Thursday, November 06, 2008

GMAC Taking a Pounding

Not that it's a big surprise or anything.

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.

But it impacts the (possible) Cerberus-Chrysler/GM merger. NOT for 'profit/loss' reasons--

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%.

Three or four years ago, GMAC was the only GM entity which was making money, and they made a LOT of it, which supported GM's losses in auto manufacturing.

HT: Calculated Risk

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