NEW YORK — GMAC Financial Services said improvement in the used-vehicle market in the United States led to pre-tax income of $346 million in its global automotive finance division in the second quarter, compared to a pre-tax loss of $709 million in the year-ago period.
“Results were driven primarily by improvement in the U.S. used-vehicle market, which resulted in increased proceeds on the sale of off-lease vehicles, favorable provisions on the retail balloon portfolio, and improved loss severity levels,” the captive lender said.
On an after-tax basis, the auto finance segment reported a net loss of $727 million, compared to a net loss of $717 million in the year-ago period. The after-tax loss was primarily driven by a tax charge related to the conversion of GMAC to a corporation.
Total new-vehicle loan originations were $5.6 billion, down from $12.5 billion in the second quarter 2008. In comparison to recent quarters, origination levels increased from extremely low levels in the first quarter 2009 ($3.4 billion) and fourth quarter 2008 ($2.7 billion). GMAC said new vehicle originations are lower because a decrease in U.S. vehicle sales, the significant reduction of leasing and the effects of a weaker economy.
GMAC continues to provide financing to Chrysler dealers and consumers. The company has financed approximately $320 million of new Chrysler consumer originations through July 20. GMAC has also extended approximately $1 billion in interim wholesale financing to approximately 1,600 U.S. and Canadian dealers. The formal credit review process of the interim-financed dealers has begun and is expected to be completed by mid-November.
GMAC did not experience significant credit losses related to the GM bankruptcy filing. General Motors Company, the new post-bankruptcy entity, holds the equity stake in GMAC and has also assumed the operating agreements between the companies.
Credit losses increased to 2.24 percent of managed retail contracts in the second quarter, compared to 1.40 percent in the year-ago period. GMAC said the increase is due to higher losses in Europe and North America, which were driven by economic weakness, the seasoning of the portfolio and a smaller asset base. However, credit losses have declined from the first quarter 2009 level of 2.41 percent and continue to improve from its peak in the fourth quarter 2008.
Delinquencies, defined as contracts more than 30-days past due, also increased to 3.44 percent in the second quarter, compared to 2.39 percent in the year-ago period. Delinquency trends have been negatively affected by higher unemployment and a smaller asset portfolio in North America and Europe, explained GMAC.
Overall, GMAC reported a second quarter 2009 after-tax net loss of $3.9 billion, compared to a net loss of $2.5 billion in the year-ago period. Results in the quarter were due to several charges incurred in the second quarter. Excluding these charges, GMAC's loss in the second quarter of 2009 was approximately $400 million.
“While difficult economic conditions persist, GMAC is encouraged by positive trends such as improving origination levels in both the auto and mortgage segments. Additionally, GM and Chrysler have exited bankruptcy, which should lead to a more stable U.S. auto industry,” the company stated.