e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
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[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006, or |
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[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to . |
Commission file number: 1-3754
GMAC LLC
(Exact name of registrant as specified in its charter)
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Delaware
(State or other
jurisdiction of
incorporation or organization)
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38-0572512
(I.R.S. Employer
Identification No.)
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200 Renaissance Center
P.O. Box 200 Detroit, Michigan
48265-2000
(Address of principal executive offices)
(Zip Code)
(313) 556-5000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer (as these terms are defined in Rule 12b-2 of the
Exchange Act).
Large accelerated
filer [ ] Accelerated
filer [ ] Non-accelerated
filer [X]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Reduced Disclosure Format
The registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is
therefore filing this Form with the reduced disclosure format.
INDEX
GMAC LLC
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Page | |
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Part I
Financial Information |
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Item 1.
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Financial Statements (unaudited)
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Condensed Consolidated Statement of Income for the Second
Quarter and Six Months Ended June 30, 2006 and 2005
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3 |
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Condensed Consolidated Balance Sheet as of June 30, 2006,
and December 31, 2005
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4 |
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Condensed Consolidated Statement of Changes in
Stockholders Equity for the
Six Months Ended June 30, 2006 and 2005
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5 |
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Condensed Consolidated Statement of Cash Flows for the Six
Months
Ended June 30, 2006 and 2005
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6 |
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Notes to Condensed Consolidated Financial Statements
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7 |
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Managements Discussion and Analysis of Financial Condition
and Results of Operations
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22 |
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Item 3.
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Quantitative and Qualitative
Disclosures About Market Risk
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* |
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Controls and Procedures
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41 |
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Part II Other Information
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Legal Proceedings
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42 |
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Risk Factors
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42 |
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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* |
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Item 3.
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Defaults Upon Senior Securities
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* |
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Item 4.
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Submission of Matters to a Vote of Security Holders
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* |
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Other Information
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43 |
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Exhibits
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43 |
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Signatures |
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44 |
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Index of Exhibits |
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45 |
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Certificate of Formation of GMAC LLC dated July 20, 2006 |
Certificate of Conversion to Limited Liability Company of GMAC to GMAC LLC, dated July 20, 2006 |
Limited Liability Company Agreement of GMAC LLC, dated July 21, 2006 |
Computation of Ratio of Earnings to Fixed Charges |
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) |
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) |
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C Section 1350 |
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* |
Item is omitted pursuant to the Reduced Disclosure Format, as
set forth on the cover page of this filing. |
Condensed Consolidated Statement of Income (unaudited)
GMAC LLC
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Second Quarter |
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Six Months |
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Period ended June 30, ($ in millions) |
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2006 |
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2005 |
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2006 |
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2005 |
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Revenue
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Consumer
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$2,548 |
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$2,471 |
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$5,114 |
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$4,990 |
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Commercial
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782 |
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748 |
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1,508 |
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1,371 |
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Loans held for sale
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371 |
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347 |
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851 |
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728 |
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Operating leases
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2,026 |
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1,751 |
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3,954 |
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3,416 |
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Total financing revenue
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5,727 |
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5,317 |
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11,427 |
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10,505 |
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Interest and discount expense
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3,819 |
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3,050 |
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7,380 |
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6,051 |
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Net financing revenue before
provision for credit losses
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1,908 |
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2,267 |
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4,047 |
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4,454 |
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Provision for credit losses
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285 |
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201 |
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420 |
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530 |
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Net financing revenue
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1,623 |
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2,066 |
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3,627 |
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3,924 |
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Insurance premiums and service
revenue earned
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1,052 |
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927 |
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2,062 |
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1,847 |
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Gain on sale of mortgage and
automotive loans, net
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504 |
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237 |
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869 |
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746 |
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Servicing fees
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446 |
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423 |
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918 |
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843 |
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Amortization and impairment of
servicing rights
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(335 |
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(23 |
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(500 |
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Servicing asset valuation and hedge
activities, net
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(171 |
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117 |
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(356 |
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94 |
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Investment income
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297 |
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403 |
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555 |
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653 |
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Gain on sale of equity method
investments, net
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411 |
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411 |
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Other income
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1,003 |
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1,012 |
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2,018 |
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1,942 |
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Total net revenue
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5,165 |
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4,850 |
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10,081 |
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9,549 |
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Expense
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Depreciation expense on operating
lease assets
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1,346 |
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1,290 |
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2,786 |
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2,560 |
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Compensation and benefits expense
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665 |
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772 |
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1,383 |
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1,583 |
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Insurance losses and loss
adjustment expenses
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653 |
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597 |
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1,250 |
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1,185 |
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Other operating expenses
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1,171 |
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979 |
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2,344 |
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1,906 |
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Total noninterest expense
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3,835 |
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3,638 |
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7,763 |
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7,234 |
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Income before income tax
expense
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1,330 |
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1,212 |
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2,318 |
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2,315 |
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Income tax expense
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430 |
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396 |
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746 |
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771 |
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Net income
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$900 |
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$816 |
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$1,572 |
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$1,544 |
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The Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
3
Condensed Consolidated Balance Sheet (unaudited)
GMAC LLC
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June 30, |
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December 31, |
($ in millions) |
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2006 |
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2005 |
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Assets
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Cash and cash equivalents
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$17,186 |
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$15,424 |
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Investment securities
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18,808 |
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18,207 |
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Loans held for sale
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20,455 |
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21,865 |
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Assets held for sale
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19,030 |
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Finance receivables and loans, net
of unearned income
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Consumer
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134,736 |
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140,411 |
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Commercial
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47,568 |
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44,574 |
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Allowance for credit losses
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(2,883 |
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(3,116 |
) |
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Total finance receivables and
loans, net
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179,421 |
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181,869 |
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Investment in operating leases, net
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34,495 |
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31,211 |
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Notes receivable from General Motors
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5,140 |
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4,565 |
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Mortgage servicing rights
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5,093 |
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4,015 |
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Premiums and other insurance
receivables
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2,147 |
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1,873 |
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Other assets
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25,637 |
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22,457 |
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Total assets
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$308,382 |
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$320,516 |
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Liabilities
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Debt
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Unsecured
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$122,833 |
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$133,269 |
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Secured
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124,945 |
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121,138 |
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Total debt
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247,778 |
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254,407 |
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Interest payable
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3,200 |
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3,057 |
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Liabilities related to assets held
for sale
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10,941 |
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Unearned insurance premiums and
service revenue
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5,183 |
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5,054 |
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Reserves for insurance losses and
loss adjustment expenses
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2,642 |
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2,534 |
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Accrued expenses and other
liabilities
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23,041 |
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18,381 |
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Deferred income taxes
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4,463 |
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4,364 |
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Total liabilities
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286,307 |
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298,738 |
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Stockholders
equity
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Common stock, $.10 par value
(10,000 shares authorized, 10 shares issued and
outstanding) and paid-in capital
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5,760 |
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5,760 |
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Retained earnings
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15,338 |
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15,190 |
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Accumulated other comprehensive
income
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977 |
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828 |
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Total stockholders equity
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22,075 |
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21,778 |
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Total liabilities and
stockholders equity
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$308,382 |
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$320,516 |
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The Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
4
Condensed Consolidated Statement of Changes in
Stockholders Equity (unaudited)
GMAC LLC
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Six months ended June 30, ($ in millions) |
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2006 |
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2005 |
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Common stock and paid-in
capital
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Balance at beginning of year and at
June 30,
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$5,760 |
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$5,760 |
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Retained earnings
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Balance at beginning of year
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15,190 |
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15,491 |
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Net income
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1,572 |
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1,544 |
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Cumulative effect of a change in
accounting principle, net of income taxes
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Transfer of unrealized loss for
certain available for sale securities to trading securities
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(17 |
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Recognize mortgage servicing rights
at fair value
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4 |
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Dividends paid
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(1,411 |
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(1,000 |
) |
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Balance at June 30,
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15,338 |
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16,035 |
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Accumulated other comprehensive
income (loss)
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Balance at beginning of year
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828 |
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1,166 |
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Other comprehensive income (loss)
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132 |
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(354 |
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Transfer of unrealized loss for
certain available for sale securities to trading securities
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17 |
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Balance at June 30,
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977 |
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|
812 |
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Total stockholders
equity
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Balance at beginning of year
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21,778 |
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22,417 |
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Net income
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1,572 |
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1,544 |
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Recognize mortgage servicing rights
at fair value
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4 |
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Dividends paid
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(1,411 |
) |
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(1,000 |
) |
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Other comprehensive income (loss)
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132 |
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(354 |
) |
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Total stockholders equity at
June 30,
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$22,075 |
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$22,607 |
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Comprehensive income
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|
|
|
|
|
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Net income
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$1,572 |
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$1,544 |
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Other comprehensive income (loss)
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|
132 |
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|
|
(354 |
) |
|
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Recognize mortgage servicing rights
at fair value
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4 |
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|
|
|
|
|
|
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Comprehensive income
|
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|
$1,708 |
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|
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$1,190 |
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The Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
5
Condensed Consolidated Statement of Cash Flows (unaudited)
GMAC LLC
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Six months ended June 30, ($ in millions) |
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2006 |
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2005 |
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Operating activities
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|
|
|
|
|
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Net cash used in operating
activities
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($4,471 |
) |
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($4,226 |
) |
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Investing activities
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|
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Purchases of available for sale
securities
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(11,416 |
) |
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(10,514 |
) |
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Proceeds from sales of available
for sale securities
|
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|
2,323 |
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|
2,614 |
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Proceeds from maturities of
available for sale securities
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|
7,912 |
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|
|
4,509 |
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|
Net increase in finance receivables
and loans
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|
(51,739 |
) |
|
|
(43,950 |
) |
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Proceeds from sales of finance
receivables and loans
|
|
|
63,595 |
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|
|
63,205 |
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Purchases of operating lease assets
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|
(9,070 |
) |
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|
(8,378 |
) |
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|
Disposals of operating lease assets
|
|
|
3,411 |
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|
|
3,156 |
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|
Change in notes receivable from
General Motors
|
|
|
(512 |
) |
|
|
549 |
|
|
|
Purchases of mortgage servicing
rights, net
|
|
|
(55 |
) |
|
|
(185 |
) |
|
|
Acquisitions of subsidiaries, net
of cash acquired
|
|
|
(324 |
) |
|
|
|
|
|
|
Proceeds from sale of business
units, net (a)
|
|
|
8,550 |
|
|
|
|
|
|
|
Settlement of residual support and
risk sharing obligations with GM (b)
|
|
|
1,074 |
|
|
|
|
|
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Other, net (c)
|
|
|
(585 |
) |
|
|
(1,534 |
) |
|
|
|
Net cash provided by investing
activities
|
|
|
13,164 |
|
|
|
9,472 |
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
Net change in short-term debt
|
|
|
(6,927 |
) |
|
|
(9,022 |
) |
|
|
Proceeds from issuance of long-term
debt
|
|
|
42,226 |
|
|
|
30,415 |
|
|
|
Repayments of long-term debt
|
|
|
(43,205 |
) |
|
|
(32,124 |
) |
|
|
Other financing activities
|
|
|
1,918 |
|
|
|
3,619 |
|
|
|
Dividends paid
|
|
|
(1,411 |
) |
|
|
(1,000 |
) |
|
|
|
Net cash used in financing
activities
|
|
|
(7,399 |
) |
|
|
(8,112 |
) |
|
|
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
97 |
|
|
|
(129 |
) |
|
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
|
1,391 |
|
|
|
(2,995 |
) |
|
|
Cash and cash equivalents at
beginning of year (d)
|
|
|
15,795 |
|
|
|
22,718 |
|
|
|
|
Cash and cash equivalents at
June 30,
|
|
|
$17,186 |
|
|
|
$19,723 |
|
|
|
|
|
|
(a) |
Includes proceeds from sale of GMAC Commercial Mortgage of
approximately $1.5 billion, proceeds from repayment of
intercompany loans with GMAC Commercial Mortgage of
approximately $7.3 billion, $250 of which was received in
preferred equity and net of cash transferred to buyer of
approximately $650. |
(b) |
Refer to Note 9 to the Condensed Consolidated Financial
Statements for a more detailed description. |
(c) |
Includes $491 and $778 for the six months ended June 30,
2006 and 2005, respectively, related to securities lending
transactions where cash collateral is received and a
corresponding liability is recorded, both of which are presented
in investing activities. |
(d) |
Includes $371 of cash and cash equivalents in GMAC Commercial
Mortgage classified as assets held for sale as of
December 31, 2005. |
The Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
6
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
Effective July 20, 2006, General Motors Acceptance
Corporation converted its form of organization from a Delaware
corporation to a Delaware limited liability company and changed
its name to GMAC LLC as contemplated by the
previously announced April 2, 2006 Purchase and Sale
Agreement among General Motors Corporation, GM Finance Co.
