(Adds S&P downgrade, analyst comment, updated stock prices)
By Jonathan Stempel
NEW YORK, July 31 (Reuters) - Finance company GMAC LLC posted a $2.48 billion second-quarter loss on Thursday, as rising gas prices forced it to write down sport-utility vehicle leases, while losses in its mortgage lending unit soared.
The lender’s fourth straight quarterly loss compared with a profit of $293 million a year earlier, and was larger than the $2.33 billion that GMAC lost in all of 2007.
Results were hurt by the U.S. housing slump, tight credit markets, mounting customer defaults, falling vehicle sales, and the sale of mortgage assets at a loss.
“This is the perfect storm for our business, and we see no meaningful signs of it blowing over,” Chief Financial Officer Robert Hull said on a conference call. “The headwinds we face will persist for the balance of 2008, at least.”
The results will hurt those of General Motors Corp (GM.N), which still owns 49 percent of Detroit-based GMAC after selling the rest in 2006 to private equity firm Cerberus Capital Management LP [CBS.UL].
Standard & Poor’s lowered GM’s and GMAC’s credit ratings one notch to “B-minus,” its sixth-highest “junk” grade, from “B,” saying poor market conditions and changes in customer demand will complicate turnaround plans and reduce liquidity.
S&P also downgraded Ford Motor Co (F.N), Cerberus-owned Chrysler LLC, and their finance arms one notch to “B-minus.”
GM is scheduled to report quarterly results on Friday. Its shares were down 8 cents at $11.32 in afternoon trading.
Minneapolis-based Residential Capital LLC, GMAC’s mortgage unit, lost $1.86 billion in the April-June period, after losing $254 million a year earlier. It has had seven straight unprofitable quarters, losing $7.2 billion over that time.
The latest loss stemmed in part from asset sales to reduce risk at ResCap, as well as higher credit losses in Europe.
Auto finance operations lost $717 million, compared with a year-earlier profit of $395 million.
GMAC took a $716 million pretax write-down on North American vehicle leases as gas prices drove U.S. and Canadian consumers to more fuel-efficient vehicles. This caused demand and prices for used SUVs and cross-over vehicles to tumble.
Typical leases run for two to five years, while automakers or lenders retain the risk of ownership.
Richard Hofmann, a CreditSights Inc analyst, wrote that GM might have as much as $1 billion of exposure to future GMAC lease write-downs, which GMAC said are a possibility.
Insurance was GMAC’s only profitable unit, with earnings of $135 million.
DEMAND FOR SUVs GROWS COLD
GMAC has reduced U.S. leasing activity and boosted pricing, and this week stopped offering leasing incentives in Canada. It ended June with about $12 billion of North American SUV leases on its books, out of a total $32.8 billion of leases.
Tougher financing terms are expected to weigh on U.S. vehicle sales, which in June fell to a 15-year low.
Last week, Chrysler LLC said its Chrysler Financial unit would end vehicle leases to U.S. consumers.
In June, GMAC arranged a $60 billion refinancing package to stave off a possible collapse for ResCap, which now focuses mainly on “prime” quality loans.
ResCap in 2007 was the eighth-largest U.S. mortgage lender, according to the newsletter Inside Mortgage Finance.
Hull said GMAC remained “committed” to ResCap and to “seeing it through.” He declined to comment on speculation that GMAC could merge with Chrysler Financial.
GM and Cerberus did not immediately return calls seeking comment.
The price on GMAC’s 7.25 percent notes maturing in 2011 fell 1.75 cents on the dollar on Thursday to 69 cents, yielding 24 percent, MarketAxess said. (Additional reporting by Kevin Krolicki in Detroit and Dena Aubin in New York; Editing by Derek Caney, Dave Zimmerman and Lisa Von Ahn)