GMAC Loses $724 million -
Hires 400 more collectors

This is a scary article in the Financial Post. GMAC is bleeding money. This is supposed to be the profitable arm of GM!!

If this company has hired 400 MORE vehicle collectors, i'm curious to know many they already have!! They must be experiencing a huge amount of delinquencies at the moment.

GM / GMAC In Real Trouble?


Fundamentally, people like their cars, and people like their convenience. In today's economy, it's normal for a family to have 2 cars sitting in the driveway. If there are lay offs, these families are going to not pay for that second car.

Comment RE: GMAC getting in 400 more collectors.. Timing wise, it usually takes a family 3-4 months from the time they start their financial crisis before they start getting collection calls. IE... they use up their cash reserves to keep their bills current as long as possible.

This means that consumers have been under a credit crunch in the last six months.. and we're just at the beginning of this financial recession phase in the U.S.

Again, I usually like to talk about Canadian topics here. I'm sure that Canadians mirror the U.S. as far as car ownership and delinquencies go.

That is why it's a good time to pay down debt, and save cash reserves in case of that personal financial downturn.

Financial Post - Concern is mounting in the United States that Americans are struggling to keep up on their car loan payments, forcing big lenders to hire more collectors and putting more pressure on automakers already hurt by sagging sales.

The latest evidence came yesterday after finance company GMAC reported a loss of US$724-million for the fourth quarter, reversing a US$1-billion profit from a year ago and prompting Moody's Investors Service to push the company's senior unsecured rating down further into junk territory.

Most of the loss came from the company's Residential Capital mortgage business. But the weakness was also evident at its auto finance unit, which recorded a 77% decline in net profit for the quarter, to US$137-million. GMAC, owned by Cerberus Capital Management and General Motors Corp., said it has tightened underwriting standards to minimize auto loan losses. It also hired 400 more collectors in the past four months, a 40% increase over previous levels.

Delinquencies on GMAC's car loans, which are payments more than 30 days late, rose to 2.68% of managed retail assets, the company said, versus 2.61% the prior year. Defaults are higher than they have been in a year or two, a GMAC spokesman said and "in line with past experience" in an environment where the economy is weakening.