GMAC posts $2.48 billion loss on big write-downs

doh · 07-31-2008, 08:15 AM

http://biz.yahoo.com/rb/080731/gmac.html?.v=1

NEW YORK (Reuters) - Finance company GMAC posted a $2.48 billion second-quarter loss on Thursday, as rising gas prices forced write-downs of truck and sport-utility vehicle leases, and losses in its mortgage lending unit soared.

"A soft economic environment and continued volatility in the mortgage and credit markets have significantly affected results," Chief Executive Alvaro de Molina said. "Higher fuel prices and weaker consumer credit prove to be headwinds."

GMAC's loss compared with a profit of $293 million a year earlier. Its Residential Capital LLC mortgage unit lost $1.86 billion, its seventh straight unprofitable quarter, after losing $254 million a year earlier. Auto finance operations lost $717 million, compared with a year-earlier $395 million profit.

Results will hurt those of General Motors Corp (NYSE:GM - News), which kept a 49 percent stake in GMAC after selling the rest in 2006 to private equity firm Cerberus Capital Management LP (CBS.UL).

GM is scheduled to report quarterly results on Friday. Its shares fell 57 cents to $10.83 in pre-market trading.

GMAC is based in Detroit, and ResCap in Minneapolis.

Results at GMAC included a $716 million write-down of vehicle leases, reflecting lower demand for and prices of used SUVs and trucks in the United States and Canada.

GMAC said it ended June with about $18 billion of SUV and truck leases in those countries on its books, out of a total $32.8 billion of leases.

In typical leasing transactions, automakers or lenders retain ownership of vehicles that customers rent, often for two to five years. But record gas prices have driven consumers to more fuel-efficient vehicles, forcing lenders to write down the value of leases on these once-popular vehicles.

GMAC this week said it stopped offering leasing incentives in Canada, and is increasing pricing on other lending.

Last week, Cerberus-controlled Chrysler LLC said its finance unit would end vehicle leases to U.S. consumers.

ResCap's loss stemmed in part from asset sales designed to reduce risk, and higher credit losses in European markets.

ByTheLake · 07-31-2008, 09:21 AM

Between GMAC and Chrysler, Cerberus is my candidate for the Worst-Timed Acquisitions in History.

Wow.

steinravnik · 07-31-2008, 09:46 AM

Too bad GM didn't sell all of GMAC.

Glass Half full · 07-31-2008, 10:59 AM

Quote:

Originally Posted by ByTheLake

Between GMAC and Chrysler, Cerberus is my candidate for the Worst-Timed Acquisitions in History.

Wow.

The TATA's come a close second.

drew770 · 07-31-2008, 11:08 AM

Quote:

Originally Posted by steinravnik

Too bad GM didn't sell all of GMAC.

Hindsight is 20/20!!
When the deal was announced that GM was selling a portion of GMAC, folks on this board was moaning and goaning that GM was giving away the Golden Goose!!

jbernie · 07-31-2008, 12:22 PM

Quote:

Originally Posted by drew770

Hindsight is 20/20!!
When the deal was announced that GM was selling a portion of GMAC, folks on this board was moaning and goaning that GM was giving away the Golden Goose!!

Well in the current environemtn you are correct with the goose portion, the golden part, maybe not so much

. Fools gold maybe?

usa1 · 07-31-2008, 12:34 PM

Quote:

Originally Posted by Glass Half full

The TATA's come a close second.

What deal of Tata's are you talking about? They just bought Jaguar/Range Rover. It's too early to tell if that will blow up in their face. It's very clear the GMAC and Chrysler acquisitions have been stinkers.

Mark

steinravnik · 07-31-2008, 02:34 PM

Quote:

Originally Posted by drew770

Hindsight is 20/20!!
When the deal was announced that GM was selling a portion of GMAC, folks on this board was moaning and goaning that GM was giving away the Golden Goose!!

That definitely wasn't me. I knew this mortgage stuff was going to blow up, but I didn't realize how over-exposed GMAC was to this.

Tstag · 07-31-2008, 03:32 PM

Quote:

Originally Posted by Glass Half full

The TATA's come a close second.

Why? Land Rover have just said that they offset sales drops in the USA with sales increases in Russia and China. Apparantly they are the number 1 premium car brand in Russia now. Jag is also seeing big increases in sales thanks to the XF which still has a 3 month waiting list roughly 9 months after launch!

Bigbee60 · 07-31-2008, 05:14 PM

Quote:

Originally Posted by Tstag

Jag is also seeing big increases in sales thanks to the XF which still has a 3 month waiting list roughly 9 months after launch!

Wagner Jaguar near me will sell the XF today for $5K off. They have plenty on the lot. I don't think the XF has a 3 month waiting list in the northeast. Maybe in fashionista CA or TX or FL, but not in the markets up north where the Financial Services meltdown is happening. Luxury car sales are discretionary purchases and not much discretionary income is floating around people working in Financial Services.

fp115 · 07-31-2008, 05:52 PM

Quote:

Originally Posted by drew770

Hindsight is 20/20!!
When the deal was announced that GM was selling a portion of GMAC, folks on this board was moaning and goaning that GM was giving away the Golden Goose!!

Funny ain't it? Buickman was still saying less than a week ago the GMAC was a bad move to sell off.

doh · 07-31-2008, 07:03 PM

Quote:

Originally Posted by ByTheLake

Between GMAC and Chrysler, Cerberus is my candidate for the Worst-Timed Acquisitions in History.

Wow.

Yes but "Cerberus" is looking at today, and today only. The lease end values will hurt for the next 3 years anyways.