Holdings, Inc., FIM Holdings LLC, and General Motors Acceptance
Corporation. GMAC LLC (referred to herein as GMAC, we, our or
us) is a wholly owned subsidiary of General Motors Corporation
(General Motors or GM). The Condensed Consolidated Financial
Statements include our accounts and those of our majority-owned
subsidiaries, after eliminating intercompany balances and
transactions, as well as all variable interest entities in which
we are the primary beneficiary.
The Condensed Consolidated Financial Statements as of
June 30, 2006, and for the second quarter and six months
ended June 30, 2006 and 2005, are unaudited but, in
managements opinion, include all adjustments consisting of
normal recurring adjustments necessary for a fair presentation
of the results for the interim periods. Certain prior period
amounts have been reclassified to conform to the current period
presentation.
The interim period consolidated financial statements, including
the related notes, are condensed and are prepared in accordance
with accounting principles generally accepted in the United
States of America (GAAP) for interim reporting. These interim
period Condensed Consolidated Financial Statements should be
read in conjunction with our audited Consolidated Financial
Statements, which are included in our Annual Report on
Form 10-K for the year ended December 31, 2005, filed
with the United States Securities and Exchange Commission (SEC)
on March 28, 2006, and revised through a Current Report on
Form 8-K filing on
June 2, 2006, to reflect changes to our reporting segments
(collectively referred to herein as the 2005 Annual Report on
10-K).
On March 23, 2006, we sold approximately 78% of our equity
in GMAC Commercial Mortgage for approximately $1.5 billion
in cash. At the closing, GMAC Commercial Mortgage also repaid to
us approximately $7.3 billion of intercompany loans,
bringing our total cash proceeds to $8.8 billion. Prior to
March 23, 2006, GMAC Commercial Mortgages activity
and balances were fully consolidated in the Consolidated
Financial Statements. Subsequent to the sale on March 23,
2006, our remaining interest in GMAC Commercial Mortgage is
accounted for as an equity method investment. Effective with the
date of the sale, GMAC Commercial Mortgage changed its name to
Capmark Financial Group Inc. (Capmark).
As a result of the sale of Capmark, results of this entity are
now included in Note 10 to the Condensed Consolidated
Financial Statements (Segment Information) in Other. Prior to
the sale, GMAC Commercial Mortgage was identified as a
reportable operating segment under Statement of Financial
Accounting Standards No. 131, Disclosures about Segments
of an Enterprise and Related Information (SFAS 131). In
addition, beginning January 1, 2006, based on changes in
the organizational structure and management for the mortgage
operations, Residential Capital Corporation (ResCap) is
presented as a reportable operating segment. As a result, prior
year financial data has been changed to reflect the current
period presentation.
Change in Accounting Principle
On January 1, 2006, we adopted Statement of Financial
Accounting Standards No. 156, Accounting for Servicing
of Financial Assets (SFAS 156), which provides the
following: (1) revised guidance on when a servicing asset
and servicing liability should be recognized, (2) requires
all separately recognized servicing assets and liabilities to be
initially measured at fair value, if practicable,
(3) permits an entity to elect to measure servicing assets
and liabilities at fair value each reporting date and report
changes in fair value in earnings in the period in which the
changes occur, (4) upon initial adoption, permits a one
time reclassification of available-for-sale securities to
trading securities for securities which are identified as
offsetting an entitys exposure to changes in the fair
value of servicing assets or liabilities that a servicer elects
to subsequently measure at fair value and (5) requires
separate presentation of servicing assets and liabilities
subsequently measured at fair value in the balance sheet and
additional disclosures. We elected to subsequently measure
servicing assets and liabilities at fair value and report
changes in fair value in earnings in the period in which the
changes occur. In addition, we made a one-time reclassification
of $927 million of available for sale securities to trading
securities for those securities identified as offsetting our
exposure to changes in the fair value of servicing assets or
liabilities. The adoption of SFAS No. 156 resulted in
a $13 million reduction in the beginning of the year
retained earnings, net of tax, as a cumulative effect of change
in accounting principle. However, the impact to total
stockholders equity was a $4 million increase, net of
tax.
We define our classes of servicing rights based on both the
availability of market inputs and the manner in which we manage
the risks of our servicing assets and liabilities. We manage our
servicing rights at the reportable operating segment level. For
all servicing assets and liabilities recorded on our balance
sheet at January 1, 2006, the date of adoption, we
identified three classes of servicing rights: those
7
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
pertaining to residential mortgage in our ResCap reporting
segment, auto finance in our North American Operations reporting
segment and commercial mortgages. We have elected to measure our
residential mortgage servicing rights at fair value for each
reporting date and report changes in fair value in earnings
during the period in which the changes occur. At June 30,
2006, these assets were valued at $5.1 billion and recorded
separately on our Condensed Consolidated Balance Sheet. Refer to
Note 6 for further information.
For our servicing assets and liabilities related to our auto
finance and commercial mortgage classes of assets, we have
elected to continue to use the amortization method of
accounting. As a result of the sale of Capmark on March 23,
2006, the commercial mortgage servicing rights are no longer
recorded on our balance sheet at June 30, 2006. Our auto
finance servicing assets and liabilities at
June 30, 2006, totaled $18 million and
$24 million, respectively, and are recorded in other assets
and other liabilities, respectively, on our Condensed
Consolidated Balance Sheet.
Recently Issued Accounting Standards
Statement of Position 05-1 In September 2005
the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position 05-1, Accounting by Insurance
Enterprises for Deferred Acquisition Costs in Connection with
Modifications or Exchanges of Insurance Contracts
(SOP 05-1). SOP 05-1 provides guidance on accounting
for deferred acquisition costs on internal replacements of
insurance contracts. SOP 05-1 defines an internal
replacement and specifies the conditions that determine whether
the replacement contract is substantially or unsubstantially
changed from the replaced contract. An internal replacement
determined to result in a substantially changed contract should
be accounted for as an extinguishment of the replaced contract
and unamortized deferred acquisition costs and unearned revenue
liabilities of the replaced contract should no longer be
deferred. An internal replacement determined to result in an
unsubstantially changed contract should be accounted for as a
continuation of the replaced asset. SOP 05-01 introduces
the terms integrated and non-integrated contract features and
specifies that non-integrated features do not change the base
contract and are to be accounted for in a manner similar to a
separately issued contract. Integrated features are evaluated in
conjunction with the base contract. SOP 05-1 is effective
for internal replacements occurring in fiscal years beginning
after December 15, 2006. Management is assessing the
potential impact on our financial condition or results of
operations.
Statement of Financial Accounting Standards
No. 155 In February 2006 the Financial
Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 155, Accounting for Certain
Hybrid Financial Instruments an amendment of
FASB Statements No. 133 and 140 (SFAS 155).
This standard permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that
otherwise would require bifurcation. SFAS 155 allows an
entity to make an irrevocable election to measure such a hybrid
financial instrument at fair value on an
instrument-by-instrument basis. The standard eliminates the
prohibition on a QSPE from holding a derivative financial
instrument that pertains to a beneficial interest other than
another derivative financial instrument. SFAS 155 also
clarifies which interest-only and principal-only strips are not
subject to the requirements of SFAS 133, as well as
determines that concentrations of credit risk in the form of
subordination are not embedded derivatives. SFAS 155 is
effective for all financial instruments acquired or issued after
the beginning of the fiscal year that begins after
September 15, 2006. Management is assessing the potential
impact on our financial condition or results of operations.
FASB Staff Position
FIN 46(R)-6 In April 2006 the FASB issued
FIN 46(R)-6, Determining the Variability to Be
Considered in Applying FASB Interpretation No. 46(R)
which requires the variability of an entity to be analyzed based
on the design of the entity. The nature of and risks in the
entity, as well as the purpose for the entitys creation
are examined to determine the variability in applying
FIN 46(R). The variability is used in applying
FIN 46(R) to determine whether an entity is a variable
interest entity, which interests are variable interests in the
entity and who is the primary beneficiary of the variable
interest entity. This statement is applied prospectively and is
effective for all reporting periods after June 15, 2006.
Management is assessing the potential impact on our financial
condition or results of operations.
FASB Interpretation No. 48 In June 2006
the FASB issued Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (FIN 48) which supplements
Statement of Financial Accounting Standard No. 109 by
defining the confidence level that a tax position must meet in
order to be recognized in the financial statements. The
Interpretation requires that the tax effects of a position be
recognized only if it is
more-likely-than-not
to be sustained based solely on its technical merits as of the
reporting date. The
more-likely-than-not
threshold represents a positive assertion by management that a
company is entitled to the economic benefits of a tax position.
If a tax position is not considered
more-likely-than-not to
be sustained based solely on its technical merits, no benefits
of the position are to be recognized. Moreover, the
more-likely-than-not
threshold must continue to be met in each reporting period to
support continued recognition of a benefit. At adoption,
companies must adjust their financial statements to reflect only
those tax positions that are
more-likely-than-not to
be sustained as of the adoption date. Any necessary adjustment
would be recorded directly to retained earnings in the period of
adoption and reported as a change in accounting principle. This
Interpretation is effective as of the beginning of the first
fiscal year beginning after December 15, 2006. Management
is assessing the potential impact on our financial condition or
results of operations.
8
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
|
|
|
|
|
|
2 |
|
|
Sale of a
Controlling Interest in GMAC |
On April 2, 2006, GM and its wholly owned subsidiaries,
GMAC and GM Finance Co. Holdings Inc., entered into a definitive
agreement pursuant to which GM will sell a 51% controlling
interest in GMAC for a purchase price of approximately
$7.4 billion to FIM Holdings LLC, a consortium of investors
led by Cerberus Capital Management, L.P., a private investment
firm, which also includes Citigroup Inc., Aozora Bank Ltd. and a
subsidiary of The PNC Financial Services Group, Inc. as
consortium members (FIM Holdings). GM will retain a 49%
equity investment interest in GMAC. In addition, GM and the
consortium will invest $1.9 billion of cash in new GMAC
preferred equity, with $1.4 billion to be invested by GM
and $500 million to be invested by FIM Holdings. The
transaction is subject to a number of closing conditions
including U.S. and international regulatory and other
approvals. GM and GMAC expect to close the transaction in the
fourth quarter of 2006, but it is possible that delays in
obtaining such approvals or in satisfying other required
conditions could defer the closing until 2007.
Prior to consummation of the agreement, (i) certain assets
with respect to automotive leases and retail installment sales
contracts owned by us and our affiliates having a net book value
of approximately $4 billion will be dividended to GM,
(ii) GM will assume certain of our post-employment benefit
obligations, (iii) we will transfer to GM certain entities
which hold a fee interest in certain real properties,
(iv) we will pay dividends to GM in an amount up to the
amount of our net income prior to the acquisition, (v) GM
will repay certain indebtedness owing to us and specified
intercompany unsecured obligations owing to us shall be no
greater than $1.5 billion and (vi) we will make a
one-time distribution to GM of approximately $2.7 billion
of cash to reflect the increase in our equity value resulting
from the transfer of a portion of our net deferred tax
liabilities arising from our conversion and certain of our
subsidiaries conversion to limited liability company form.
The total value of the cash proceeds and distributions to GM
before its purchase of the preferred limited liability company
interests will be approximately $14 billion over three
years, comprised of the $7.4 billion purchase price, the
$4 billion of retained assets and the $2.7 billion
cash dividend.
As part of the transaction, GM and GMAC will enter into a number
of agreements that will require that we continue to allocate
capital to automotive financing consistent with historical
practices, thereby continuing to provide critical financing
support to a significant share of GMs global sales. While
we will retain the right to make individual credit decisions, we
will commit to fund a broad spectrum of customers and dealers
consistent with historical practice in the relevant
jurisdiction. Subject to our fulfillment of certain conditions,
GM will grant us exclusivity for 10 years for U.S.,
Canadian, and international GM-sponsored retail and wholesale
marketing incentives around the world, with the exception of
Saturn branded products.
As part of the agreement, GM will retain an option, for
10 years after the closing of the transaction, to
repurchase certain assets from us related to the Automotive
Finance operations of the North American Operations and
International Operations of GMAC, subject to certain conditions,
including that GMs credit ratings are investment grade or
are higher than our credit ratings. The call option price will
be calculated as the higher of (i) fair market value or
(ii) 9.5 times the consolidated net income of our
automotive finance operations in either the calendar year the
call option is exercised or the calendar year immediately
following the year the call option is exercised.
The agreement is subject to the satisfaction or waiver of
customary and other closing conditions, including, among other
things, (i) reasonable satisfaction by the members of the
purchaser, pursuant to an agreement with, or writing from, the
Pension Benefit Guaranty Corporation that, following the
closing, GMAC and its subsidiaries will not have any liability
with respect to the ERISA plans of GM, which writing was
received by FIM Holdings in July 2006, (ii) receipt of
ratings for our senior unsecured long-term indebtedness and the
ratings of ResCap, our wholly owned subsidiary, after giving
effect to the transactions contemplated by the agreement, of at
least BB and BBB- (or their respective equivalents),
respectively, and an A.M. Best rating for our significant
insurance subsidiaries of at least B++, (iii) that no
material adverse effect will have occurred with respect to our
business, financial condition or results of operations, which
includes any actual downgrading by any of the major rating
agencies of GMs unsecured long-term indebtedness rating
below CCC or its equivalent, (iv) receipt of required
regulatory approvals and licenses and (v) receipt of
certain legal opinions at closing. The agreement may be
terminated upon the occurrence of certain events, including the
failure to complete the transaction by March 31, 2007.
