NEW YORK — GMAC Financial Services today reported a first quarter 2009 net loss of $675 million, compared to a net loss of $589 million in the first quarter 2008.
"The effects of a soft economy and weaker credit performance on legacy assets continued to put pressure on GMAC's financial performance in the quarter. We continue to manage through this economic cycle and focus on strengthening operations for the long-term," said GMAC Chief Executive Officer Alvaro G. de Molina.
He also addressed the company’s announcement last week that it was becoming the preferred provider for Chrysler LLC’s dealers and customers. “This agreement leverages GMAC's strengths, diversifies our auto finance business and provides new revenue opportunities for the company,” he said.
In conjunction with last week’s announcement, the U.S. government has indicated that it intends to support GMAC in promoting the availability of credit for dealers and customers.
GMAC’s global automotive finance division posted a $225 million in net income in the first quarter 2009, down from $258 million recorded in the year-ago period. Results were driven primarily by weaker credit performance, which was partially offset by lower interest expense due to lower debt balances.
New vehicle consumer financing originations during the first quarter 2009 significantly decreased to $3.4 billion from $13.1 billion in the first quarter 2008. However, in comparison to the prior period, origination levels in the first quarter 2009 increased from low levels in the fourth quarter 2008, which totaled $2.7 billion. After receiving funding from the U.S. Treasury's Troubled Asset Relief Program (TARP) in December, GMAC expanded its new North American retail auto financing activities from fourth quarter 2008 levels by $1.1 billion.
On April 1, 2009, GMAC eliminated all dealer curtailment payments for aged inventory for the month of April. On April 30, the company extended the waiver for the month of May and said it would begin accepting new applications for wholesale financing from qualified U.S. dealers of GM and non-GM franchises.
Credit losses increased in the first quarter 2009 to 2.41 percent of managed retail assets, versus 1.34 percent in the first quarter 2008. The increase is due to higher frequency of losses in North America and Europe and increased severity in North America. The increase is primarily attributable to weaker economic conditions and a smaller asset base. While credit losses are also up on a quarter-over-quarter basis due to frequency and an aging portfolio, severity in the first quarter 2009 has improved compared to the fourth quarter 2008.
Delinquencies, which are contracts more than 30-days past due, also increased to 3.08 percent in the first quarter 2009, compared to 2.42 percent in the first quarter 2008. Driving the increase is weaker economic conditions in certain international markets, such as Spain and Colombia, and a smaller asset portfolio in North America and Europe.