With GM’s April announcement of an impending sale of a controlling interest in GMAC to the Cerberus Capital-led investor consortium, we are poised to enhance our ability to strengthen GMAC’s credit ratings and improve access to a more diversified funding base. Once the transaction is completed, we believe GMAC will be much better able to continue to diversify and grow its portfolio. Having a strong strategic partner should enable us to meet our operational and financial objectives with a growing, rather than shrinking, global asset base.
As we look forward to this promising future, it is important to reflect on the year past. Despite significant hurdles in 2005, GMAC still had another great year and accomplished both its operational and strategic objectives. GMAC had operating earnings of $2.8 billion, and paid GM a dividend of $2.5 billion. In addition, GMAC’s strategic support of GM led to the financing of more than 2 million vehicles for consumers, a global retail market share of 36 percent of GM’s automotive business and a global share of 82 percent of dealer inventory financing. Overall, GMAC purchased or originated $63 billion of consumer automotive retail or lease contracts.
All of this was done in a very challenging funding environment. Credit rating downgrades to non-investment grade by three of the four rating agencies resulted in lost access to traditional sources of funding and impacted our funding strategy.
GMAC had to reinvent itself by developing new sources of funding. The global borrowings function of GMAC rose to the challenge and ended ’05 with adequate liquidity and access to a sufficient number of committed funding facilities.
Our innovative approach in 2005 resulted in many firsts:
- GMAC successfully launched Residential Capital Corporation (ResCap), its global residential business as a stand-alone, ring-fenced business, and secured an investment grade credit rating for it. Since its inception, ResCap has raised more than $10 billion from bond offerings, and $4 billion in syndicated bank credit facilities.
- GMAC completed two landmark multi-year auto “whole loan” sale agreements totaling $75 billion in 2005.
- GMAC completed several billion dollars worth of nontraditional, first-of-its-kind, private securitization structures.
- GMAC Automotive Bank and GMAC Bank continued to obtain efficient funding as they grew to $2.3 billion and $4.1 billion in deposits, respectively.
GMAC will continue to validate its culture of innovation and flexibility for navigating the future. We anticipate the announced equity transaction will improve access to low-cost funding that will enable GMAC to continue its successful diversification strategy, critical to our success, with growth in all three of our business segments. As we move forward, we are focused, as always, on increasing the value of the interests of GMAC’s various stakeholders.
