GMAC posts $589 million loss; may not turn 2008 profit
 

Automotive News | April 29, 2008 - 9:15 am EST

NEW YORK (Reuters) — Finance company GMAC said on Tuesday its first-quarter loss nearly doubled as more customers fell behind on mortgage payments, and that it may not turn a profit this year.

The loss increased to $589 million from $305 million a year earlier. Results included an $859 million loss at Residential Capital LLC, the mortgage unit’s sixth straight quarterly loss.

GMAC also said ResCap has "significant near-term liquidity requirements," with $17 billion of debt coming due this year. GMAC said it may provide more funding, sell some ResCap assets, or try to refinance the debt. ResCap has already reduced riskier lending and announcing 5,000 job cuts.

General Motors owns 49 percent of GMAC. Private equity firm Cerberus Capital Management LP led a group that bought 51 percent of GMAC from the automaker in 2006.

GMAC said that challenging market conditions "have not shown signs of moderation." It said if these conditions persist, the company may not return to profitability before 2009, later than expected.

"While the actions we have taken to date to reduce risk, reduce leverage and streamline the cost structure have produced results, there is still more to do to stabilize ResCap," CEO Alvaro de Molina said in a statement.

Earnings fell 35 percent to $258 million in auto finance and 8 percent to $132 million in insurance. GMAC is based in Detroit, and ResCap in Minneapolis.

De Molina became GMAC’s chief executive on April 1, after joining Cerberus last year. He had previously been chief financial officer at Bank of America Corp.

GMAC said it ended the quarter with $18.6 billion of cash and liquidity, down from $22.7 billion at year end.

Alvaro de Molina has been GMAC’s COO since August.