By on November 5, 2008

Initially, GM CEO Rick Wagoner’s sale of 51 percent of The General’s captive finance unit to Cerberus Financial (Chrysler’s new owners) seemed like a well-timed stroke of luck. Anyone paying close attention (i.e. reading this site) would have realized that Red Ink Rick was simply throwing GM’s furniture into the cash conflagration consuming the company; GMAC was just about all that was left worth burning. But GM had used GMAC as the engine for its car sales. When GMAC’s ResCap’s (Residential Capital) sub-division found itself (to be polite) deeply mired in the subprime mess, the lender couldn’t– can’t– lend squat, either on the house OR the automotive front. Not too put too fine a point on it, GM’s getting screwed from both ends. Bloomberg reports that GMAC’s taken a $2.52b hit in Q3, which brings us to $4.6b for the year. “Total net revenue declined 43 percent to $1.72 billion. The Residential Capital home-loan unit lost $1.9 billion during the quarter, while GMAC’s auto finance unit lost $294 million.” Even GMAC admits– in that “give us a bailout” kinda way– that it’s towel-throwing-in time. “Substantial doubt exists regarding ResCap’s ability to continue as a going concern,” GMAC said in today’s statement.If ResCap dies, GMAC dies. If GMAC dies, well, we’re almost there already. GM’s 45 percent sales drop in October reflects the loss of low credit score in-house financing. Hear that sound? It’s Uncle Sam’s wallet creaking open…

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13 Comments on “GMAC Posts $2.52b Q3 Loss, Predicts ResCap C11...”


  • avatar
    N85523

    Where do you find all of these photos of sinking ships?

  • avatar
    TexN

    “……and so begins the end of days. How did it come to this?”

  • avatar
    WhatTheHel

    GM: the Cadillc of Bunkruptcy.

  • avatar
    autonut

    GM: the Hummer of failure!
    GM: is NOT your father’s Oldsmobile!
    GM: we will bailout and rescue to be damned again

  • avatar
    yankinwaoz

    “Where do you find all of these photos of sinking ships?”

    I’m just a commenter, but I recommend The Gallery of Transport Loss at Cargo Law. They also show lots of Airplane SNAFU’s too.

  • avatar

    This might be a stupid question: if GMAC can’t lend to save their lives, then why is Ditech (with “the confidence of working with a GMAC company”) still pushing hard on TV/Radio advertisements???

  • avatar
    Ralph SS

    Sajeev: They didn’t get the memo?

  • avatar
    John Horner

    GM needs to go C11 and get an entirely new generation of leadership in place yesterday.

    Unfortunately, that statement was true last year as well and the time since then has been squandered.

    Regime change is a necessary, but insufficient, step. Where is the team of smart, deep, motivated leaders to take over this mess and rebuild it? How about a joint effort of Mr. Farago and Phil Ressler? I’m serious. A creative combination of ruthless criticism for failings and a passionate belief in the righteous cause of working together for the common good is just what GM needs.

  • avatar
    mel23

    Lewis Campbell heads up Textron, seems to be doing an excellent job and was with GM for 24 years. I’d give him a look if it were up to me. One thing that failing CEOs do is drive away competent underlings who they view as threats. John Akers did it repeatedly while he headed IBM as he ran it into the ground before being kicked out just in time. But the stockholders deserve to lose every dime they’ve got in the game for letting things get to this point, and of course the BOD has to go. This cries out for a bankruptcy filing with a smart judge calling the shots. Steve Miller need not apply.

  • avatar
    Mr. Sparky

    The econ blog, Calculated Risk, reported on this with the theory that part of the reason for the shotgun marriage of GM and Chrysler was so that GM would own less that 25% of GMAC so that GMAC could become a bank holding company and can access the Fed’s deep money pool (a.k.a. the Goldman Sachs/Fed trick). At last, a sinster yet plausible reason for a horrible idea!

    http://calculatedrisk.blogspot.com/2008/11/gmac-25-billion-loss.html

  • avatar
    autonut

    @Sajeev Mehta
    GMAC cant finance vehicles: those are considered risky loans. However, if home buyer comes up with 20% down payment on a house there is no reason for them not to facilitate funds transfer from treasury to customer, collecting service fee and interest points in the process.

  • avatar
    brush

    John Horner

    That team is probaly all of the overseas division heads that have made GM money in their home countries despite (or semi-ignoring) the directives from the top. Let them run with it. Wasn’t it Dr. Deeming that said “the best ideas to fix a company’s problem comes from the lower levels, not the top.”

  • avatar

    autonut : GMAC cant finance vehicles: those are considered risky loans. However, if home buyer comes up with 20% down payment on a house there is no reason for them not to facilitate funds transfer from treasury to customer, collecting service fee and interest points in the process.

    Guess it always pays to read the fine print. I wonder if I’ve TiVo’d that ad so I can do just that.

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