Legacy issues helped weigh down GMAC, even as it picked up new business as the new lender of choice for Chrysler dealers.

GMAC Financial Services, the principle source of financing for both General Motors and Chrysler dealerships, reported a net loss of $767 million during the third quarter, compared to a net loss of $2.5 billion in the third quarter of 2008.

The latest loss threatens to increase the need for additional aid from the Federal Reserve Board and/or the Federal Deposit Insurance Corp.  GMAC has already received roughly $12 billion from the government’s Troubled Asset Relief Program, or TARP.

“We continue to work through solutions for certain legacy assets and that is still weighing on GMAC’s financial performance,” said GMAC Chief Executive Officer Alvaro G. de Molina. “Progress is being made toward the transformation of the company as we shed non-strategic operations while at the same time invest in structuring the company to be more competitive for the long term.”

Molina said the lender is leveraging its core strengths and noted the speed by which it has ramped up its operations with Chrysler – whose own captive finance subsidiary was ordered to close by government regulators.  Chrysler Financial Services will cease all activities by the end of 2010.

Most of the losses in the third quarter came from legacy assets in the mortgage operations, GMAC officials said.
GMAC’s third-quarter results also included losses from the company’s discontinued consumer property and casualty insurance business in the U.S. and three international automotive financing operations that are no longer part of the company’s continuing operations.  Excluding these businesses, net losses from continuing operations totaled $671 million in the third quarter of 2009, compared to $2.5 billion in the comparable prior year period.

Credit losses increased in the third quarter of 2009 to 3.29 percent of managed retail assets, versus 1.56 percent in the third quarter of 2008  Lower loss severities in North America have partially offset weak economic trends.  Excluding the effect of the change in the charge-off policy, credit losses would have been 2.19 percent of managed retail assets in the third quarter of 2009.

Delinquencies, defined as contracts more than 30-days past due, also increased to 3.76 percent in the third quarter of 2009, compared to 2.77 percent in the third quarter of 2008 and 3.48 percent in the second quarter of 2009.  Delinquency trends have been negatively affected by higher unemployment and a smaller asset portfolio in North America and Europe.

GMAC’s total equity at Sept. 30 was $24.9 billion, down from $26.0 billion at June 30, 2009.  Total equity was marginally lower primarily due to the net loss in the quarter and the payment of preferred dividends.  GMAC’s preliminary third quarter Tier 1 capital ratio was 14.4 percent, and the Tier 1 common capital ratio was 6.1 percent.  The increase in the Tier 1 capital ratio is the result of the company’s continued effort to de-risk and de-lever.

Ally Bank and ResMor Trust continue to enhance GMAC’s funding flexibility through growth in deposits.  Ally Bank and ResMor Trust deposits, excluding $5.2 billion of certain intercompany amounts, increased in the third quarter to $28.8 billion as of Sept. 30, 2009, from $26.3 billion at June 30, 2009.  Retail deposits at Ally Bank were $15.9 billion at quarter-end, compared to $14.5 billion at the end of second quarter 2009.  Brokered deposits at Ally Bank increased to $9.5 billion at quarter-end, compared to $8.7 billion at the end of second quarter 2009.
GMAC’s global automotive finance business reported third quarter 2009 pre-tax income from continuing operations of $395 million, compared to a pre-tax loss from continuing operations of $379 million in the comparable prior year period.  Continuing operations in the segment excludes certain discontinued operations, which consist of automotive finance operations in Argentina and full-service leasing operations in the U.K. and Italy.   Continuing operations in the segment were driven by the continued normalization of origination volumes, credit improvement and used vehicle prices.

Total consumer financing originations during the third quarter of 2009 were $7.7 billion, which included $6.8 billion of new originations, approximately $800 million of used originations and approximately $100 million of new leases.  Third quarter 2008 consumer financing originations totaled $13.3 billion, which included $9.2 billion of new originations, $2.0 billion of used originations and $2.1 billion of new leases/retail balloon contracts.  Originations were lower compared to the prior year primarily due to a decrease in U.S. vehicle sales and lower leasing levels.

Consumer financing origination increased  26 percent from $6.1 billion in the second quarter of 2009.  The increase from last quarter includes improved pricing competitiveness, an increase in Chrysler originations and the effect of the “cash-for-clunkers” program.

GMAC continues to make significant progress in extending financing to Chrysler dealers and customers.  During the third quarter of 2009, the company originated approximately $720 million of Chrysler retail loans, compared with approximately $200 million in the previous quarter.