GMAC, the financial arm of General Motors, announced this week that its global automotive finance business posted a net loss of $1.31 billion in the fourth quarter of 2008, and a loss of $2.07 billion for the entire year. In 2007, GMAC had a net income of $137 million for the fourth quarter of 2007 and a $1.48 billion in profit. GMAC blamed the losses on problems with auto leases, the declining value of financed cars, and credit losses on vehicles (repossessions).
In December of 2008 the U.S. Treasury bought a $5 billion stake in GMAC to keep it afloat. During the fourth quarter of 2008, new vehicle financing through GMAC fell dramatically as Americans lost jobs and the credit crunch hit the industry full force. Despite the huge losses, GMAC was able to create a 2008 profit on paper by means of a $6 billion federal bailout and an $11.4 billion gain tied to a $21.2 billion debt swap meant to boost capital.
Tags: Auto Bailout, GMAC, losses