There can be no assurance that the sale transaction will be
completed or if it is completed, that the terms of the sale will
not be different from those set forth in the definitive
agreement.
9
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
The following table presents the components of other income,
which includes Capmark activity through March 23, 2006, the
date of sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Six Months |
|
|
|
|
|
Period ended June 30, ($ in millions) |
|
2006 | |
|
2005 | |
|
2006 | |
|
2005 | |
|
|
|
Interest on cash equivalents
|
|
|
178 |
|
|
|
69 |
|
|
|
297 |
|
|
|
168 |
|
|
|
Interest on restricted cash deposits
|
|
|
31 |
|
|
|
25 |
|
|
|
59 |
|
|
|
49 |
|
|
|
Real estate services
|
|
|
187 |
|
|
|
194 |
|
|
|
331 |
|
|
|
325 |
|
|
|
Interest and service fees on
transactions with GM (a)
|
|
|
147 |
|
|
|
123 |
|
|
|
294 |
|
|
|
233 |
|
|
|
Other interest revenue
|
|
|
128 |
|
|
|
101 |
|
|
|
249 |
|
|
|
195 |
|
|
|
Mortgage processing fees
|
|
|
37 |
|
|
|
106 |
|
|
|
106 |
|
|
|
198 |
|
|
|
Full service leasing fees
|
|
|
71 |
|
|
|
43 |
|
|
|
135 |
|
|
|
86 |
|
|
|
Late charges and other
administrative fees
|
|
|
41 |
|
|
|
39 |
|
|
|
82 |
|
|
|
81 |
|
|
|
Insurance service fees
|
|
|
28 |
|
|
|
38 |
|
|
|
57 |
|
|
|
76 |
|
|
|
Factoring commissions
|
|
|
15 |
|
|
|
18 |
|
|
|
30 |
|
|
|
36 |
|
|
|
Specialty lending fees
|
|
|
15 |
|
|
|
14 |
|
|
|
30 |
|
|
|
29 |
|
|
|
Fair value adjustment on certain
derivatives (b)
|
|
|
(14 |
) |
|
|
5 |
|
|
|
(22 |
) |
|
|
(3 |
) |
|
|
Other
|
|
|
139 |
|
|
|
237 |
|
|
|
370 |
|
|
|
469 |
|
|
|
|
Total other income
|
|
|
$1,003 |
|
|
|
$1,012 |
|
|
|
$2,018 |
|
|
|
$1,942 |
|
|
|
|
|
|
|
(a) |
Refer to Note 9 to the Condensed Consolidated Financial
Statements for a description of transactions with GM. |
|
(b) |
Refer to Note 8 to our Condensed Consolidated Financial
Statements for a description of derivative instruments and
hedging activities. |
|
|
|
|
|
|
|
|
4 |
|
|
Other Operating
Expenses |
The following table presents the components of other operating
expenses, which includes Capmark activity through March 23,
2006, the date of sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter | |
|
Six Months |
|
|
| |
|
|
Period ended June 30, ($ in millions) |
|
2006 | |
|
2005 | |
|
2006 | |
|
2005 | |
|
|
|
Insurance commissions
|
|
|
$211 |
|
|
|
$233 |
|
|
|
$454 |
|
|
|
$468 |
|
|
|
Technology and communications
expense
|
|
|
134 |
|
|
|
143 |
|
|
|
265 |
|
|
|
282 |
|
|
|
Professional services
|
|
|
111 |
|
|
|
100 |
|
|
|
216 |
|
|
|
205 |
|
|
|
Advertising and marketing
|
|
|
92 |
|
|
|
108 |
|
|
|
176 |
|
|
|
211 |
|
|
|
Premises and equipment depreciation
|
|
|
62 |
|
|
|
67 |
|
|
|
126 |
|
|
|
140 |
|
|
|
Full service leasing vehicle
maintenance costs
|
|
|
63 |
|
|
|
58 |
|
|
|
123 |
|
|
|
119 |
|
|
|
Auto remarketing and repossession
|
|
|
75 |
|
|
|
51 |
|
|
|
122 |
|
|
|
80 |
|
|
|
Rent and storage
|
|
|
54 |
|
|
|
65 |
|
|
|
121 |
|
|
|
132 |
|
|
|
Lease and loan administration
|
|
|
53 |
|
|
|
50 |
|
|
|
107 |
|
|
|
93 |
|
|
|
Amortization of intangible assets
|
|
|
5 |
|
|
|
3 |
|
|
|
12 |
|
|
|
6 |
|
|
|
Operating lease disposal loss (gain)
|
|
|
21 |
|
|
|
(118 |
) |
|
|
(28 |
) |
|
|
(214 |
) |
|
|
Other
|
|
|
290 |
|
|
|
219 |
|
|
|
650 |
|
|
|
384 |
|
|
|
|
Total other operating expenses
|
|
|
$1,171 |
|
|
|
$979 |
|
|
|
$2,344 |
|
|
|
$1,906 |
|
|
|
|
10
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
|
|
|
|
|
|
|
5 |
|
|
Finance
Receivables and Loans |
The composition of finance receivables and loans outstanding,
which excludes Capmark, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2006 | |
|
December 31, 2005 | |
|
|
| |
|
| |
($ in millions) |
|
Domestic | |
|
Foreign | |
|
Total | |
|
Domestic | |
|
Foreign | |
|
Total | |
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail automotive
|
|
|
$43,749 |
|
|
|
$18,553 |
|
|
|
$62,302 |
|
|
|
$53,789 |
|
|
|
$17,663 |
|
|
|
$71,452 |
|
|
Residential mortgages
|
|
|
68,640 |
|
|
|
3,794 |
|
|
|
72,434 |
|
|
|
65,040 |
|
|
|
3,919 |
|
|
|
68,959 |
|
|
Total consumer
|
|
|
112,389 |
|
|
|
22,347 |
|
|
|
134,736 |
|
|
|
118,829 |
|
|
|
21,582 |
|
|
|
140,411 |
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
|
15,122 |
|
|
|
8,303 |
|
|
|
23,425 |
|
|
|
13,202 |
|
|
|
7,372 |
|
|
|
20,574 |
|
|
|
Leasing and lease financing
|
|
|
396 |
|
|
|
765 |
|
|
|
1,161 |
|
|
|
461 |
|
|
|
767 |
|
|
|
1,228 |
|
|
|
Term loans to dealers and other
|
|
|
2,091 |
|
|
|
735 |
|
|
|
2,826 |
|
|
|
2,397 |
|
|
|
719 |
|
|
|
3,116 |
|
|
Commercial and industrial
|
|
|
14,961 |
|
|
|
2,148 |
|
|
|
17,109 |
|
|
|
14,908 |
|
|
|
2,028 |
|
|
|
16,936 |
|
|
Real estate construction and other
|
|
|
2,907 |
|
|
|
140 |
|
|
|
3,047 |
|
|
|
2,601 |
|
|
|
119 |
|
|
|
2,720 |
|
|
Total commercial
|
|
|
35,477 |
|
|
|
12,091 |
|
|
|
47,568 |
|
|
|
33,569 |
|
|
|
11,005 |
|
|
|
44,574 |
|
|
Total finance receivables and
loans (a)
|
|
|
$147,866 |
|
|
|
$34,438 |
|
|
|
$182,304 |
|
|
|
$152,398 |
|
|
|
$32,587 |
|
|
|
$184,985 |
|
|
|
|
(a) |
Net of unearned income of $5,236 and $5,868 as of June 30,
2006, and December 31, 2005, respectively. |
The following table, which excludes Capmark activity, presents
an analysis of the activity as of June 30 in the allowance
for credit losses on finance receivables and loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
|
|
|
|
|
Second quarter ended June 30, ($ in millions) |
|
Consumer |
|
Commercial |
|
Total |
|
Consumer |
|
Commercial |
|
Total |
|
|
|
Allowance at beginning of period
|
|
|
$2,542 |
|
|
|
$368 |
|
|
|
$2,910 |
|
|
|
$2,909 |
|
|
|
$463 |
|
|
|
$3,372 |
|
|
|
|
Provision for credit losses (a)
|
|
|
258 |
|
|
|
30 |
|
|
|
288 |
|
|
|
174 |
|
|
|
21 |
|
|
|
195 |
|
|
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(320 |
) |
|
|
(24 |
) |
|
|
(344 |
) |
|
|
(323 |
) |
|
|
(16 |
) |
|
|
(339 |
) |
|
|
|
|
Foreign
|
|
|
(39 |
) |
|
|
(3 |
) |
|
|
(42 |
) |
|
|
(52 |
) |
|
|
(8 |
) |
|
|
(60 |
) |
|
|
|
|
Total charge-offs
|
|
|
(359 |
) |
|
|
(27 |
) |
|
|
(386 |
) |
|
|
(375 |
) |
|
|
(24 |
) |
|
|
(399 |
) |
|
|
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
50 |
|
|
|
2 |
|
|
|
52 |
|
|
|
32 |
|
|
|
2 |
|
|
|
34 |
|
|
|
|
|
Foreign
|
|
|
11 |
|
|
|
|
|
|
|
11 |
|
|
|
14 |
|
|
|
1 |
|
|
|
15 |
|
|
|
|
|
Total recoveries
|
|
|
61 |
|
|
|
2 |
|
|
|
63 |
|
|
|
46 |
|
|
|
3 |
|
|
|
49 |
|
|
|
|
|
Net charge-offs
|
|
|
(298 |
) |
|
|
(25 |
) |
|
|
(323 |
) |
|
|
(329 |
) |
|
|
(21 |
) |
|
|
(350 |
) |
|
|
|
Impacts of foreign currency
translation
|
|
|
6 |
|
|
|
1 |
|
|
|
7 |
|
|
|
(1 |
) |
|
|
(13 |
) |
|
|
(14 |
) |
|
|
|
Securitization activity
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(3 |
) |
|
|
|
Allowance at June 30
|
|
|
$2,509 |
|
|
|
$374 |
|
|
|
$2,883 |
|
|
|
$2,752 |
|
|
|
$448 |
|
|
|
$3,200 |
|
|
|
|
|
|
(a) |
Capmark activity excluded in the commercial column of $0 and $6
at June 30, 2006 and 2005, respectively. Refer to
Note 1 to the Condensed Consolidated Financial Statements
for further details. |
11
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
|
|
|
|
|
Six months ended June 30, ($ in millions) |
|
Consumer |
|
Commercial |
|
Total |
|
Consumer |
|
Commercial |
|
Total |
|
|
|
Allowance at beginning of period
|
|
|
$2,683 |
|
|
|
$433 |
|
|
|
$3,116 |
|
|
|
$2,951 |
|
|
|
$464 |
|
|
|
$3,415 |
|
|
|
|
Provision for credit losses (a)
|
|
|
415 |
|
|
|
5 |
|
|
|
420 |
|
|
|
479 |
|
|
|
31 |
|
|
|
510 |
|
|
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(641 |
) |
|
|
(70 |
) |
|
|
(711 |
) |
|
|
(669 |
) |
|
|
(23 |
) |
|
|
(692 |
) |
|
|
|
|
Foreign
|
|
|
(85 |
) |
|
|
(4 |
) |
|
|
(89 |
) |
|
|
(102 |
) |
|
|
(9 |
) |
|
|
(111 |
) |
|
|
|
|
Total charge-offs
|
|
|
(726 |
) |
|
|
(74 |
) |
|
|
(800 |
) |
|
|
(771 |
) |
|
|
(32 |
) |
|
|
(803 |
) |
|
|
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
103 |
|
|
|
6 |
|
|
|
109 |
|
|
|
79 |
|
|
|
4 |
|
|
|
83 |
|
|
|
|
|
Foreign
|
|
|
24 |
|
|
|
3 |
|
|
|
27 |
|
|
|
28 |
|
|
|
1 |
|
|
|
29 |
|
|
|
|
|
Total recoveries
|
|
|
127 |
|
|
|
9 |
|
|
|
136 |
|
|
|
107 |
|
|
|
5 |
|
|
|
112 |
|
|
|
|
|
Net charge-offs
|
|
|
(599 |
) |
|
|
(65 |
) |
|
|
(664 |
) |
|
|
(664 |
) |
|
|
(27 |
) |
|
|
(691 |
) |
|
|
|
Impacts of foreign currency
translation
|
|
|
8 |
|
|
|
1 |
|
|
|
9 |
|
|
|
(12 |
) |
|
|
(16 |
) |
|
|
(28 |
) |
|
|
|
Securitization activity
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(6 |
) |
|
|
|
Allowance at June 30
|
|
|
$2,509 |
|
|
|
$374 |
|
|
|
$2,883 |
|
|
|
$2,752 |
|
|
|
$448 |
|
|
|
$3,200 |
|
|
|
|
|
|
(a) |
Capmark activity excluded in the commercial column of $3 and $20
at June 30, 2006 and 2005, respectively. Refer to
Note 1 to the Condensed Consolidated Financial Statements
for further details. |
|
|
|
|
|
|
|
6 |
|
|
Mortgage
Servicing Rights |
The following table summarizes 2006 activity related to mortgage
servicing rights (MSRs) carried at fair value.
|
|
|
|
|
|
|
|
($ in millions) |
|
Total |
|
|
|
Estimated fair value at
January 1, 2006
|
|
$ |
4,021 |
|
|
|
Additions obtained from sales of
financial assets
|
|
|
770 |
|
|
|
Additions from purchases of
servicing rights
|
|
|
5 |
|
|
|
Changes in fair value:
|
|
|
|
|
|
|
|
Due to changes in valuation inputs
or assumptions used in the valuation model
|
|
|
654 |
|
|
|
|
Other changes in fair value
|
|
|
(357 |
) |
|
|
|
Estimated fair value at
June 30, 2006
|
|
$ |
5,093 |
|
|
|
|
Changes in fair value due to changes in valuation inputs or
assumptions used in the valuation models include all changes due
to a revaluation by a model or by a benchmarking exercise. This
line item also includes changes in fair value due to a change in
valuation assumptions and/or model calculations. Other changes
in fair value primarily include the accretion of the present
value of the discount related to forecasted cash flows and the
economic run-off of the portfolio. Other changes that affect the
balance primarily include foreign currency adjustments and the
extinguishment of mortgage servicing rights related to clean-up
calls of securitization transactions.
