GMAC posts loss on mortgage woes
NEW YORK (Reuters) - Finance company GMAC said on Tuesday its first-quarter loss nearly doubled as more customers fell behind on mortgage payments, and warned that it might not be profitable until well into 2009, later than expected.
The loss increased to $589 million from $305 million a year earlier. It included an $859 million loss at Residential Capital LLC, the mortgage unit's sixth straight quarterly loss, though the amount fell from $910 million a year earlier. GMAC had in March said it had a plan to be profitable this year.
"On balance, results were perhaps not as bad as the market's worst fears," wrote JPMorgan analyst Himanshu Patel.
Results will hurt those of former parent General Motors Corp GM.N, which kept a 49 percent stake after selling the rest in 2006 to private equity firm Cerberus Capital Management LP CBS.UL. GM reports first-quarter results on Wednesday.
GMAC Chief Financial Officer Robert Hull on a conference call said international operations, including in the United Kingdom, weighed particularly on ResCap's results.
He said the unit is laboring under "falling home prices in the U.S. and tight mortgage liquidity around the world."
ResCap now focuses mainly on "prime" quality loans after reducing riskier lending. It has also announced 5,000 job cuts, while GMAC in February set 930 job cuts in auto finance.
"There is still more to do to stabilize ResCap and position the overall company for profitable growth," GMAC Chief Executive Alvaro de Molina said in a statement.
GMAC said it ended the quarter with $18.6 billion of cash and liquidity, down from $22.7 billion at year end.
The latest sum included $4.2 billion at ResCap, which on April 18 obtained a new $750 million credit facility from GMAC and immediately borrowed $468 million.
GMAC said ResCap still has $17 billion of debt due in 2008, and may provide more funding, sell ResCap assets, or try to refinance the debt.
Hull said "every option is on the table" for funding, but that GMAC wouldn't sell ResCap assets at "fire-sale prices."
GMAC is based in Detroit, and ResCap in Minneapolis.
Shares of GM fell 31 cents to $21.63 in morning trading on the New York Stock Exchange.
DOWNGRADES
ResCap is the largest independent U.S. mortgage lender other than Countrywide Financial Corp CFC.N, and the nation's eighth-largest mortgage lender overall, according to the newsletter Inside Mortgage Finance.
Countrywide posted an $893 million quarterly loss on Tuesday. It agreed in January to be bought by Bank of America.
Auto finance profit at GMAC fell 35 percent to $258 million because of rising delinquencies and lower values on contracts sold. Insurance profit fell 8 percent to $132 million, hurt by increased investments.
Last week, Moody's Investors Service and Standard & Poor's downgraded GMAC and ResCap to their respective fifth- and seventh-highest "junk" grades, saying GMAC may need to provide more support to ResCap.
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 (BAC.N).
ResCap's 8.875 percent notes maturing in 2015 rose 0.13 cents on the dollar to 48 cents, yielding 24.68 percent, according to Trace, the Financial Industry Regulatory Authority bond pricing service. The level is considered "distressed."
GMAC's 8 percent bonds maturing in 2031 fell 2.4 cents to 75.6 cents on the dollar, yielding 10.9 percent.
(Additional reporting by Kevin Krolicki; Editing by Gerald E. McCormick and Dave Zimmerman)
