GMAC posts $675 million loss
Sixth loss in seven quarters for the lender, which says it can survive even if General Motors goes bankrupt.
 |
| Click the chart to view the latest stock prices. |
NEW YORK (Reuters) -- GMAC LLC, which provides loans to buyers of General Motors Corp. vehicles, said its first-quarter loss grew 15%, reflecting an increase in soured mortgage and auto loans as the economy weakens.
Despite posting its sixth loss in seven quarters, the lender said it would not be forced into bankruptcy if GM (GM, Fortune 500) were unable to restructure itself.
GMAC (GJM) has struggled as the deteriorating auto and housing markets caused financing volume to decline and credit losses to increase. The lender's owners include GM and private equity firm Cerberus Capital Management LP.
"Clearly a GM bankruptcy would not be good for us, but don't get me wrong, a GM bankruptcy would not trigger a GMAC filing," GMAC Chief Financial Officer Robert Hull said on a conference call.
The first-quarter net loss for Detroit-based GMAC increased to $675 million from $589 million a year earlier.
GMAC increased by 78% to $843 million the amount it set aside for loan losses, and posted an $825 million net loss tied to a bond exchange and the elimination of some debt.
Profit fell in auto finance and insurance, while the mortgage business posted a smaller loss.
GMAC is one of 19 lenders subject to government "stress tests" of their ability to weather a deep recession. Results of the tests are due Thursday.
In December, GMAC got a $6 billion government bailout and completed a debt restructuring that enabled it to become a bank holding company.
Despite GM's problems, GMAC will benefit from an agreement to become the preferred lender for Chrysler customers no later than May 16.
Cerberus and other investors bought a controlling stake in Chrysler in 2007. That automaker filed for bankruptcy protection on April 30.
"We have plans to work through 2009 with our current liquidity" without more federal funding and "don't feel we are short on cash in any way," Hull said.
GMAC said first-quarter profit from auto finance fell 13% to $225 million.
Mortgage operations including the Residential Capital LLC unit lost $125 million, the 10th straight quarterly loss, but the loss declined from $859 million a year earlier. Mortgage lending increased 57% from the fourth quarter.
Insurance profit fell 62% to $50 million. Overall net revenue fell 9% to $2.2 billion.
Last month, GMAC said that it would resume making car and truck loans to subprime borrowers to help spur sales at GM, and that ResCap was hiring 1,000 people to handle a surge in refinancings and jumbo loans.
GMAC has said there is substantial doubt about ResCap's survival. "As long as it's in the interest of the core GMAC stakeholder base, we will continue to support it," Hull said.
GMAC's 8% bonds maturing in 2031 on Tuesday rose 1.5 cents on the dollar to 64.5 cents, yielding 12.86%, according to the bond pricing service Trace.
The bonds had traded at about 43 cents on the dollar on April 29, the day before GMAC announced the Chrysler financing agreement, according to MarketAxess. 