The following are key assumptions used by us in valuing our MSRs:
|
|
|
|
|
|
|
June 30, 2006 |
|
Total |
|
|
|
Range of prepayment speeds
|
|
|
7.0 - 38.5% |
|
|
|
Range of discount rates
|
|
|
8.0 - 14.0% |
|
|
|
|
Our servicing rights primary risk is interest rate risk
and the resulting impact on prepayments. A significant decline
in interest rates could lead to higher than expected
prepayments, which could reduce the value of the mortgage
servicing rights. We economically hedge the income statement
impact of these risks with both derivative and non-derivative
financial instruments. These instruments include interest rate
swaps, caps and floors, options to purchase these items, futures
and forward contracts and/or purchasing or selling
U.S. Treasury and principal-only securities. At
June 30, 2006, the fair value of derivative financial
instruments and non-derivative financial instruments used to
mitigate these risks amounted to a liability of $32 million and
an asset of $1.9 billion, respectively. The change in the
fair value of the derivative financial instruments amounted to a
loss of $656 million for the six months ended June 30,
2006, and is included in net servicing asset valuation and hedge
activities in the Condensed Consolidated Statement of Income.
12
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
The components of servicing fees were as follows for the six
months ended June 30, 2006:
|
|
|
|
|
|
|
($ in millions) |
|
Total |
|
|
|
Contractual servicing fees (net of
guarantee fees and including subservicing)
|
|
|
$640 |
|
|
|
Late fees
|
|
|
62 |
|
|
|
Ancillary fees
|
|
|
59 |
|
|
|
|
Total
|
|
|
$761 |
|
|
|
|
At June 30, 2006, we pledged MSRs of $2.5 billion as
collateral for borrowings.
The following table, which includes Capmark activity, summarizes
activity and related amortization of MSRs which prior to
January 1, 2006 were carried at lower of cost or fair value.
|
|
|
|
|
|
|
($ in millions) |
|
2005 |
|
|
|
Balance at January 1, 2005
|
|
|
$4,819 |
|
|
|
Originations and purchases, net of
sales
|
|
|
784 |
|
|
|
Amortization
|
|
|
(541 |
) |
|
|
SFAS 133 hedge valuation
adjustments
|
|
|
(338 |
) |
|
|
Other than temporary impairment
|
|
|
(21 |
) |
|
|
|
Balance at June 30, 2005
|
|
|
4,703 |
|
|
|
Valuation allowance
|
|
|
(867 |
) |
|
|
|
Carrying value at June 30, 2005
|
|
|
$3,836 |
|
|
|
|
Estimated fair value at
June 30, 2005
|
|
|
$3,925 |
|
|
|
|
The following table summarizes the change in the valuation
allowance for mortgage servicing rights.
|
|
|
|
|
|
|
($ in millions) |
|
2005 |
|
|
|
Valuation allowance at
January 1, 2005
|
|
|
$929 |
|
|
|
Deductions (a)
|
|
|
(41 |
) |
|
|
Other than temporary impairment
|
|
|
(21 |
) |
|
|
|
Valuation allowance at
June 30, 2005
|
|
|
$867 |
|
|
|
|
|
|
|
(a) |
Changes to the valuation allowance are reflected as a component
of amortization and impairment of servicing rights. |
|
For a description of MSRs and the related hedging strategy,
refer to Notes 1 and 10 to our 2005 Annual Report on
Form 10-K.
13
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
The presentation of debt in the following table, which excludes
Capmark balances, is classified between domestic and foreign
based on the location of the office recording the transaction.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2006 | |
|
December 31, 2005 | |
|
|
| |
|
| |
($ in millions) |
|
Domestic | |
|
Foreign | |
|
Total | |
|
Domestic | |
|
Foreign | |
|
Total | |
| |
Short-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
$283 |
|
|
|
$567 |
|
|
|
$850 |
|
|
|
$227 |
|
|
|
$297 |
|
|
|
$524 |
|
|
Demand notes
|
|
|
5,325 |
|
|
|
120 |
|
|
|
5,445 |
|
|
|
5,928 |
|
|
|
119 |
|
|
|
6,047 |
|
|
Bank loans and overdrafts
|
|
|
1,023 |
|
|
|
4,379 |
|
|
|
5,402 |
|
|
|
1,165 |
|
|
|
5,487 |
|
|
|
6,652 |
|
|
Repurchase agreements and
other (a)
|
|
|
19,727 |
|
|
|
4,552 |
|
|
|
24,279 |
|
|
|
22,330 |
|
|
|
5,954 |
|
|
|
28,284 |
|
|
Total short-term debt
|
|
|
26,358 |
|
|
|
9,618 |
|
|
|
35,976 |
|
|
|
29,650 |
|
|
|
11,857 |
|
|
|
41,507 |
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior indebtedness:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within one year
|
|
|
29,409 |
|
|
|
12,722 |
|
|
|
42,131 |
|
|
|
31,286 |
|
|
|
10,443 |
|
|
|
41,729 |
|
|
|
Due after one year
|
|
|
145,369 |
|
|
|
25,499 |
|
|
|
170,868 |
|
|
|
147,307 |
|
|
|
23,862 |
|
|
|
171,169 |
|
|
Total long-term debt
|
|
|
174,778 |
|
|
|
38,221 |
|
|
|
212,999 |
|
|
|
178,593 |
|
|
|
34,305 |
|
|
|
212,898 |
|
Fair value adjustment (b)
|
|
|
(1,176 |
) |
|
|
(21 |
) |
|
|
(1,197 |
) |
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
Total debt
|
|
|
$199,960 |
|
|
|
$47,818 |
|
|
|
$247,778 |
|
|
|
$208,243 |
|
|
|
$46,164 |
|
|
|
$254,407 |
|
|
|
|
(a) |
Repurchase agreements consist of secured financing arrangements
with third parties at our mortgage operations. Other primarily
includes non-bank secured borrowings, as well as Notes payable
to GM. Refer to Note 9 to the Condensed Consolidated
Financial Statements for further details. |
(b) |
To adjust designated fixed rate debt to fair value in accordance
with SFAS 133. |
The following summarizes assets that are restricted as
collateral for the payment of the related debt obligation
primarily arising from securitization transactions accounted for
as secured borrowings and repurchase agreements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2006 |
|
December 31, 2005 |
|
|
|
|
|
|
|
|
|
Related |
|
|
|
Related |
|
|
|
|
secured |
|
|
|
secured |
($ in millions) |
|
Assets |
|
debt (a) |
|
Assets |
|
debt (a) |
|
Loans held for sale
|
|
|
$15,701 |
|
|
|
$13,187 |
|
|
|
$16,147 |
|
|
|
$12,647 |
|
Mortgage assets held for investment
and lending receivables
|
|
|
83,544 |
|
|
|
71,256 |
|
|
|
78,820 |
|
|
|
71,083 |
|
Retail automotive finance
receivables
|
|
|
18,837 |
|
|
|
17,138 |
|
|
|
20,427 |
|
|
|
18,888 |
|
Wholesale automotive finance
receivables
|
|
|
472 |
|
|
|
337 |
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
3,002 |
|
|
|
3,955 |
|
|
|
3,631 |
|
|
|
4,205 |
|
Investment in operating leases, net
|
|
|
18,204 |
|
|
|
15,839 |
|
|
|
13,136 |
|
|
|
11,707 |
|
Real estate investments and other
assets
|
|
|
5,824 |
|
|
|
3,233 |
|
|
|
4,771 |
|
|
|
2,608 |
|
|
|
Total
|
|
|
$145,584 |
|
|
|
$124,945 |
|
|
|
$136,932 |
|
|
|
$121,138 |
|
|
|
|
(a) |
Included as part of secured debt are repurchase agreements of
$9,647 and $9,897 where we have pledged assets, reflected as
investment securities as collateral for approximately the same
amount of debt at June 30, 2006, and December 31,
2005, respectively. |
14
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
Liquidity Facilities
Liquidity facilities represent additional funding sources, if
required. The financial institutions providing the uncommitted
facilities are not legally obligated to fund such amounts. The
following table summarizes the liquidity facilities maintained
by us, excluding Capmark.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed |
|
Uncommitted |
|
Total liquidity |
|
Unused liquidity |
|
|
facilities |
|
facilities |
|
facilities |
|
facilities |
|
|
|
|
|
|
|
|
|
|
|
Jun 30, |
|
Dec 31, |
|
Jun 30, |
|
Dec 31, |
|
Jun 30, |
|
Dec 31, |
|
Jun 30, |
|
Dec 31, |
($ in billions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Automotive operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated multi-currency global
credit facility (a)
|
|
|
$7.6 |
|
|
|
$7.4 |
|
|
|
$ |
|
|
|
$ |
|
|
|
$7.6 |
|
|
|
$7.4 |
|
|
|
$7.6 |
|
|
|
$7.4 |
|
Mortgage operations (b)
|
|
|
3.9 |
|
|
|
3.9 |
|
|
|
0.9 |
|
|
|
0.9 |
|
|
|
4.8 |
|
|
|
4.8 |
|
|
|
2.5 |
|
|
|
2.2 |
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. asset-backed commercial
paper liquidity and receivables facilities (c)
|
|
|
21.3 |
|
|
|
21.5 |
|
|
|
|
|
|
|
|
|
|
|
21.3 |
|
|
|
21.5 |
|
|
|
21.3 |
|
|
|
21.5 |
|
|
Other foreign facilities (d)
|
|
|
2.5 |
|
|
|
2.9 |
|
|
|
8.2 |
|
|
|
7.5 |
|
|
|
10.7 |
|
|
|
10.4 |
|
|
|
2.1 |
|
|
|
1.7 |
|
|
Total bank liquidity facilities
|
|
|
35.3 |
|
|
|
35.7 |
|
|
|
9.1 |
|
|
|
8.4 |
|
|
|
44.4 |
|
|
|
44.1 |
|
|
|
33.5 |
|
|
|
32.8 |
|
|
Secured funding facilities (e)
|
|
|
109.3 |
|
|
|
114.9 |
|
|
|
|
|
|
|
|
|
|
|
109.3 |
|
|
|
114.9 |
|
|
|
67.5 |
|
|
|
79.1 |
|
|
Total
|
|
|
$144.6 |
|
|
|
$150.6 |
|
|
|
$9.1 |
|
|
|
$8.4 |
|
|
|
$153.7 |
|
|
|
$159.0 |
|
|
|
$101.0 |
|
|
|
$111.9 |
|
|
|
|
(a) |
The entire $7.6 is available for use in the U.S., $0.8 is
available for use by GMAC (UK) plc and $0.8 is available for use
by GMAC International Finance B.V. in Europe. |
(b) |
In July 2005 ResCap closed a $3.5 syndication of its bank
facilities, consisting of a $1.75 syndication term loan, a $0.9
syndication line of credit committed through July 2008 and a
$0.9 syndicated line of credit committed through July 2007. |
(c) |
Relates to New Center Asset Trust (NCAT) and Mortgage Interest
Networking Trust (MINT), which are special purpose entities
administered by us for the purpose of funding assets as part of
our securitization and mortgage warehouse funding programs.
