Brown-Waite questions automakers
Congresswoman Ginny Brown-Waite, a Republican from Brooksville, took her turn grilling the Detroit auto executives who are in Washington begging for money. She is one of 70 members of the U.S. House Financial Services Committee. To read her opening remarks, and questions (unedited from a transcription service) see below.
Brown-Waite's opening statement:
Several weeks ago when you were here, we think of Christmas time and the three wise men. Your method of transportation proved that you are the three wise guys. I am glad to see that you have turned into the three wise men in choosing your own products instead of - as a method of transportation here. After a day of declining sales volume, if it were not for the financial crisis, consumers would be buying the cars in the torrid over the competition. However, the current crisis is not one born from short-term problems beyond your control. And brother, the crisis facing you all comes from long-term lack of foresight. To be fair, Ford did have the foresight to make preparations for the future. General Motors and Chrysler, though, ignored their liquidity problems, probably collect - planning to come to Congress rather than taking an objective look at reality. Today we have over 3-million jobs at risk. Fortunately, the $34-billion that you are asking for today is obviously more than what you asked for the last time and probably less than what everyone feels you will be coming back for within a reasonable timeframe. That is pretty sad. As we learned with AIG, these situations can spiral out of control and despite the recent lessons of some of my colleagues - recent lessons, some of my colleagues want to do for Detroit what has already been done for AIG.
Chairman: The gentlewoman from Florida (is recognized).
Brown-Waite: Thank you, Mr. Chairman. I have a large number of retirees in Florida. They're former union members or retired union members. So, I take this whole issue very seriously. It really is about their future. It is also about the future of their children and grandchildren who may want or currently have a job in the industry. One of the things I think we need to be careful of is not unduly cause concern because if bankruptcy is necessary in your organization, people need to be sure that the Pension Benefit Guaranty Corp. will be there for those pensioners. I wanted to make that statement because I have heard from many people who were afraid that their pensions are at risk. Mr. Nardelli, I have a question specifically for you. If the private equity company that currently has the major holding in chrysler has $24-billion currently in assets and they will not put forth any more money to stave off bankruptcy, how can we in all good conscience expect the taxpayers to take on this substantial cost? I would appreciate hearing from you.
Response: It is a question that has been asked yesterday. Just to bring some clarity - the private equity firm is a composite of many investors. You may have pension funds, teachers funds, state funds - they have the same regulatory responsibility - fiduciary responsibility as a publicly traded company would be relative to those fiduciary responsibilities. It is not an issue of them being able to commit on behalf of those investors to put more and, number two ...
Brown-Waite: Did you ask?
Response: Yes. We have asked them, we have asked every major financial institution for funding. We have gone offshore asking for funding.
Brown-Waite: And the private equity companies said no?
Response: Let me be clear. They already put the equity in to create the company. We did another $2-billion drawdown on equity on the car side. They have continued to put more equity into our finance company to make sure that the car company could continue to provide consumer loans and wholesale support. So, i want to be clear. It is not as if they have not continually tried to provide financial support for us. Finally, they have publicly said that any carry forward interest - they have been willing to convert 100 percent of that to equity.
Brown-Waite: Thank you. My question for the three auto manufacturers is, obviously overcapacity has been a part of the problem. You have a combined market share of about 50 percent. There are nearly 70 percent - it is accounted for your various brands' dealerships. How many of those do you expect will be closing over the next four years even with a bailout? That is the first question. The second question is, what are you doing to help those dealers out there who every member of Congress has heard from to help the dealers with the excess inventories that they have now? I would appreciate hearing from the three of you.
Response: Our plan calls for a reduction in the number of dealers - about 1,500 over the next four years. We do that by individual dealers. If they do not want to stay in the business or we have cases where we might have five dealers in a city or we really - and we only can have four be profitable. Profitability is critical. What we are trying to do is be very diligent in not overproducing the number of vehicles that we ask them to carry inventory right now. It is the biggest thing that we can do.
Chairman: The time has expired.