GMAC on Thursday announced its second-quarter financial results, revealing a $717 million loss in the second quarter for its automotive financing business. The vast majority — about $716 million — of the losses came as a direct result of the lower-than-expected values of vehicles leased in North America. Overall, the big financing company posted a $2.48 billion total loss in 2008’s second quarter.
In contrast, GMAC put up a $293 million profit in the second quarter of 2007, according to an Automotive News report. The company said the falling residual values of leased SUVs “more than offset” any profits from its steady business outside of North America. Of the $30 billion in leases as of June 30, a full 80 percent, or more than $24 billion, was split up evenly between cars and SUVs, while pickup truck leases made up $6 billion. GMAC says it only recovered nearly 75 percent of expected returns on off-lease SUVs, or 85 percent of the expected value of all its vehicles.
The actual losses are higher, as General Motors, which owns 49 percent of GMAC, is obligated under contract to pay for a part of GMAC’s lease losses, which will hurt the struggling automaker further. GM is due to release its second quarter financials on Friday.
“We intend to support GM within the realm of our liquidity capacity,” said Rob Hull, GMAC’s Chief Financial Officer.
Earlier , GMAC announced it would scale back leases in the U.S. and stop offering incentives in Canada.
GMAC also lost $1.86 billion net as a result of a poor residential mortgage business.
07/31, 2:46 PM
posted by:
tripleonefive
Wow GMs dont hold their value Hmmmmmm
07/31, 3:11 PM
posted by:
acura_el2000
HAHAHA
07/31, 5:51 PM
posted by:
injunraiv
This is an industry wide problem. You’ll see…
07/31, 7:20 PM
posted by:
ktulu
I thinl this is a real-world problem. Bobody is leasing carys that they can afford, but big gas-guzlers. And no 1 wants 2 buy them, so the valu is lower thatn the residual in the lease contracts.
Not many Tundra’s leased, so this looks now like a big 3 problem,
08/01, 12:29 AM
posted by:
The Stig
Nobody wants a gas guzzler just off lease, that’s for sure. What a shocking surprise. Of course those who had leases recently expire are doing just fine especially if they downsized. And that’s the wonderful thing about leasing – you don’t own it – but realistically (and rationally) you don’t want to anyway.
08/01, 8:42 AM
posted by:
Fletch
There are millions of people upside-down in their mortgages wishing they would have “leased” housing arrangement.