These entities fund assets primarily through the issuance of
asset-backed commercial paper and represent an important source
of liquidity to us. At June 30, 2006, NCAT had commercial
paper outstanding of $11.8, which is not consolidated in the
Condensed Consolidated Balance Sheet. At June 30, 2006,
MINT had commercial paper outstanding of $1.9, which is
reflected as secured debt in the Condensed Consolidated Balance
Sheet. |
(d) |
Consists primarily of credit facilities supporting operations in
Canada, Europe, Latin America and Asia-Pacific. |
(e) |
Consists of committed and uncommitted secured funding facilities
with third parties, including commitments with third-party
asset-backed commercial paper conduits, as well as forward flow
sale agreements with third parties and repurchase facilities.
Amounts include five year commitments that we entered into in
2005 with remaining capacity to sell up to $48 of retail
automotive receivables to a third-party purchaser through June
2010. |
The syndicated multi-currency global credit facility includes a
$4.35 billion
five-year facility
(expires June 2008) and a $3.25 billion
364-day facility
(expires June 2007). In the event that a public announcement is
made by GMAC or GM that the acquisition as defined in the
current report on
Form 8-K filed by
GMAC on April 3, 2006, will not be consummated or that such
transaction has otherwise been terminated, $1.51 billion of
the 364-day facility
may be terminated by the lenders, and the remaining
$1.74 billion will be transferred to the NCAT secured
committed facility. Provided that such announcement has not been
made, the facility also includes a term out option, which if
exercised by us prior to expiration, carries a one-year term.
Additionally, a leverage covenant in the liquidity facilities
and certain other funding facilities restricts the ratio of
consolidated unsecured debt to total stockholders equity
to no greater than 11.0:1, under certain conditions. More
specifically, the covenant is only applicable on the last day of
any fiscal quarter (other than the fiscal quarter during which a
change in rating occurs) during such times that we have senior
unsecured long-term debt outstanding, without third-party
enhancement, which is rated BBB+ or less (by Standard &
Poors), or Baa1 or less (by Moodys). Our leverage
ratio covenant was 6.8:1 at June 30, 2006, and we are,
therefore, in compliance with this covenant. The leverage
covenant calculation excludes from debt those securitization
transactions accounted for as on-balance sheet secured
financings.
15
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
|
|
|
|
|
|
8 |
|
|
Derivative
Instruments and Hedging Activities |
We enter into interest rate and foreign currency futures,
forwards, options and swaps in connection with our market risk
management activities. In accordance with SFAS 133, as
amended, we record derivative financial instruments on the
balance sheet as assets or liabilities at fair value. Changes in
fair value are accounted for depending on the use of the
derivative financial instrument and whether it qualifies for
hedge accounting treatment. Refer to our 2005 Annual Report on
Form 10-K for a
more detailed description of our use of and accounting for
derivative financial instruments.
The following table, which includes Capmark activity through
March 23, 2006, the date of sale, summarizes the pre-tax
earnings effect for each type of accounting hedge
classification, segregated by the asset or liability being
hedged.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Six Months |
|
|
Period ended June 30, |
|
|
|
|
|
|
($ in millions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Income Statement Classification |
|
Fair value hedge ineffectiveness
gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt obligations
|
|
|
($19 |
) |
|
|
$39 |
|
|
|
($44 |
) |
|
|
$34 |
|
|
Interest and discount expense
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
9 |
|
|
Servicing asset valuation and hedge
activities, net
|
|
Loans held for sale
|
|
|
1 |
|
|
|
(14 |
) |
|
|
1 |
|
|
|
(15 |
) |
|
Gain on sale of mortgage and
automotive loans, net
|
Cash flow hedge ineffectiveness
gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt obligations
|
|
|
|
|
|
|
(5 |
) |
|
|
1 |
|
|
|
(2 |
) |
|
Interest and discount expense
|
Economic hedge change in fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance sheet securitization
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Finance operations
|
|
|
(13 |
) |
|
|
5 |
|
|
|
(21 |
) |
|
|
(3 |
) |
|
Other income
|
|
|
Mortgage operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
Other Income
|
|
Foreign currency debt (a)
|
|
|
6 |
|
|
|
(71 |
) |
|
|
58 |
|
|
|
(161 |
) |
|
Interest and discount expense
|
|
Loans held for sale or investment
|
|
|
48 |
|
|
|
(94 |
) |
|
|
158 |
|
|
|
(40 |
) |
|
Gain on sale of mortgage and
automotive loans, net
|
|
Mortgage servicing rights
|
|
|
(275 |
) |
|
|
75 |
|
|
|
(656 |
) |
|
|
39 |
|
|
Servicing asset valuation and hedge
activities, net
|
|
Mortgage related securities
|
|
|
(23 |
) |
|
|
9 |
|
|
|
(30 |
) |
|
|
(34 |
) |
|
Investment income
|
|
Other
|
|
|
10 |
|
|
|
(30 |
) |
|
|
27 |
|
|
|
(18 |
) |
|
Other income
|
|
|
|
Total loss
|
|
|
($265 |
) |
|
|
($50 |
) |
|
|
($506 |
) |
|
|
($190 |
) |
|
|
|
|
|
|
(a) |
Amount represents the difference between the changes in the fair
values of the currency swap, net of the revaluation of the
related foreign denominated debt. |
|
In addition, net gains on fair value hedges excluded from
assessment of effectiveness totaled $0 million and
$6 million for the second quarter of 2006 and 2005,
respectively, and $0 million and $46 million for the
six months ended 2006 and 2005, respectively.
|
|
|
|
|
|
|
9 |
|
|
Transactions
with Affiliates |
As a wholly owned subsidiary, we enter into various operating
and financing arrangements with our parent GM. A master
intercompany operating agreement governs the nature of these
transactions to ensure that they are done on an
arms-length basis, in accordance with commercially
reasonable standards and in our best interest as a diversified
financial services company. In addition, GM and we agree that
our total stockholders equity, as reflected in our
consolidated financial statements at the end of any quarter,
will be maintained at a commercially reasonable level
appropriate to support the amount, quality and mix of our assets.
16
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
Balance Sheet
A summary of the balance sheet effect of transactions with GM
and affiliated companies is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
($ in millions) |
|
2006 |
|
2005 |
|
Assets:
|
|
|
|
|
|
|
|
|
Finance receivables and loans, net
of unearned income (a)
|
|
|
|
|
|
|
|
|
|
Wholesale auto financing
|
|
|
$995 |
|
|
|
$1,159 |
|
|
Term loans to dealers
|
|
|
185 |
|
|
|
207 |
|
Investment in operating leases, net
(b)
|
|
|
305 |
|
|
|
286 |
|
Notes receivable from GM (c)
|
|
|
5,140 |
|
|
|
4,565 |
|
Other assets
|
|
|
|
|
|
|
|
|
|
Real estate synthetic lease (d)
|
|
|
1,028 |
|
|
|
1,005 |
|
|
Receivable related to taxes (due
from GM) (e)
|
|
|
708 |
|
|
|
690 |
|
Liabilities:
|
|
|
|
|
|
|
|
|
Unsecured debt
|
|
|
|
|
|
|
|
|
|
Notes payable to GM
|
|
|
1,129 |
|
|
|
1,190 |
|
Accrued expenses and liabilities (f)
|
|
|
|
|
|
|
|
|
|
Wholesale payable
|
|
|
703 |
|
|
|
802 |
|
|
Subvention receivables (rate and
residual support)
|
|
|
(428 |
) |
|
|
(133 |
) |
|
Insurance premium and contract
receivable, net
|
|
|
(61 |
) |
|
|
(81 |
) |
|
Lease pull ahead receivable
|
|
|
(106 |
) |
|
|
(189 |
) |
|
Other payable (receivable)
|
|
|
39 |
|
|
|
(246 |
) |
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
Dividends paid (g)
|
|
|
1,411 |
|
|
|
2,500 |
|
|
|
|
|
(a) |
Represents wholesale financing and term loans to certain
dealerships wholly owned by GM or in which GM has a controlling
interest. All of these amounts are included in finance
receivables and loans. |
|
(b) |
Includes net balance of buildings and other equipment classified
as operating lease assets that are leased to GM affiliated
entities. |
|
(c) |
Includes borrowing arrangements with GM Opel and GM of Canada
and arrangements related to our funding of GM company-owned
vehicles, rental car vehicles awaiting sale at auction, our
funding of the sale of GM vehicles through the use of overseas
distributors and amounts related to a GM trade supplier finance
program. In addition, we provide wholesale financing to GM for
vehicles in which GM retains title while the vehicles are
consigned to us or dealers in the UK. The financing to GM
remains outstanding until the title is transferred to the
dealers. The amount of financing provided to GM under this
arrangement varies based on inventory levels. In May 2006 GMAC
recorded a note receivable from GM in the amount of
$1.35 billion related to the settlement between GM and GMAC
of residual support and risk sharing liabilities as of
April 30, 2006, as well as to fund estimated residual
support at lease inception pursuant to new up-front payment
terms for residual support which began on May 1, 2006. This
note is expected to be paid immediately prior to the closing of
the GMAC majority sale transaction. |
|
(d) |
During 2000 we entered into a 16-year lease arrangement with GM,
under which we agreed to fund and capitalize improvements to
three Michigan properties leased by GM totaling
$1.2 billion. In 2004 the lease arrangement was increased
to $1.3 billion. The total construction advances as of
June 30, 2006, and December 31, 2005, were $997 and
$971, respectively. It is anticipated that prior to the closing
of the GMAC majority sale transaction, GMAC will dividend the
properties back to GM at the then current net book value. The
lease arrangement will then be terminated and no further lease
payments or advances will be made. |
|
(e) |
At June 30, 2006 we carried an intercompany tax receivable from
GM of $708 million. This receivable is expected to be paid
immediately prior to the closing of the GMAC majority sale
transaction. The receivable is comprised of federal net
operating loss carryforwards of $629, charitable contributions
carryforwards of $12 and foreign tax credit carryforwards of
$67. We believe that the intercompany tax receivable is
realizable as GM has determined that it is more likely than not
that the tax attributes will be utilized in the remaining
carryforward period. |
|
(f) |
Includes (receivables) payables from GM as follows: wholesale
settlements payable to GM, subvention receivables due from GM
and notes payable due from GM, which are included in accrued
expenses, and other liabilities and debt, respectively. |
|
(g) |
The 2005 amount represents dividends of $500 million in
each of the first three quarters and $1.0 billion in the
fourth quarter. The 2006 amount represents dividends of
$1.4 billion in the second quarter. |
|
17
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
Retail and lease contracts acquired by us that included rate and
residual subvention from GM, payable directly or indirectly to
GM dealers as a percent of total new retail and lease contracts
acquired, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
|
2006 |
|
2005 |
|
|
|
GM and affiliates subvented
contracts acquired:
|
|
|
|
|
|
|
|
|
|
|
|
North American operations
|
|
|
89 |
% |
|
|
76 |
% |
|
|
|
International operations
|
|
|
57 |
% |
|
|
59 |
% |
|
|
|
GM also provides payment guarantees on certain commercial assets
we have outstanding with certain third-party customers. As of
June 30, 2006, and December 31, 2005, commercial
obligations guaranteed by GM were $175 million and
$934 million, respectively. In addition, we have a
consignment arrangement with GM for commercial inventories in
Europe. As of June 30, 2006, and
December 31, 2005, commercial inventories related to
this arrangement were $338 million and $303 million,
respectively, and are reflected in Other assets in the Condensed
Consolidated Balance Sheet.
