GMAC Reports $2.5 Billion Loss as Auto, Housing Slump
July 31 2008 - GMAC LLC, the auto and mortgage finance company majority owned by Cerberus Capital Management LP, reported a $2.5 billion loss as vehicle sales plummeted and the housing slump boosted foreclosures.
The second-quarter loss, GMAC’s fourth straight, compares with profit of $293 million a year earlier, the Detroit-based company said today in a statement. Residential Capital LLC’s loss jumped to $1.86 billion from $254 million a year earlier, and the home loan unit has suspended almost all production outside the U.S.
Since arranging a $60 billion debt refinancing package last month to keep ResCap out of bankruptcy, GMAC has faced a deteriorating auto market on top of the U.S. housing slump. General Motors Corp., which sold 51 percent of GMAC to Cerberus two years ago, said sales of new cars and light trucks dropped 18 percent in June.
“It’s a disaster,” said Gregory Habeeb, who manages $8.5 billion in fixed-income investment at Calvert Asset Management Co. in Bethesda, Maryland, including a “small position” in GMAC and ResCap bonds. “There’s very little good news with General Motors. Then you consider all the mortgage-related problems.” He was interviewed before results were released.
ResCap has recorded $7.2 billion of losses in seven quarters. The second-quarter deficit stemmed from losses on sales of pools of mortgages and increased reserves because of “continued deterioration in certain European markets,” the company said. ResCap said today it halted all lending outside the U.S. with the exception of Canadian insured loans.
GMAC Reports $2.5 Billion Loss as Auto, Housing Slump
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