i have one comment about that. i think all of us are frustrated. on the one hand, we tell you we don't want the government running these businesses. on the other hand, we tell you we wish you would step in and make gm and chrysler do this, this and this. i understand we all do that. i've done that. but i think none of us has really heard, i know the dealer, lot of the dealers think this, i know a lot of the public thinks this, i know a lot of senators and congressmen and women think this, we have never really heard the economic argument made by chrysler or gm to close these dealerships unilaterally the way they have. understanding they pick off in many cases those that might be the weakest in terms of profits in sales although as senator kohl said, many of them are making money. many have been around 20, 30, 40 years. i have some in ohio have been around 75 years that are closed and it's tragic because the dealers do so much for the communities and all that. so i just wish that the two major companies would explain

beer sort of the economics of why they did it. the other point i want to make, i apologize, senator hutchison, you mentioned jamesville. if you made public the three communities if there are in fact three, you seem to sound like there are, that gm is looking at for the small cars or would you like to make that announcement right now, mr. alabama? . >> i know there are three. i know there's one in michigan in jamesville, to be perfectly honest, i don't recall whether it's been made public but we will get back to you on that. >> any in ohio, by chance? >> no comment. >> well done. >> i'm not telling you. >> 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. 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 under performing dealers for several years, however, its current pace leave it with too many dealers which create a drag on the overall brand equity of gm and hurt the prospects of the many stronger dealers who could help gm drive incremental sales. then on may 15th, the treasury department says that as was 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 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, i think, 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 or fact sheet from the 30th. it'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. 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 and it included white collar head count and it included blue collar head count and it included every aspect of the company from the top to the bottom.

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 not give them a numerical target but we certainly did say regarding plants, regarding dealers, regarding white and blue collar head count, regarding all these matters, 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 overall, 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 -- 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 area, which would be an apples to apples comparison, the through-put of these other companies is far higher and our judgment and the judgment of many, many outside experts we have consulted is 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 okay, you want bigger dealerships that can do more volume sales and yet,

you are -- sorry. so you are doing bigger dealerships that -- you are doing bigger dealerships, more volume, yet in the contract that is being put forward by gm, if they sign it, they take away their right to protest now any dealer that would come in within four or six miles. so there's so much disconnection which is why i think the dealers are feeling so wrong about this and let me give you one other example of where i would like to ask if the task force is going to take a position. one of the dealers that's being closed, chrysler in this instance, chrysler financial is asking for 3% of their loan balance to cover potential charge-backs. now, chrysler of course is now

closed but these dealers are going to be able to sell used cars but not under the chrysler name. so for one dealer who has been in business for 90 years in texas, it's a $90,000 requirement for a $1500 a year annual risk. now, is the task force going to look into that kind of requirement and say there should be some protection here with our taxpayer dollars? >> let me try to answer two or three of the points you raise, senator. regarding the new participation agreement, i don't know if you're aware of this or not but general motors has been an active dialogue over the recent period with both the nada, the national association as well as their own dealer council and i believe that nada has put out a statement indicating that they find the modifications that have been made to the go forward

agreement, participation agreement, to meet the majority of the dealer concerns so i think concerns were raised. i think you and others brought them to the attention of gm, and i think good dialogue was had, and i think a good result. so certainly when members of congress bring to our attention situations, we absolutely will do everything we can to facilitate dialogue between the affected stake holder and the company and that we are not going to intervene and become the arbitrator of a dispute, but we certainly are going to ask and insist that the companies listen carefully to the concerns of any stake holder and if it's the particular situation you mention regarding the chrysler dealer or the participation agreement which is a broader issue, we are going to insist that they be listened to. but again, i don't want to mislead you. we're not going to substitute our judgment on every particular case. i do know in the case of the chrysler dealers that are not being brought forward that every

single car on their lots is going to be moved to another dealer with financial -- with financing provided by either gmac or other entities so all the dealers are going to be able to sell their cars at dealer cost. again, this was a matter that was raised. members like you brought it to attention and i think a good solution was made. we certainly see our role as monitoring and staying on top of these things and whether it's a senator or mayor or anybody who identifies a stake holder who's not being dealt with, we're going to insist on everybody getting a hearing. but as i said earlier, i don't want to mislead you. we're not going to get in and kind of arbitrate disputes between the company and its stake holders. we're going to insist these companies manage themselves in a commercial fashion. >> mr. chairman, of course my time is it is the taxpayers' money they your l