Income Statement
A summary of the income statement effect of transactions with GM
and affiliated companies is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Six Months |
|
|
|
|
|
|
|
|
|
Period ended June 30, ($ in millions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
Net financing revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM and affiliates lease residual
value support (a)
|
|
|
$208 |
|
|
|
$130 |
|
|
|
$375 |
|
|
|
$233 |
|
|
|
|
Wholesale subvention and service
fees from GM
|
|
|
45 |
|
|
|
58 |
|
|
|
88 |
|
|
|
111 |
|
|
|
|
Interest paid on loans from GM
|
|
|
(10 |
) |
|
|
(10 |
) |
|
|
(27 |
) |
|
|
(19 |
) |
|
|
|
Consumer lease payments from
GM (b)
|
|
|
21 |
|
|
|
78 |
|
|
|
61 |
|
|
|
112 |
|
|
|
|
Insurance premiums earned from GM
|
|
|
77 |
|
|
|
99 |
|
|
|
157 |
|
|
|
203 |
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on notes receivable from
GM and affiliates
|
|
|
67 |
|
|
|
55 |
|
|
|
136 |
|
|
|
106 |
|
|
|
|
Interest on wholesale
settlements (c)
|
|
|
49 |
|
|
|
36 |
|
|
|
93 |
|
|
|
63 |
|
|
|
|
Revenues from GM leased properties
|
|
|
28 |
|
|
|
21 |
|
|
|
54 |
|
|
|
42 |
|
|
|
Service fee income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMAC of Canada operating lease
administration (d)
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
12 |
|
|
|
|
Rental car repurchases held for
resale (e)
|
|
|
4 |
|
|
|
6 |
|
|
|
11 |
|
|
|
9 |
|
|
|
Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement plan costs
allocated by GM
|
|
|
30 |
|
|
|
32 |
|
|
|
64 |
|
|
|
78 |
|
|
|
|
Off-lease vehicle selling expense
reimbursement (f)
|
|
|
8 |
|
|
|
(8 |
) |
|
|
14 |
|
|
|
(3 |
) |
|
|
|
Payments to GM for services, rent
and marketing expenses
|
|
|
24 |
|
|
|
38 |
|
|
|
47 |
|
|
|
91 |
|
|
|
|
|
|
|
(a) |
Represents total amount of residual support paid (or invoiced)
for the second quarter 2006 and 2005 under the residual support
and risk sharing programs. However, the table does not include a
payment of $1.1 billion made during the second quarter in
connection with the settlement of residual support and risk
sharing obligations for a portion of the lease portfolio, as
described below. |
|
(b) |
GM sponsors lease pull-ahead programs whereby consumers are
encouraged to terminate lease contracts early in conjunction
with the acquisition of a new GM vehicle, with the
customers remaining payment obligation waived. For certain
programs, GM compensates us for the waived payments, adjusted
based on the remarketing results associated with the underlying
vehicle. |
|
(c) |
The settlement terms related to the wholesale financing of
certain GM products are at shipment date. To the extent that
wholesale settlements with GM are made prior to the expiration
of transit, we receive interest from GM. |
|
(d) |
GMAC of Canada, Limited administered operating lease receivables
on behalf of GM of Canada, Limited (GMCL) and received a
servicing fee, which was included in other income. As of October
2005 GMAC of Canada, Limited no longer administers these
operating lease receivables. |
|
(e) |
We receive a transaction fee from GM related to the resale of
rental car repurchases. |
|
|
|
|
(f) |
An agreement with GM provides for the reimbursement of certain
selling expenses incurred by us on off-lease vehicles sold by GM
at auction. |
|
Operating Lease Residuals
As a marketing incentive GM may sponsor residual support
programs as a way to lower customer monthly payments. Under
residual support programs, the customers contractual
residual value is adjusted above our standard residual rates. GM
reimburses us if remarketing sales proceeds are less than the
customers contract residual value limited to our standard
residual value. In addition to
18
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
residual support programs, GM also participates in a risk
sharing arrangement whereby GM shares equally in residual losses
to the extent that remarketing proceeds are below our standard
residual rates (limited to a floor).
In connection with the agreement to sell a 51 percent
ownership interest in GMAC, GM settled its estimated liabilities
with respect to residual support and risk sharing on a portion
of our operating lease portfolio (approximately 19% of the North
American Automotive Finance operating lease portfolio) and on
the entire U.S. balloon retail receivable portfolio in a
lump-sum payment. As of April 30, 2006, the maximum amount
that would have been paid under the residual support and risk
sharing arrangements with GM on this portion of the portfolio
totaled approximately $2.0 billion. A negotiated amount
totaling approximately $1.1 billion was agreed to between
GM and GMAC to settle the expected amount (based on expected
remarketing performance of the vehicles) to be paid by GM under
these leases and was paid to us on May 15, 2006. The
payment of $1.1 billion was recorded as a deferred amount
in accrued expenses and other liabilities in our Condensed
Consolidated Balance Sheet and will be treated as sales proceeds
on the underlying assets, as the contracts terminate and the
vehicles are sold at auction, in recognizing the gain or loss on
sale.
For the remainder of the operating lease portfolio, not subject
to this payout arrangement, based on June 30, 2006
outstandings, the current amount that we would expect to be paid
by GM under residual support programs would be
$1.5 billion. These projections would be paid over the
remaining life of the lease portfolio at the time of sale of the
related vehicle (on average approximately 2 years) and are
based on the expected remarketing performance of the vehicles.
The maximum that could be paid under the residual support
programs on this portion of the lease portfolio is approximately
$2.6 billion and would be paid only in the unlikely event
that the proceeds from this portion of the operating lease
portfolio are lower than both the contractual residual value and
our standard residual rates. The maximum amount that could be
paid under the risk sharing arrangements on the remaining lease
portfolio is approximately $1.4 billion and would only be
paid in the unlikely event that the proceeds from the
outstanding lease vehicles would be lower than our standard
residual rates. As disclosed in Note 2, certain assets with
respect to automotive leases will be dividended to GM prior to
consummation of the agreement.
In addition, as it relates to a portion of lease originations
(approximately 19% of North American Automotive Finance lease
originations) and all U.S. balloon retail contract originations
occurring after April 30, 2006, GM agreed to begin payment
of the expected residual support owed to us at the time of
contract origination as opposed to after contract termination at
the time of sale of the related vehicle. The amount paid is
based on the historical remarketing experience of the vehicles.
Upon sale of the related vehicle after contract termination, GM
and GMAC will settle the amount of actual residual support
payment owed based on the actual sales proceeds received and GM
will pay to us amounts owed related to the risk sharing
arrangements, if any. After the sale of a 51 percent
ownership interest in GMAC is completed, all new operating lease
originations will be subject to this revised residual support
arrangement with GM. For the affected contracts originated in
the second quarter of 2006, GM paid or agreed to pay us a total
of $65 million for contracts originated in May and June.
The remaining maximum exposure after consideration of these
payments that could be paid under these contracts for residual
support is approximately $43 million and would be paid only
in the unlikely event that the proceeds from this portion of the
operating lease portfolio are lower than both the contractual
residual value and our standard residual rates. The remaining
maximum amount that could be paid under the risk sharing
arrangements on these contracts is approximately
$174 million and would only be paid in the unlikely event
that the proceeds from the outstanding lease vehicles would be
lower than our standard residual rates.
In addition to the financing arrangements summarized in the
foregoing table, GM has a $4 billion revolving line of
credit from us that expires in September 2006. This credit line
is used for general operating and seasonal working capital
purposes and to reduce external liquidity requirements. As of
June 30, 2006, and December 31, 2005, there were no
amounts outstanding on this line.
19
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
Financial results for our reporting segments are summarized
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Finance operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
|
|
|
|
|
|
|
|
Second Quarter ended June 30, |
|
American |
|
International |
|
|
|
Insurance |
|
|
|
|
($ in millions) |
|
Operations (a) |
|
Operations (a) |
|
ResCap (b) |
|
Operations |
|
Other (c) |
|
Consolidated |
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue before provision for
credit losses
|
|
|
$1,156 |
|
|
|
$333 |
|
|
|
$263 |
|
|
|
$ |
|
|
|
$156 |
|
|
|
$1,908 |
|
Provision for credit losses
|
|
|
(130 |
) |
|
|
(22 |
) |
|
|
(123 |
) |
|
|
|
|
|
|
(10 |
) |
|
|
(285 |
) |
Other revenue
|
|
|
826 |
|
|
|
200 |
|
|
|
1,434 |
|
|
|
1,157 |
|
|
|
(75 |
) |
|
|
3,542 |
|
|
Total net revenue
|
|
|
1,852 |
|
|
|
511 |
|
|
|
1,574 |
|
|
|
1,157 |
|
|
|
71 |
|
|
|
5,165 |
|
Noninterest expense
|
|
|
1,642 |
|
|
|
410 |
|
|
|
695 |
|
|
|
1,040 |
|
|
|
48 |
|
|
|
3,835 |
|
|
Income before income tax expense
|
|
|
210 |
|
|
|
101 |
|
|
|
879 |
|
|
|
117 |
|
|
|
23 |
|
|
|
1,330 |
|
Income tax expense
|
|
|
32 |
|
|
|
27 |
|
|
|
331 |
|
|
|
37 |
|
|
|
3 |
|
|
|
430 |
|
|
Net income
|
|
|
$178 |
|
|
|
$74 |
|
|
|
$548 |
|
|
|
$80 |
|
|
|
$20 |
|
|
|
$900 |
|
|
Total assets
|
|
|
$157,039 |
|
|
|
$29,738 |
|
|
|
$124,552 |
|
|
|
$13,475 |
|
|
|
($16,422 |
) |
|
|
$308,382 |
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue before provision for
credit losses
|
|
|
$1,250 |
|
|
|
$385 |
|
|
|
$375 |
|
|
|
$ |
|
|
|
$257 |
|
|
|
$2,267 |
|
Provision for credit losses
|
|
|
(18 |
) |
|
|
(32 |
) |
|
|
(145 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
(201 |
) |
Other revenue
|
|
|
633 |
|
|
|
197 |
|
|
|
866 |
|
|
|
1,049 |
|
|
|
39 |
|
|
|
2,784 |
|
|
Total net revenue
|
|
|
1,865 |
|
|
|
550 |
|
|
|
1,096 |
|
|
|
1,049 |
|
|
|
290 |
|
|
|
4,850 |
|
Noninterest expense
|
|
|
1,466 |
|
|
|
405 |
|
|
|
637 |
|
|
|
904 |
|
|
|
226 |
|
|
|
3,638 |
|
|
Income before income tax expense
|
|
|
399 |
|
|
|
145 |
|
|
|
459 |
|
|
|
145 |
|
|
|
64 |
|
|
|
1,212 |
|
Income tax expense
|
|
|
134 |
|
|
|
44 |
|
|
|
159 |
|
|
|
45 |
|
|
|
14 |
|
|
|
396 |
|
|
Net income
|
|
|
$265 |
|
|
|
$101 |
|
|
|
$300 |
|
|
|
$100 |
|
|
|
$50 |
|
|
|
$816 |
|
|
Total assets
|
|
|
$179,098 |
|
|
|
$29,524 |
|
|
|
$98,571 |
|
|
|
$12,173 |
|
|
|
($9,375 |
) |
|
|
$309,991 |
|
|
|
|
(a) |
North American Operations consist of automotive financing in the
U.S., Canada and certain corporate activities. International
Operations consists of automotive financing and full service
leasing in all other countries and Puerto Rico through
March 31, 2006. Beginning April 1, 2006, Puerto Rico
is included in North American Operations. |
(b) |
Refer to Note 1 to the Condensed Consolidated Financial
Statements for a discussion on changes to the reportable
operating segments. |
(c) |
Represents our Commercial Finance Group, Capmark, certain
corporate activities related to the Mortgage Group, and
reclassifications and eliminations between the reporting
segments. The financial results for 2006 reflect our 22% equity
interest in Capmark commencing March 23, 2006, while the
2005 financial results represent Capmark as wholly-owned. |
20
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Finance operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
|
|
|
|
|
|
|
|
Six Months ended June 30, |
|
American |
|
International |
|
|
|
Insurance |
|
|
|
|
($ in millions) |
|
Operations (a) |
|
Operations (a) |
|
ResCap (b) |
|
Operations |
|
Other (c) |
|
Consolidated |
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue before provision for
credit losses
|
|
|
$2,374 |
|
|
|
$686 |
|
|
|
$527 |
|
|
|
$ |
|
|
|
$460 |
|
|
|
$4,047 |
|
Provision for credit losses
|
|
|
(144 |
) |
|
|
(15 |
) |
|
|
(245 |
) |
|
|
|
|
|
|
(16 |
) |
|
|
(420 |
) |
Other revenue
|
|
|
1,570 |
|
|
|
417 |
|
|
|
2,234 |
|
|
|
2,298 |
|
|
|
(65 |
) |
|
|
6,454 |
|
|
Total net revenue
|
|
|
3,800 |
|
|
|
1,088 |
|
|
|
2,516 |
|
|
|
2,298 |
|
|
|
379 |
|
|
|
10,081 |
|
Noninterest expense
|
|
|
3,316 |
|
|
|
802 |
|
|
|
1,297 |
|
|
|
1,995 |
|
|
|
353 |
|
|
|
7,763 |
|
|
Income before income tax expense
|
|
|
484 |
|
|
|
286 |
|
|
|
1,219 |
|
|
|
303 |
|
|
|
26 |
|
|
|
2,318 |
|
Income tax expense (benefit)
|
|
|
133 |
|
|
|
83 |
|
|
|
469 |
|
|
|
94 |
|
|
|
(33 |
) |
|
|
746 |
|
|
Net income
|
|
|
$351 |
|
|
|
$203 |
|
|
|
$750 |
|
|
|
$209 |
|
|
|
$59 |
|
|
|
$1,572 |
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue before provision for
credit losses
|
|
|
$2,384 |
|
|
|
$762 |
|
|
|
$794 |
|
|
|
$ |
|
|
|
$514 |
|
|
|
$4,454 |
|
Provision for credit losses
|
|
|
(166 |
) |
|
|
(63 |
) |
|
|
(278 |
) |
|
|
|
|
|
|
(23 |
) |
|
|
(530 |
) |
Other revenue
|
|
|
1,251 |
|
|
|
393 |
|
|
|
1,705 |
|
|
|
2,082 |
|
|
|
194 |
|
|
|
5,625 |
|
|
Total net revenue
|
|
|
3,469 |
|
|
|
1,092 |
|
|
|
2,221 |
|
|
|
2,082 |
|
|
|
685 |
|
|
|
9,549 |
|
Noninterest expense
|
|
|
2,901 |
|
|
|
798 |
|
|
|
1,233 |
|
|
|
1,794 |
|
|
|
508 |
|
|
|
7,234 |
|
|
Income before income tax expense
|
|
|
568 |
|
|
|
294 |
|
|
|
988 |
|
|
|
288 |
|
|
|
177 |
|
|
|
2,315 |
|
Income tax expense
|
|
|
176 |
|
|
|
86 |
|
|
|
366 |
|
|
|
93 |
|
|
|
50 |
|
|
|
771 |
|
|
Net income
|
|
|
$392 |
|
|
|
$208 |
|
|
|
$622 |
|
|
|
$195 |
|
|
|
$127 |
|
|
|
$1,544 |
|
|
|
|
(a) |
North American Operations consist of automotive financing in the
U.S., Canada and certain corporate activities. International
Operations consists of automotive financing and full service
leasing in all other countries and Puerto Rico through
March 31, 2006. Beginning April 1, 2006, Puerto Rico
is included in North American Operations. |
(b) |
Refer to Note 1 to the Condensed Consolidated Financial
Statements for a discussion on changes to the reportable
operating segments. |
(c) |
Represents our Commercial Finance Group, Capmark, certain
corporate activities related to the Mortgage Group, and
reclassifications and eliminations between the reporting
segments. The financial results for 2006 reflect our 22% equity
interest in Capmark commencing March 23, 2006 while the
2005 financial results represent Capmark as wholly-owned. |
Effective July 20, 2006, General Motors Acceptance
Corporation converted its form of organization from a Delaware
corporation to a Delaware limited liability company and changed
its name to GMAC LLC as contemplated by the
previously announced April 2, 2006 Purchase and Sale
Agreement among General Motors Corporation, GM Finance Co.
