Although General Motors Corp. today posted better-than-expected results based on strong overseas sales, it also took a $1.45-billion charge for its remaining investment in auto finance company GMAC, according to market reports.
The company also took a $731-million charge for its exposure to the bankruptcy of former subsidiary Delphi Corp.
Because of these charges, GM posted a net loss of $3.25 billion, which is equivalent to $5.74 per share, versus a profit of $62 million, or 11 cents a share a year ago.
The firms revenue also dropped to $42.7 billion from $43.4 billion.
GMACs woes are not good news for the somewhat weaker auto sector. Barclays Capital expects limited, if any, subprime auto issuance, citing investor distaste for monoline exposure.
Analysts added thattraditional retail auto ABS which includes prime and non-prime loans as well as retail lease collateral issuance reached only $13 billion year-to-date, a 24% dip year-over-year.
According to Barclays, the activity in autos is mostly due to non-existent activity in the subprime sector. Despite being a bright spot in an otherwise bleak year for auto ABS issuance, year-to-date growth of 67% in prime retail auto issuance has not been sufficient to offset the declines in subprime and floorplan securitization, Barclays analysts said.