GMAC to cut 930 auto finance jobs
DETROIT (Reuters) - Finance company GMAC said on Wednesday it would restructure its auto finance unit by eliminating about 930 jobs and closing smaller offices in the face of tighter credit markets and slumping new car sales.
The job cuts represent about 15 percent of the 6,275 employees in GMAC's auto finance business. GMAC said the layoffs and office closures would take effect this year and prompt a charge of between $65 million and $85 million.
GMAC also said it would close smaller offices to consolidate its auto finance business into five regional hubs in North America.
Charges for the restructuring will be taken over the course of 2008, with the majority in the second half, GMAC said. It expected the cuts to produce annual savings of $175 million once fully implemented.
The move to cut costs in GMAC's core auto finance unit marks a new phase in the restructuring of the privately held finance company's business. It devoted recent quarters to shoring up its mortgage arm Residential Capital LLC, which was pushed into deep losses by the subprime mortgage collapse.
General Motors Corp (GM.N) owns 49 percent of GMAC. A group led by private equity firm Cerberus Capital Management LP CBS.UL owns 51 percent. GMAC is based in Detroit.
For all of 2007, GMAC lost $2.33 billion, including a loss of $4.35 billion at ResCap. That loss compared with a $2.13 billion overall profit a year earlier.
By contrast, GMAC's global auto finance business returned a net profit of $1.49 billion in 2007 and GMAC expects to be profitable in 2008.
GMAC was spun off by GM in late 2006 and remains the major finance provider for dealers representing the No. 1 U.S. automaker, underwriting leases and loans for new and used cars and trucks.
GMAC will close 15 offices as part of the restructuring, three in Canada and 12 in the United States, GMAC spokeswoman Gina Proia said.
GMAC's decision to restructure its auto business comes at a time of slumping new car sales. Industry sales are widely forecast to contract for a third straight year in 2008.
Many analysts and some industry executives see the risk that overall U.S. vehicle sales could slip to near 15.5 million units this year, although some automakers such as GM are banking on stronger demand in the second half as the economy steadies.
In addition to its ownership of GMAC, Cerberus also owns Chrysler Financial as part of its buyout of the No. 3 U.S. automaker last year. Speculation at the time of its purchase centered on whether Cerberus could look to combine units of GMAC and Chrysler's captive finance company.
GMAC's Proia said she had no comment on that prospect.
In an unusual statement earlier this month, Cerberus said it believed GMAC represented a "resilient business platform and a survivor." Continued...