Holdings, Inc., FIM Holdings LLC, and General Motors Acceptance
Corporation. At present GMAC has elected to be treated as a
corporation for federal income tax purposes and continues to be
part of GMs consolidated federal income tax return. Upon
conversion to a multi-member LLC which is planned for two
business days prior to closing of the sale transaction, then
existing deferred tax assets and liabilities for converting
subsidiaries will be eliminated with the impact being recognized
in current period earnings. Pursuant to the Purchase and Sale
Agreement a dividend will be made to GM for the income
recognized related to the deferred tax assets and liabilities.
On July 28, 2006, the Federal Deposit Insurance Corporation
(the FDIC) announced a six-month moratorium on the acceptance
of, or final decisions on, notices filed under the Change in
Bank Control Act with regard to industrial loan companies
(ILCs). In connection with the GMAC Transaction, FIM Holdings
has submitted such notices with respect to GMACs ILC, GMAC
Automotive Bank. GM and GMAC are currently evaluating the effect
of the FDICs action on these pending notices, but it
appears that the timing of any approval of the notices is likely
to be affected by the moratorium. Since FDIC approval of the
Change in Bank Control Act notices with regard to GMAC
Automotive Bank is a condition to closing the GMAC Transaction,
GM and GMAC are now working with FIM Holdings to consider ways
to try to avoid delaying the targeted closing date until 2007.
21
Managements Discussion and Analysis
GMAC LLC
We are a leading global financial services firm with
approximately $308 billion of assets and operations in
approximately 40 countries. Founded in 1919 as a wholly owned
subsidiary of General Motors Corporation, GMAC was originally
established to provide GM dealers with the automotive financing
necessary to acquire and maintain vehicle inventories and to
provide retail customers the means by which to finance vehicle
purchases through GM dealers. Our products and services have
expanded beyond automotive financing as we currently operate in
the following lines of business Automotive Finance,
Mortgage (ResCap), and Insurance. Refer to our 2005 Annual
Report on
Form 10-K for a
more complete description of our business activities, along with
the products and services offered and the market competition.
Net income for our businesses is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Six Months |
|
|
|
|
|
Period ended June 30, ($ in millions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
Automotive Finance (a)
|
|
|
$252 |
|
|
|
$366 |
|
|
|
$554 |
|
|
|
$600 |
|
|
|
ResCap
|
|
|
548 |
|
|
|
300 |
|
|
|
750 |
|
|
|
622 |
|
|
|
Insurance
|
|
|
80 |
|
|
|
100 |
|
|
|
209 |
|
|
|
195 |
|
|
|
Other (b)
|
|
|
20 |
|
|
|
50 |
|
|
|
59 |
|
|
|
127 |
|
|
|
|
Net income
|
|
|
$900 |
|
|
|
$816 |
|
|
|
$1,572 |
|
|
|
$1,544 |
|
|
|
|
Return on average
equity
|
|
|
15.8 |
% |
|
|
14.4 |
% |
|
|
14.0 |
% |
|
|
13.6 |
% |
|
|
|
|
|
|
(a) |
Includes our North America and International automotive finance
reporting segments, separately identified in Note 10 to the
Condensed Consolidated Financial Statements. |
|
|
|
(b) |
Includes our Commercial Finance Group operating segment, equity
interest in Capmark, and Mortgage Group activity. |
GMAC LLC earned a record $900 million in the second quarter
of 2006, up $84 million from second quarter 2005 earnings
of $816 million. Gross revenues increased to
$9.3 billion in the second quarter of 2006 as compared to
$8.1 billion in the second quarter of 2005. The increase in
second quarter earnings was due to strong earnings at ResCap
which more than offset lower earnings from Automotive Finance
and Insurance. GMAC also provided a significant source of cash
flow to GM through the payment of a $1.4 billion dividend
in the second quarter.
Results for Automotive Finance were $252 million, down
$114 million from $366 million earned in the same
period in the prior year. The decrease is due to a combination
of continued margin pressures, lower marketing results in the
U.S. and Canada and higher consumer credit provisions, slightly
offset by certain favorable non-U.S tax rate changes and
increases in investment income.
ResCap earnings were $548 million in the second quarter of
2006, up $248 million from $300 million earned in the
second quarter of 2005. The increase in earnings was due
primarily to a $259 million gain on sale of ResCaps
equity investment in a regional homebuilder. Absent the impact
of the equity sale, ResCap earnings declined slightly in
comparison to the same period last year. Mortgage originations
were $47.0 billion for the second quarter of 2006,
representing an increase from the $42.6 billion in the
prior year.
GMACs Insurance operations generated net income of
$80 million in the second quarter of 2006, down
$20 million from earnings of $100 million in the
second quarter of 2005, primarily due to a combination of lower
capital gains and wholesale losses incurred in the quarter
related to hail storms in the Midwest. In addition, GMAC
Insurance maintained a strong investment portfolio, with a
market value of $7.7 billion at June 30, 2006,
including after tax net unrealized capital gains of
$545 million.
In addition, earnings for GMACs Other segment, which
includes the Commercial Finance business unit and GMACs
equity investment of approximately 22% in Capmark, totaled
$20 million, down $30 million from $50 million
earned in the same period last year when Capmark was
wholly-owned and fully consolidated.
GMAC continues to maintain adequate liquidity with cash reserve
balances at June 30, 2006, of $22.7 billion, comprised
of $17.2 billion in cash and cash equivalents and
$5.5 billion invested in marketable securities.
The sale of 51 percent of GMAC to FIM Holdings is expected
to close in the fourth quarter of this year, but it is possible
that delays in obtaining such approvals or in satisfying other
required conditions could defer the closing until 2007. In
addition to continuing to enable GMAC to support the sale of GM
vehicles, the transaction is intended to support GMACs
strategic goal of a stable investment grade credit rating and
profitable growth.
22
Managements Discussion and Analysis
GMAC LLC
Our Automotive Finance operations offer a wide range of
financial services and products (directly and indirectly) to
retail automotive consumers, automotive dealerships and other
commercial businesses. Our Automotive Finance operations are
comprised of two separate reporting segments North
American Automotive Finance Operations and International
Automotive Finance Operations and certain corporate
activities. The products and services offered by our Automotive
Finance operations include the purchase of retail installment
sales contracts and leases, extension of term loans, dealer
floor plan financing and other lines of credit to dealers, and
fleet leasing. Refer to pages 21-31 of our 2005 Annual
Report on Form 10-K for further discussion of the business
profile of our Automotive Finance operations.
Results of Operations
The following table summarizes the operating results of our
Automotive Finance operations for the periods indicated. The
amounts presented are before the elimination of balances and
transactions with our other reporting segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Six Months |
|
|
|
|
|
Period ended June 30, ($ in millions) |
|
2006 |
|
2005 |
|
Change |
|
% |
|
2006 |
|
2005 |
|
Change |
|
% |
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
$1,361 |
|
|
|
$1,676 |
|
|
|
($315 |
) |
|
|
(19 |
) |
|
|
$2,786 |
|
|
|
$3,387 |
|
|
|
($601 |
) |
|
|
(18 |
) |
|
|
Commercial
|
|
|
419 |
|
|
|
416 |
|
|
|
3 |
|
|
|
1 |
|
|
|
788 |
|
|
|
799 |
|
|
|
(11 |
) |
|
|
(1 |
) |
|
|
Operating leases
|
|
|
2,023 |
|
|
|
1,753 |
|
|
|
270 |
|
|
|
15 |
|
|
|
3,949 |
|
|
|
3,418 |
|
|
|
531 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing revenue
|
|
|
3,803 |
|
|
|
3,845 |
|
|
|
(42 |
) |
|
|
(1 |
) |
|
|
7,523 |
|
|
|
7,604 |
|
|
|
(81 |
) |
|
|
(1 |
) |
|
|
Interest and discount expense
|
|
|
(2,247 |
) |
|
|
(2,182 |
) |
|
|
(65 |
) |
|
|
(3 |
) |
|
|
(4,345 |
) |
|
|
(4,458 |
) |
|
|
113 |
|
|
|
3 |
|
|
|
Provision for credit losses
|
|
|
(152 |
) |
|
|
(50 |
) |
|
|
(102 |
) |
|
|
(204 |
) |
|
|
(159 |
) |
|
|
(229 |
) |
|
|
70 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing revenue
|
|
|
1,404 |
|
|
|
1,613 |
|
|
|
(209 |
) |
|
|
(13 |
) |
|
|
3,019 |
|
|
|
2,917 |
|
|
|
102 |
|
|
|
3 |
|
|
|
Servicing fees
|
|
|
59 |
|
|
|
21 |
|
|
|
38 |
|
|
|
181 |
|
|
|
118 |
|
|
|
45 |
|
|
|
73 |
|
|
|
162 |
|
|
|
Gains (losses) on sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale securitizations
|
|
|
155 |
|
|
|
139 |
|
|
|
16 |
|
|
|
12 |
|
|
|
305 |
|
|
|
283 |
|
|
|
22 |
|
|
|
8 |
|
|
|
|
Retail automotive whole loan sale
transactions
|
|
|
(26 |
) |
|
|
(20 |
) |
|
|
(6 |
) |
|
|
(30 |
) |
|
|
(67 |
) |
|
|
(49 |
) |
|
|
(18 |
) |
|
|
(37 |
) |
|
|
|
Retail automotive securitizations
|
|
|
|
|
|
|
(18 |
) |
|
|
18 |
|
|
|
100 |
|
|
|
(54 |
) |
|
|
(19 |
) |
|
|
(35 |
) |
|
|
(184 |
) |
|
|
Other income
|
|
|
769 |
|
|
|
679 |
|
|
|
90 |
|
|
|
13 |
|
|
|
1,565 |
|
|
|
1,384 |
|
|
|
181 |
|
|
|
13 |
|
|
|
Depreciation expense on operating
leases
|
|
|
(1,344 |
) |
|
|
(1,287 |
) |
|
|
(57 |
) |
|
|
(4 |
) |
|
|
(2,782 |
) |
|
|
(2,554 |
) |
|
|
(228 |
) |
|
|
(9 |
) |
|
|
Noninterest expense
|
|
|
(706 |
) |
|
|
(583 |
) |
|
|
(123 |
) |
|
|
(21 |
) |
|
|
(1,334 |
) |
|
|
(1,145 |
) |
|
|
(189 |
) |
|
|
(17 |
) |
|
|
Income tax expense
|
|
|
(59 |
) |
|
|
(178 |
) |
|
|
119 |
|
|
|
67 |
|
|
|
(216 |
) |
|
|
(262 |
) |
|
|
46 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$252 |
|
|
|
$366 |
|
|
|
($114 |
) |
|
|
(31 |
) |
|
|
$554 |
|
|
|
$600 |
|
|
|
($46 |
) |
|
|
(8 |
) |
|
|
|
Total assets
|
|
|
$180,866 |
|
|
|
$205,789 |
|
|
|
($24,923 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Finance operations net income decreased 31% and 8%
for the second quarter and first six months of 2006,
respectively, with decreases in both the North American and
International Automotive operations in comparison with
2005 second quarter results. The decrease in net income in
comparison with 2005 second quarter results is due to a
combination of continued margin pressures, lower remarketing
results in the U.S. and Canada and higher consumer credit
provisions, slightly offset by certain favorable non-U.S. tax
rate changes and increases in investment income.
