Filed under: Hirings/Firings/Layoffs, GM, Earnings/Financials
GMAC restructuring will shed 930 jobs from financing branch
Two days ago we told you about Cerberus head Stephen Feinberg's rather sanguine thoughts on Chrysler. Cerberus' other big auto investment, GMAC, is having a few issues of its own. Last year GMAC's auto lending division posted a profit of $1.77 billion, but losses in the mortgage loan division turned that into a $2.33 billion for the entire company. So, GMAC is doing what companies often do in these situations: positioning itself "with a more competitive cost structure and greater operational flexibility for future growth." Which is done by firing people, shutting down offices, and consolidating what's left over.From 20 North American offices, the company will trim down to five regional centers in the U.S. and Canada, and get rid of 930 workers, representing 15-percent of the workforce. After GM takes the charge for restructuring, the move will provide $175 million in savings.
And as with Chrysler, Cerberus isn't sweating the current state of things. Feinberg, in that letter to investors, said of GMAC, "The good news is that we bought GMAC cheaply enough so that even with all the bad news in the mortgage market and credit markets, we are still in reasonable shape with our overall investment. However, if the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty." Still, doomsday appears to be a ways off: GMAC expects to be profitable again in 2008.
[Source: Yahoo!]
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Reader Comments (Page 1 of 1)
olddavid 8:41AM (2/22/2008)
As an old hand in the financial arms of the Big 3, the money boys have been carrying the water for the manufacturing divisions for going on 30 years now. I never understood GM selling GMAC, even in light of the billion dollar ransom to divest its' FIAT stake. Even more mystifying was their entry- in a big way- into the mortgage business. I don't think that GM has had a true visionary since Ed Cole.........hell, Bunkie Knudsen was better than most. These 21st century "Whiz Kids", may be the smartest guys in the room but if you're the guy assigning seats, that's not too hard to accomplish. I would like to spend a year working for Toyota, just as juxtaposition on my domestic experience. We need their keiretsu manufacturing dogma, and they need our innovation and financial expertise. Somehow, someone has to find that synergy, or the last northern manufacturing job will be dismantling -for scrap- the RenCen and River Rouge. What a loss to our to our collective legacy............or maybe it's already gone, and we don't know it yet.
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Noidor 12:29PM (2/22/2008)
GMAC is in huge trouble make no mistake about it. Defaults will spread from mortgages, to credit card loans, to auto loans. Anything to do with US consumer debt is going to suffer and in some cases like here, go bankrupt. This is bad news for GM and Cerberus.
GMAC is going to become a skeleton operation, but I think it's too late.
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jw 1:00PM (2/22/2008)
they are in big trouble..they bought thousands of equity loans behind neg am 1st loans so you know they have no water in them...huge write offs coming!!!someone needs to take the blame for that decision..oh he's probably already retired with a nice golden parachute!!!
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AZMike 1:51PM (2/22/2008)
it should be noted here that over 90% of GMAC's problems are NOT auto-loan related, but mortgage related. Chrysler Financial never got into making mortgage loans, and is in much better financial shape now because of it.
there will be some fallout in the auto loan department in relation to the mortgage meltdown, but not much. car payments are generally much cheaper than mortgages, and you need a car to get somewhere; you don't need to own a house. it's also much easier to keep a close rein on an auto delinquency than a house, and the remedies (i.e., repossession) are much easier and faster with a car than a house.
AZMike
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The Highwayman 12:39AM (2/24/2008)
R. Wagoner could have been the saviour of GM had he only sold GMAC's mortgage unit and kept the auto finance division. Instead the grand plan to decouple GMAC's credit rating from GM has failed miserably. The mortgage business has dragged the credit ratings lower and lower, and decreased the margins on the auto side. Further it is now costing GM billions to offer cheap financing because GMAC's cost of funds are outrageous
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