It’s no secret that the U.S. economy is in the midst of a downturn, but nowhere is this fact more evident than in the credit and mortgage markets. GMAC announced on Tuesday that it posted a first quarter loss of $589 million — nearly doubling its $305 million first quarter loss from the year prior.
Of that $589 million, Residential Capital LLC — GMAC’s mortgage unit — lost $859 million, largely due to customers falling behind on mortgage payments.
According to Automotive News, ResCap also has a “significant near-term liquidity requirements,” with $17 billion in debt being due this year. The pending debt has already forced ResCap to reduce lending to riskier customers and cut 5,000 jobs, with further cuts likely.
The sagging market has also pushed back GMAC’s plans to be profitable in 2008 to at least 2009.
GM owns a 49 percent stake in GMAC while Cerberus Capital Management LP — the parent company of Chrysler — owns the remaining 51 percent.
