The cash burn continues unabated.
Auto lease writedowns drive $2.5B loss at GMAC
DETROIT -- GMAC Financial Services said today it swung to a net loss of
$2.48 billion in the second quarter as its auto finance business
cratered on weaknesses in the leasing market. It posted a $293 million
profit in the second quarter of last year.
The company's automotive finance business lost $717 million in the
second quarter. The company said that was largely due to $716 million in
writedowns related to its North American leases. GMAC said the
writedowns were due to the falling residual value of leased trucks and
SUVs. GMAC said that "more than offset" profits from its international
GMAC said sport utility vehicle leases made up $12 billion of its $30
billion North American lease portfolio as of June 30. Trucks made up $6
billion and cars were $12 billion.
New vehicle financing was also down in the second quarter. GMAC signed
$12.4 billion in retail and lease contracts last quarter, compared to
$14.0 billion a year ago.
GMAC's quarterly loss was also driven by a $1.86 billion net loss in its
troubled residential mortgage business.
General Motors owns 49 percent of GMAC. Cerberus Capital Management LLC,
the private equity firm that controls a majority stake in Chrysler LLC
and Chrysler Financial, owns the other 51 percent.
GM’s GMAC Cash Cow Moos No More: Loses -2.5b
At one point, GM's captive finance company, GMAC, was the tail that
wagged the dog, dumping billions in profit into the corporate coffers
from vehicle leasing and loans. As GM's decline gathered pace, GM CEO
Rick Wagoner sold 51 percent of GMAC to Cerberus (current owners of
Chrysler). The finance company immediately hit the rocks. Today, the
gash in the hull widened. GMAC reported a net loss of $2.48b. In the
second quarter. ""A soft economic environment and continued volatility
in the mortgage and credit markets have significantly affected results,"
GMAC Chief Executive Alvaro de Molina told Reuters. "Higher fuel prices
and weaker consumer credit prove to be headwinds." That's a bit like
calling a tornado a light breeze. We repeat: GMAC's NA leasing is
heading for termination. The results included a $716m write-down of
vehicle leases. And… "GMAC said it ended June with about $18 billion of
SUV and truck leases in those countries on its books, out of a total
$32.8 billion of leases." Expect GM to have to write-off at least a
billion of lost residual values on those leases, when it reports its
financial results on, of course, Friday. Oh and ResCap, GMAC's mortgage
arm, lost $1.86b in its seventh straight unprofitable quarter. If ResCap
fails, it's all over bar the filing. Whether GM would be dragged under
is an open question. Dark days.