|
GMAC posts profit, but main units lose money
2009-02-03
NEW YORK - Finance company GMAC LLC, which in December won a $6 billion government bailout, posted a $7.46 billion fourth-quarter profit on Tuesday because of a one-time gain, but its main operating units lost money amid higher credit losses and slumps in the housing and auto markets. The profit compared with a loss of $724 million a year earlier and followed five straight quarters of losses. Results included a gain of $11.4 billion tied to a $21.2 billion debt swap to boost Detroit-based GMAC's capital. This was offset by a loss of $1.31 billion in its auto finance business, compared with a year-earlier profit of $137 million, reflecting lease writedowns and higher loan losses. The Residential Capital LLC mortgage business lost $981 million, the unit's ninth straight quarterly loss, as credit losses increased. ResCap's loss would have been higher but for a $754 million gain from the debt swap. GMAC's insurance business had a $95 million quarterly profit, up from $68 million a year earlier, as a gain from selling its reinsurance business offset a goodwill writedown and lower U.S. volume because vehicle sales fell. GMAC set aside $1.34 billion during the quarter for credit losses, up from $1.02 billion a year earlier. GMAC won a reprieve in December when the U.S. Treasury Department agreed to take a $5 billion stake in the company and General Motors Corp (GM.N) agreed to lend it $1 billion. The Treasury investment reduced the GMAC stakes held by GM, which had held 49 percent, and private equity firm Cerberus Capital Management LP (CBS.UL), which had held 51 percent. GMAC also won bank holding company status from the U.S. Federal Reserve, allowing it to tap lower-cost funding. "Today, GMAC has a stronger capital base and is positioned to be more competitive over the long-term," Chief Executive Alvaro de Molina said in a statement. GMAC is the main lender to GM customers. After getting government help, GMAC eased its rules to allow loans to vehicle buyers with credit scores of at least 621, down from 700 previously. The higher level excluded roughly two-fifths of U.S. consumers. ResCap's status remains uncertain. The company retrenched after a surge in subprime and other soured loans forced it to tighten its lending standards. It says it has reduced its workforce to about 3,800 from 14,000 two years ago. GMAC on Tuesday repeated its lukewarm support for ResCap, calling it an important subsidiary but saying it would provide more support only if it were in GMAC stakeholders' interest. (Reporting by Jonathan Stempel; Editing by Lisa Von Ahn and John Wallace)
| 
