Even the bailout could not bring any respite for the GMAC, one of the largest car loan providers in the US. GMAC Financial Services said on Tuesday that the company expects to post a fourth-quarter loss of $5 billion. Combined loss for the whole of 2009 is expected to surpass the $10 billion mark.
The loss as per the company is a result of the company’s bid to write down or sell its risky mortgage assets. Write down’s alone remained at $3.8 billion.
On the sidelines of a conference, GMAC’s executives said that they are now ready to sell some of the assets of Residential Capital (ResCap), its home loan arm, to a third party. The value of ResCap’s assets in 2006 was $136 billion. Now it stands at just $20 billion. “We’re not going to do anything crazy and give value away, but it’s an asset we’d like to figure out how to capitalize on its value,” is what Michael A. Carpenter, Chief Executive Officer of GMAC had to say about the selling of assets.
ResCap, agrees Carpenter, is a major drain of resources for the company. Even after receiving three bailouts, in total costing the US exchequer $13.5 billion, the company has not been able to curb its losses. The government, which now owns the majority stake in the company (56 per cent) after the last bailout on December 30, faces the question of being able to repay the money to the shareholders.
The latest capital infusions, believe experts, could not help in stabilizing the position of ResCap since the liquidity position and the franchise system is damaged. Rating agency Moody’s said in a statement that the capital provided was insufficient looking at the current position of the company. Analysts believe that the major concern is that GMAC is facing losses more than what was expected.