NEW YORK (AP) _ GMAC Financial Services, the finance company
formerly controlled by General Motors Corp., said Monday continued
losses from its home lending operations caused second-quarter
profits to fall sharply.
The New York-based company reported a profit of US$293 million,
compared with $787 million in the same period last year. Revenue
fell to $4.02 billion from $5 billion in the year-ago period.
GMAC blamed the drop on losses in its Residential Capital LLC
home lending unit, more commonly known as ResCap. The unit lost $254
million during the second quarter, compared with a loss of $910
million a year earlier.
Eric Feldstein, GMAC's chief executive, said the company made
great strides during the first half of 2007 to stem losses from the
troubled residential mortgage unit. GMAC's exposure to the subprime
mortgage market caused the company to post a $305 million net loss
during this year's first quarter.
``The net losses incurred by ResCap continue to constrain GMAC's
bottom-line profitability,'' he said in a statement. ``But we are
encouraged to see that the aggressive risk-mitigation initiatives
implemented in the first half of this year have reduced ResCap's
losses _ quickly and significantly _ despite increasing challenges
in the U.S. mortgage market.''
In November 2006, GM sold a 51 per cent controlling interest in
GMAC to a consortium of investors led by Cerberus Capital Management
LP. The automaker maintains a 49 per cent stake.
GMAC said its prospects in the long-term ``remain favourable.''
It expects continued improvement in earnings performance at its
mortgage-lending unit during the second half of the year.
The company said it continues to reduce its exposure to subprime
mortgages, and will restrict origination of those that have
``limited market liquidity.''
At the end of the second quarter, ResCap's U.S. nonprime
held-for-sale portfolio was reduced to $1.9 billion from $3.1
billion at the end of March, and from $5.4 billion at year-end 2006.
Stripping out losses from the Residential Capital unit,
second-quarter profit would have been $547 million _ more than
double the year-ago period for the same operations.