Then there is the "Now" timing of pulling away from All Leasing. The bleeding will not stop for 3+ years, but there will be no influcs of selling through it.

This is a bandaid, that is suppose to last 3 years, because they will not be able to afford another one till then.

Grab your life vests boys, this ship is sinking.

vam29 · 07-31-2008, 08:16 PM

If Cerberus goes down what happens to GMAC, GM and Chrysler? It's like the auto version of the bank sub-prime problem. Maybe the Government will have to step in and help the auto companies as the Treasury helped the brokerages or we might all have to start learning to say "yes please" in Japanese.

stormwatcher · 07-31-2008, 09:19 PM

Keeping all of GMAC still would have been preferrable. It produced excellent profits for GM for decades.

wescoent · 07-31-2008, 09:31 PM

Quote:

Originally Posted by vam29

If Cerberus goes down what happens to GMAC, GM and Chrysler? It's like the auto version of the bank sub-prime problem. Maybe the Government will have to step in and help the auto companies as the Treasury helped the brokerages or we might all have to start learning to say "yes please" in Japanese.

Chrysler and GMAC cannot bring down Cerberus. Chrysler and GMAC represent a tiny fraction of Cerberus's portfolio, and even if both companies go completely bankrupt, it would barely be a blip on their radar.

07-31-2008, 08:15 AM	#1 (permalink)
doh 6.0 Liter LS2 V8 Join Date: Sep 2003 Location: N.W.Ontario Posts: 4,254	GMAC posts $2.48 billion loss on big write-downs http://biz.yahoo.com/rb/080731/gmac.html?.v=1 NEW YORK (Reuters) - Finance company GMAC posted a $2.48 billion second-quarter loss on Thursday, as rising gas prices forced write-downs of truck and sport-utility vehicle leases, and losses in its mortgage lending unit soared. "A soft economic environment and continued volatility in the mortgage and credit markets have significantly affected results," Chief Executive Alvaro de Molina said. "Higher fuel prices and weaker consumer credit prove to be headwinds." GMAC's loss compared with a profit of $293 million a year earlier. Its Residential Capital LLC mortgage unit lost $1.86 billion, its seventh straight unprofitable quarter, after losing $254 million a year earlier. Auto finance operations lost $717 million, compared with a year-earlier $395 million profit. Results will hurt those of General Motors Corp (NYSE:GM - News), which kept a 49 percent stake in GMAC after selling the rest in 2006 to private equity firm Cerberus Capital Management LP (CBS.UL). GM is scheduled to report quarterly results on Friday. Its shares fell 57 cents to $10.83 in pre-market trading. GMAC is based in Detroit, and ResCap in Minneapolis. Results at GMAC included a $716 million write-down of vehicle leases, reflecting lower demand for and prices of used SUVs and trucks in the United States and Canada. GMAC said it ended June with about $18 billion of SUV and truck leases in those countries on its books, out of a total $32.8 billion of leases. In typical leasing transactions, automakers or lenders retain ownership of vehicles that customers rent, often for two to five years. But record gas prices have driven consumers to more fuel-efficient vehicles, forcing lenders to write down the value of leases on these once-popular vehicles. GMAC this week said it stopped offering leasing incentives in Canada, and is increasing pricing on other lending. Last week, Cerberus-controlled Chrysler LLC said its finance unit would end vehicle leases to U.S. consumers. ResCap's loss stemmed in part from asset sales designed to reduce risk, and higher credit losses in European markets.

07-31-2008, 09:21 AM	#2 (permalink)
ByTheLake 6.2 Liter Vortec V8 Join Date: Jun 2004 Location: North Western MI Drives: '04 Corvette, '08 CTS Posts: 2,617	Re: GMAC posts $2.48 billion loss on big write-downs Between GMAC and Chrysler, Cerberus is my candidate for the Worst-Timed Acquisitions in History. Wow.

07-31-2008, 09:46 AM	#3 (permalink)
steinravnik 6.0 Liter Vortec V8 Join Date: Mar 2003 Location: Eckington, Washington, DC Drives: 2007 Nissan XTerra Offroad Posts: 1,576	Re: GMAC posts $2.48 billion loss on big write-downs Too bad GM didn't sell all of GMAC. __________________ You call yourself the Moral Majority We call ourselves the people in the real world You say, 'God loves you. Come and buy the Good News' Then you buy the president and swimming pools If Jesus don't save 'til we're lining your pockets God must be dead if you're alive Circus-tent con-men and Southern belle bunnies Milk your emotions then they steal your money It's the new dark ages with the fascists toting bibles Cheap nostalgia for the Salem Witch Trials Dead Kennedys

07-31-2008, 08:16 PM	#13 (permalink)
vam29 2.4 Liter ECOTEC Join Date: Nov 2007 Posts: 100	Re: GMAC posts $2.48 billion loss on big write-downs If Cerberus goes down what happens to GMAC, GM and Chrysler? It's like the auto version of the bank sub-prime problem. Maybe the Government will have to step in and help the auto companies as the Treasury helped the brokerages or we might all have to start learning to say "yes please" in Japanese.

07-31-2008, 09:19 PM	#14 (permalink)
stormwatcher 3.6 Liter V6 Join Date: Dec 2004 Posts: 1,003	Re: GMAC posts $2.48 billion loss on big write-downs Keeping all of GMAC still would have been preferrable. It produced excellent profits for GM for decades.

Remove Advertisements Sponsored Links
GM Inside News Forum Advertisement

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)

Thread Tools
Show Printable Version Email this Page
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode