GMAC to downsize 930 auto finance jobs, close office to save costs
By Our Corporate Bureau | 21 Feb 2008
Detroit: GMAC, the auto finance arm of General Motors, which is co-owned by a group lead by private equity firm Cerberus Capital Management, has said that it will restructure its auto finance business, and in the process do away with around 930 jobs, and would close some smaller offices. The restructuring of the business comes in the light of a tighter credit market, and slumping new car sales.
GMAC would roll back almost a sixth of its employee base, or around 15 per cent, given that it employs around 6,500 people in the auto finance business, of a total of 26,700 worldwide. The company will also 15 of 20 offices across North America, and transform the remaining five into regional hubs. The restructuring of the business has been undertaken ostensibly to offer a more competitive cost structure with greater operational flexibility for future growth.
The cost reduction exercise in GMAC's core business of auto finance could herald a overall restructuring of the company. GMAC has been slogging over the last few quarters to beef up and support its mortgage business, Residential Capital LLC, which like other lenders had to take large write downs because of the sub prime mortgage situation. Residential Capital LLC had lost $4.35 billion in 2007.
Formerly known as the General Motors Acceptance Corporation, General Motors spun off the company late in 2006, with controlling interest going to a consortium led by Cerberus Capital Management, L.P., a private equity firm, and including Citigroup Inc., Aozora Bank Ltd., and a subsidiary of The PNC Financial Services Group, Inc. The company is still a major finance provider for the auto maker's dealers, and underwrites loans and leases for used and new GM vehicles.
Last month, GMAC had announced an expected return to profitability sometime this year. Tighter credit is widely expected to add to a drop in new vehicle sales this year, which has been predicted to shrink for the third year in a row. Tightening of credit norms will also impact the used-car market.