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Wednesday, November 05, 2008

GMAC: $2.5 Billion Loss

by Calculated Risk on 11/05/2008 08:22:00 AM

From Bloomberg: GMAC Posts Quarterly Loss, ResCap Unit Faces Doubt on Survival

GMAC ... third-quarter net loss widened to a record $2.52 billion from $1.6 billion a year earlier ...

GMAC's results were crushed by slumps in the housing market, where foreclosures are running at record levels, and in auto sales, which GM labeled the worst since 1945 when it reported October results this week.
The story mentions that GMAC will only lend to car buyers with the highest credit ratings - and that contributed to the dismal sales auto sales in October.

Also GMAC is considering converting to a bank holding company to gain more access to capital. Currently GM owns 49% of GMAC, and entities (like GM) with more than 25% ownership in a bank holding company are subject to strict capital requirements and other regulations. That is why a conversion of GMAC to a bank holding company would probably be part of a GM-Chrysler merger, with Cerberus swapping Chrysler for enough of GM's stake in GMAC to lower GM's ownership below 25%.