GMAC: An Explosion In The Boiler Room For Cerberus

November 5, 2008 by Douglas A. McIntyre

95129cCerberus has invested billions of dollars into the US auto industry. Its best-known deal was its purchase of 80% of Chrysler. That investment is probably worth nothing. Its other highly visible deal was the acquisition of 51% of GM’s (GM) financial arm, GMAC.

News on earnings from GMAC indicates that it may be worthless as well.

According to Reuters, "Finance company GMAC LLC lost $2.52 billion in the third quarter, hurt by the housing slump and vehicle lease writedowns, and said its mortgage unit, one of the nation’s largest home loan providers, may not survive." What happens to ResCap, the mortgage operation? No one knows.

GM reports GMAC earnings at part of its own quarterly filings. Whether it has liability for ResCap’s liabilities is not clear. Nor is the extent to which Cerberus is one the hook.

A lot of private equity and venture firms are in very deep trouble. Cerberus may be one of them.

Douglas A. McIntyre