GMAC posts a profit thanks to credit swap
GMAC Financial Services lost billions of dollars on its auto-financing and mortgage businesses in the fourth quarter, the company said Tuesday, but swung to a $7.46-billion profit thanks to proceeds from a huge debt swap.
The financing arm of General Motors Corp. is struggling to transform itself amid record-low new-vehicle demand, a weak economy and tight credit markets. In addition, GMAC faces increased oversight stemming from the $5 billion in federal aid it got last year.
The recent quarter’s profit compared with a loss of $724 million in the same quarter last year. The results include a gain of $11.4 billion related to GMAC’s debt-exchange program, which was designed to raise cash to qualify it for bank status and federal aid.
GMAC dramatically cut lending in the fourth quarter.
GMAC’s auto finance division posted a $1.3-billion fourth-quarter loss after a profit of $137 million a year earlier. Losses at the company’s home mortgage division, ResCap, grew to $981 million from $921 million. The loss would have been worse if not for a $754-million gain from the retirement of debt related to the bond exchange.
For 2008, GMAC had a profit of $1.87 billion, contrasted with a 2007 loss of $2.33 billion.