GMAC 3Q loss widens, blames economic woes

GMAC Financial Services said Wednesday its third-quarter loss widened to $2.52 billion, as the ongoing woes of the global credit industry resulted in steep losses at its mortgage division.

For the year-earlier period, GMAC had a loss of $1.6 billion. Revenue tumbled 24 percent in the latest quarter to $1.72 billion from $2.25 billion.

The New York-based company said economic and market conditions made things tough for the lending industry overall during the quarter.

Alvaro G. de Molina, chief executive officer, said in a statement, "In this climate, our primary objective is to make prudent use of our resources and take the steps needed to address the reduced access to liquidity."

GMAC is 51 percent owned by private equity firm Cerberus Capital Management LP, while Detroit-based General Motors Corp. holds the rest. Cerberus also is the majority owner of Chrysler LLC, which has been in talks with GM about a possible merger aimed at helping the automakers survive the downturn in the auto industry.

GMAC has said it is holding discussions with U.S. federal regulators about becoming a bank holding company, a move that could help it access government funding and be part of a potential acquisition of Chrysler.

GMAC's mortgage lending division, ResCap, lost $1.91 billion in the third quarter, compared with $2.26 billion a year ago. Still, GMAC said that absent economic support, substantial doubt exists about ResCap's ability to continue as a going concern.

GMAC's automotive finance division swung to a loss of $294 million from a profit of $554 million. GMAC said the business was pressured by lower used vehicle prices and weaker consumer and dealer credit performance.

New vehicle financing originations fell to $11.3 billion of retail and lease contracts from $14.5 billion a year earlier, as a result of tighter lending standards and a drop in vehicle demand, GMAC said.

Last month, GMAC tightened its criteria for U.S. consumer automotive financing, citing the continued upheaval in the lending industry. The changes included limiting purchases to contracts with a credit score of 700 or above and restricting contracts with higher advance rates and longer terms.

The company also stopped making auto loans in seven European countries at the beginning of November and announced plans to end lending activities in Australia and New Zealand by the end of the year.

GMAC said the third-quarter's performance also was affected by realized losses and valuation adjustments on assets held for sale and certain other investment securities as a result of a lack of liquidity in the credit and capital markets.

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