Macro Economic Trends and Risks
GMAC, How's the Economy Doing?

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By RodgerRafter
February 12, 2008

Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light. How are these posts selected? Click here to find out and nominate a post yourself!

Here's a quick economic quiz based on GMAC's Q4 earnings release from last week. Answers are at the bottom of the page. See if you can guess:

1. Did GMAC finance a larger or smaller share of GM's retail sales in Q4 '07 vs. Q4 '06.
2. Has the percentage of new cares relative to used cars increased or decreased?
3. Are 30-day delinquencies increasing or decreasing?
4. Did they repossess more or less vehicles in Q4 2007 vs. the year earlier?
5. Did GM's profits from North American Automotive Finance rise or fall from the year earlier quarter?
6. Is GM stock up or down year to date?


1. A larger percentage. 43% in Q42007 vs. 36% in Q42006.
2. Decreased. New/Used was 84%/16% in Q42006 and was 80%/20% in Q42007.
3. Increasing. 30-day delinquencies for managed and serviced contracts were 2.77% and 2.67% respectively in Q4'07 vs. 2.62% and 2.35% a year earlier.
4. More. Repossessions as a percentage of managed retail contracts outstanding rose to 2.71% from 2.44%.
5. Profits fell. North American Operations within Automotive Finance reported a profit of $572 million in Q4 2006 compared to just $40 million in Q4 2007.
6. Up. The stock ended 2007 at $24.89 and is now trading around $27.50, for a gain of over 10%.

GM's book value per share is negative seventy-three dollars and eighty-two cents. No, the market does not always make sense.

ResCap, the residential finance wing of GMAC, lost $4.3 billion in 2007, including $921 million in Q4. Overall GMAC lost $2.3 billion during the year. GM currently owns about one half of GMAC, having pawned off the other half to Cerberus.

For several years GM's automotive division was struggling to make money or reporting losses, while the financial wing was supposedly profitable. Of course those profits were largely imaginary as they came from overestimating the profitability of the consumer and residential loans that were being made and securitized at the time.