GM says no ResCap contingent liabilities
Automotive News | November 21, 2007 - 9:00 am EST
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DETROIT (Reuters) - General Motors has no contingent liabilities through the GMAC finance company, which has been damaged by the subprime crisis, but could face more losses because of its 49 percent ownership, a top GM executive said on Tuesday.
GMAC posted a $1.6 billion third-quarter loss earlier this month, hurt by four straight losing quarters at its Residential Capital LLC (ResCap) division, the second-largest independent U.S. mortgage lender. "The only downside is if … ResCap keeps doing worse and worse, and we keep having to absorb our 49 percent of the worse and worse," Bob Lutz, GM’s vice chairman and head of product development, told the Reuters Autos Summit. "But at some point it will bottom out." Asked if GM had contingent liabilities, Lutz said, "No, they’ve got it." Contingent liabilities can include pending lawsuits or disputed claims. Lutz said when GM sold the 51 percent GMAC stake to Cerberus Capital Management LP "… we thought we were doing it to raise cash … but it turns out what we were really doing was reducing our exposure to ResCap." "We shudder to think what our situation would be if we had to support the full ResCap losses right now," he said. Like many lenders, GMAC’s ResCap unit has struggled as falling home prices and rising interest rates have made it tougher for many homeowners to keep up with mortgage payments. |
