GMAC to shut 75% of auto sites

Lender to have only five auto-finance outlets in U.S., Canada after $2.3 billion loss in 2007.

Greg Bensinger / Bloomberg News

GMAC LLC, the lender partially owned by General Motors Corp., plans to close about 75 percent of its auto-financing offices in the U.S. and Canada after losing $2.3 billion last year.

GMAC will reduce the number of offices serving U.S. auto dealers to four and eliminate three of four outlets in Canada, said Barbara Stokel, executive vice president of North American operations, in a letter scheduled to be sent to dealers today. GMAC had 16 regional auto-lending offices in the U.S., according to a May 17 statement.

"Given the recent macro-economic conditions during the past year and anticipated well into 2008, we need to make structural cost reductions to restore our competitive position," said Stokel in the letter. GMAC spokeswoman Gina Proia declined to comment.

The plan to cut North American field operations follows a Jan. 22 letter to investors in GMAC’s majority owner, Cerberus Capital Management LP, that predicted GMAC may run into "substantial difficulty" if credit markets fail to improve. GMAC’s 2007 loss came as profit from auto lending declined and record U.S. home foreclosures squeezed available credit for consumers.

The four remaining U.S. offices will be in Dallas, Pittsburgh, Atlanta and Chicago. "The new Regional Business Center alignment will enable us to reduce our cost structure," Stokel said in an advance copy of the letter.

The lone Canadian office will be in Toronto.

GM injected $1 billion into Detroit-based GMAC to help cover earlier losses at its Residential Capital mortgage unit. GMAC also pumped $1 billion into ResCap during the third quarter to help the lender meet minimum net worth limits set by bankers.

GMAC said most of the restructuring should be complete by the end of the year. Cerberus spokesman Peter Duda said he had no immediate comment.