Troubled GMAC Is Making It Look Easy For Rival Ford Credit

(MoneyWatch)  The ongoing problems at GMAC Financial Services are in sharp contrast to rival Ford Credit.

The contrast points up the fact that avoiding bankruptcy confers some advantages on Ford Motor Co. (F) after all, even though bankruptcy in some ways has served GM and Chrysler well -- especially since GM and Chrysler were able to write off much of their pre-bankruptcy debt.

GMAC this week appointed a new CEO, Michael A. Carpenter, a GMAC board member since May 2009. Previously, he was CEO for a succession of financial companies, most recently Citigroup's Global Corporate & Investment Bank (C).

Carpenter has his work cut out for him. GMAC's disintegration started with subprime mortgages, but the finance company's auto finance business has also been crippled in the recent past.

"You can't sell them if you can't finance them," is a truism in the auto industry, but GMAC nearly dropped out of making new auto loans and leases at the end of last year. The U.S. Treasury Department provided GMAC with a $5 billion bailout in the last days of 2008, and allowed GMAC to redefine itself as a bank holding company.

Since then, GMAC has started a bank for consumers called Ally Bank. GMAC also has been slowly rebuilding its business with new loans and a limited amount of leasing for GM, and also for Chrysler dealers and customers.

In the third quarter of 2009, GMAC made $7.7 billion in auto loans and leases. That was more than double the recent low point of $3.3 billion in originations in the fourth quarter of 2008, but it was down more than 40 percent from the year-ago quarter.

GMAC had a net loss of $767 million in the third quarter, an improvement over a net loss of $2.5 billion in the year-ago quarter. Meanwhile, Ford Credit reported net income of $427 million in the third quarter, up from $95 million a year earlier.

Poor performance at GMAC is a drag on former parent GM's efforts to recover from bankruptcy in more ways than one. As a condition of GMAC's government bailout, GM cut its stake in GMAC from 49 percent to 24.5 percent. Only 9.9 percent is held directly, the rest is held in an independent trust.

"A renewed GMAC is crucial to business and public sector efforts to bolster the U.S. auto industry, and we have a special obligation to the public to do everything we can to ensure GMAC succeeds," Carpenter said in a written statement. Carpenter succeeds Alvaro de Molina, who resigned.