GMAC LLC, the former finance unit of General Motors Corp., lost $724 million in the fourth quarter, it said, because homebuyers did not keep up with their mortgage payments.
The net loss was narrower than the $1 billion a year earlier, the Detroit finance company said Tuesday. The results included a $921 million loss at the Residential Capital LLC mortgage unit.
GMAC vowed to return to profitability this year. Falling home prices and record U.S. foreclosures had forced ResCap to cut 5,000 jobs, or one-third of its staff, last year. The company said it is talking to potential buyers for parts of ResCap. GMAC's auto finance business remained profitable, overcoming a 6.1% decline in GM's North American auto sales last year.
"Performance throughout 2007 was severely affected by the ongoing challenges in the mortgage, credit, and capital markets," GMAC's chief executive, Eric Feldstein, said in a press release.
Profit at GMAC's auto finance unit declined 77%, to $137 million, because of reduced gains from the sale of contracts signed with car buyers. Income at the insurance business declined 91%, to $68 million, because of lower capital gains and higher losses on customer claims.
For the full year GMAC lost $2.3 billion, compared with net income of $2.1 billion in 2006. ResCap lost $4.3 billion in 2007, GMAC said.
ResCap's loss stemmed from a higher provision for bad loans, fewer new mortgages, and markdowns on the value of securities and loans held for sale.
"We continue to see ResCap as a survivor of the current industry shakeout based on its scale within the overall industry and the fact that subprime accounts for only a portion of its total business mix," Bank of America Corp. analyst John Guarnera wrote in a Jan. 11 report.
A group led by Cerberus Capital Management bought a 51% stake in GMAC in 2006.