Total financing revenue was relatively constant in the second
quarter and first six months of 2006, with declines in consumer
revenue being nearly offset by higher operating lease revenues.
The decrease in consumer revenue is consistent with the
reduction in consumer asset levels as a result of continued
whole loan sale activity. Consumer finance receivables declined
by $16 billion, or approximately 20%, since June 30,
2005. Operating lease revenue (along with the related
depreciation expense) increased year over year consistent with
the increase in the size of the operating lease portfolio
(approximately 21% since June 2005). The increase in the
portfolio is reflective of the shift in our financing volume mix
to more leases in the North American operations. The increase in
interest and discount expense for the second quarter as compared
to the second quarter of 2005 reflects an increasing cost of
funds partially offset by decreasing debt levels.
23
Managements Discussion and Analysis
GMAC LLC
The provision for credit losses increased in comparison to the
prior year largely due to increases in provisions within the
North American Operations consumer loan portfolio. The increase
in the loss provision is consistent with the increase in
delinquencies in the North American Operations portfolio. Refer
to the Credit Risk discussion within this Automotive Finance
Operations section of the MD&A for further discussion.
Other income increased for both the second quarter and first six
months of 2006, as compared to the same periods in 2005. An
increase in interest income realized from cash reserve balances
as a result of higher short term interest rates in 2006 versus
2005 contributed to the increases over the prior year. In
addition, non-interest expenses increased in comparison with
2005 levels due to a decrease in operating lease remarketing
results and an overall decrease in lease termination volume.
Total income tax expense declined by $119 million and
$46 million in the second quarter and first six months of
2006, respectively, as compared to the same periods in 2005.
These decreases were largely due to a reduction in pre-tax
income and enacted changes in Canadian corporate and provincial
tax rates and the elimination of the large corporation tax for
the North American Automotive operations.
Automotive Financing Volume
The following table summarizes our new vehicle consumer
financing volume, our share of GM retail sales and our
wholesale financing of new vehicles and related share of GM
sales to dealers in markets where we operate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Six Months |
|
|
|
|
|
|
|
|
|
Share of |
|
|
|
Share of |
|
|
GMAC volume |
|
GM sales |
|
GMAC volume |
|
GM sales |
Period ended June 30, |
|
|
|
|
|
|
|
|
(units in thousands) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
New vehicle consumer
financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail contracts
|
|
218 |
|
277
|
|
25% |
|
25%
|
|
406 |
|
589
|
|
25% |
|
31%
|
|
|
Leases
|
|
168 |
|
175
|
|
19% |
|
16%
|
|
333 |
|
313
|
|
21% |
|
16%
|
|
|
|
|
|
|
Total North America
|
|
386 |
|
452
|
|
44% |
|
41%
|
|
739 |
|
902
|
|
46% |
|
47%
|
|
International (retail contracts and
leases)
|
|
129 |
|
142
|
|
23% |
|
27%
|
|
264 |
|
268
|
|
24% |
|
27%
|
|
|
|
|
|
|
|
|
|
|
|
Total GM units financed
|
|
515 |
|
594
|
|
36% |
|
36%
|
|
1,003 |
|
1,170
|
|
37% |
|
40%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GM units financed
|
|
17 |
|
21
|
|
|
|
|
|
34 |
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer automotive financing
volume
|
|
532 |
|
615
|
|
|
|
|
|
1,037 |
|
1,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale financing of new
vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
921 |
|
1,016
|
|
75% |
|
79%
|
|
1,841 |
|
1,892
|
|
75% |
|
80%
|
|
International
|
|
694 |
|
631
|
|
85% |
|
83%
|
|
1,354 |
|
1,204
|
|
88% |
|
86%
|
|
|
|
|
|
|
|
|
|
|
|
Total GM units financed
|
|
1,615 |
|
1,647
|
|
79% |
|
81%
|
|
3,195 |
|
3,096
|
|
80% |
|
82%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GM units financed
|
|
35 |
|
48
|
|
|
|
|
|
73 |
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total wholesale volume
|
|
1,650 |
|
1,695
|
|
|
|
|
|
3,268 |
|
3,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our consumer financing volume and penetration levels are
significantly impacted by the nature, timing and extent of
GMs use of rate, residual and other financing incentives
for marketing purposes on consumer retail contracts and leases.
Late in 2004 and through the early part of 2005, GM reduced its
use of special rate financing programs and utilized marketing
programs that provided cash incentives to customers that use us
to finance their purchase of a new GM vehicle. As a result, our
North America penetration levels were positively impacted in the
first half of 2005. However, as GM has begun to focus on
value pricing, the use of special rate marketing
incentives was reduced and, as a result, our share of retail
financing volume has declined since the second quarter of 2005.
In addition, the reduction in retail contracts as compared to
the second quarter of 2005 had the impact of increasing the
percentage of lease contracts relative to the total volume
financed. Lease financing volume in the second quarter of 2006
also benefited from a shift by GM in some vehicle incentive
programs towards more leasing in replacement of retail marketing
activities. In our International Automotive Finance Operations,
financing volume has increased as we continue to expand (most
notably financing in China and providing financing to
Chevrolet-Daewoo). Our wholesale financing continues to be the
primary funding source for GM dealer inventories, as total
penetration levels in the second quarter of 2006 remained
relatively consistent with levels in the second quarter of 2005,
and continue to reflect traditionally strong levels.
24
Managements Discussion and Analysis
GMAC LLC
Consumer Credit
The following tables summarize pertinent loss experience in the
consumer managed and on-balance sheet automotive retail contract
portfolio. In general, the credit quality of the off-balance
sheet portfolio is representative of our overall managed
consumer automotive retail contract portfolio. The off-balance
sheet portfolio includes receivables securitized and sold that
we continue to service and in which we retain an interest or
risk of loss but excludes securitized and sold finance
receivables that we continue to service but in which we retain
no interest or risk of loss. The process of creating a pool of
retail finance receivables for securitization or sale typically
excludes accounts that are greater than 30 days delinquent
at such time. In addition, the process involves selecting from a
pool of receivables that are currently outstanding and,
therefore, represent seasoned accounts. A seasoned portfolio
that excludes delinquent accounts historically results in better
credit performance in the managed portfolio than in the
on-balance sheet portfolio of retail finance receivables. In
addition, the current off-balance sheet transactions are
comprised mainly of subvented rate retail finance receivables,
which generally attract higher quality customers (or otherwise
cash purchasers) than customers typically associated with
non-subvented receivables.
The managed portfolio includes retail receivables held
on-balance sheet for investment and receivables securitized and
sold that we continue to service and have a continued
involvement in (i.e., in which we retain an interest or risk of
loss in the underlying receivables) but excludes securitized and
sold finance receivables that we continue to service but have no
other continuing involvement (serviced-only portfolio). We
believe that the disclosure of the credit experience of the
managed portfolio presents a more complete presentation of our
risk of loss in the underlying assets (typically in the form of
a subordinated retained interest). Consistent with the
presentation in the Condensed Consolidated Balance Sheet, retail
contracts presented in the table represent the principal balance
of the finance receivables discounted for any unearned rate
support received from GM.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Charge-offs, |
|
|
|
|
retail |
|
net of |
|
Annualized net |
|
|
contracts |
|
recoveries |
|
charge-off rate |
|
|
|
|
|
|
|
Second quarter ended June 30, ($ in millions) |
|
2006 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Managed
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$54,186 |
|
|
$120 |
|
$172
|
|
0.89% |
|
0.90%
|
International
|
|
|
15,115 |
|
|
23 |
|
35
|
|
0.61% |
|
0.94%
|
|
|
|
|
|
Total managed
|
|
|
$69,301 |
|
|
$143 |
|
$207
|
|
0.83% |
|
0.91%
|
|
On-balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$48,726 |
|
|
$118 |
|
$169
|
|
0.97% |
|
0.94%
|
International
|
|
|
15,115 |
|
|
23 |
|
35
|
|
0.61% |
|
0.94%
|
|
|
|
|
|
Total on-balance sheet
|
|
|
$63,841 |
|
|
$141 |
|
$204
|
|
0.88% |
|
0.94%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Charge-offs, |
|
|
|
|
retail |
|
net of |
|
Annualized net |
|
|
contracts |
|
recoveries |
|
charge-off rate |
|
|
|
|
|
|
|
Six months ended June 30, ($ in millions) |
|
2006 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Managed
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$56,631 |
|
|
$281 |
|
$366
|
|
0.99% |
|
0.93%
|
International
|
|
|
14,944 |
|
|
50 |
|
69
|
|
0.67% |
|
0.92%
|
|
|
|
|
|
Total managed
|
|
|
$71,575 |
|
|
$331 |
|
$435
|
|
0.92% |
|
0.93%
|
|
On-balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$51,303 |
|
|
$277 |
|
$360
|
|
1.08% |
|
0.98%
|
International
|
|
|
14,944 |
|
|
50 |
|
69
|
|
0.67% |
|
0.92%
|
|
|
|
|
|
Total on-balance sheet
|
|
|
$66,247 |
|
|
$327 |
|
$429
|
|
0.99% |
|
0.97%
|
|
25
Managements Discussion and Analysis
GMAC LLC
|
|
The following table summarizes pertinent delinquency experience
in the consumer automotive retail contract portfolio. |
|
|
|
|
|
|
|
|
|
|
|
|
Percent of retail contracts |
|
|
30 days or more past due (a) |
|
|
|
|
|
Managed |
|
On-balance sheet |
|
|
|
|
|
June 30, |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
North America
|
|
2.35% |
|
2.02%
|
|
2.57% |
|
2.14%
|
International
|
|
2.64% |
|
2.70%
|
|
2.64% |
|
2.70%
|
|
Total
|
|
2.52% |
|
2.19%
|
|
2.63% |
|
2.29%
|
|
|
|
|
(a) |
Past due contracts are calculated on the basis of the average
number of contracts delinquent during a month and exclude
accounts in bankruptcy. |
|
In addition to the preceding loss and delinquency data, the
following table summarizes bankruptcies and repossession
information for the United States consumer automotive retail
contract portfolio (which represents approximately 58% of our
on-balance sheet consumer automotive retail contract portfolio):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed |
|
On-balance sheet |
|
|
|
|
|
Second quarter ended June 30, |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
Average retail contracts in
bankruptcy (in units)
|
|
|
92,961 |
|
|
|
99,338 |
|
|
|
91,952 |
|
|
|
95,011 |
|
|
|
Bankruptcies as a percent of
average number of contracts outstanding
|
|
|
2.74 |
% |
|
|
2.13 |
% |
|
|
2.92 |
% |
|
|
2.20 |
% |
|
|
Retail contract repossessions (in
units)
|
|
|
21,432 |
|
|
|
23,306 |
|
|
|
21,081 |
|
|
|
22,952 |
|
|
|
Annualized repossessions as a
percent of average number of contracts outstanding
|
|
|
2.51 |
% |
|
|
1.97 |
% |
|
|
2.66 |
% |
|
|
2.10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed |
|
On-balance sheet |
|
|
|
|
|
Six months ended June 30, |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
Average retail contracts in
bankruptcy (in units)
|
|
|
98,598 |
|
|
|
97,809 |
|
|
|
97,265 |
|
|
|
93,261 |
|
|
|
Bankruptcies as a percent of
average number of contracts outstanding
|
|
|
2.80 |
% |
|
|
2.05 |
% |
|
|
2.93 |
% |
|
|
2.11 |
% |
|
|
Retail contract repossessions (in
units)
|
|
|
46,565 |
|
|
|
50,384 |
|
|
|
45,964 |
|
|
|
48,702 |
|
|
|
Annualized repossessions as a
percent of average number of contracts outstanding
|
|
|
2.62 |
% |
|
|
2.12 |
% |
|
|
2.75 |
% |
|
|
2.20 |
% |
|
|
|
26
Managements Discussion and Analysis
GMAC LLC
The following table summarizes activity related to the consumer
allowance for credit losses for our Automotive Finance
operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Six Months |
|
|
|
|
|
Period ended June 30, ($ in millions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
Allowance at beginning of period
|
|
|
$1,463 |
|
|
|
$1,978 |
|
|
|
$1,618 |
|
|
|
$2,035 |
|
|
|
Provision for credit losses
|
|
|
148 |
|
|
|
49 |
|
|
|
176 |
|
|
|
226 |
|
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(164 |
) |
|
|
(193 |
) |
|
|
(357 |
) |
|
|
(414 |
) |
|
|
|
Foreign
|
|
|
(36 |
) |
|
|
(50 |
) |
|
|
(80 |
) |
|
|
(99 |
) |
|
|
|
Total charge-offs
|
|
|
(200 |
) |
|
|
(243 |
) |
|
|
(437 |
) |
|
|
(513 |
) |
|
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
40 |
|
|
|
23 |
|
|
|
78 |
|
|
|
59 |
|
|
|
|
Foreign
|
|
|
11 |
|
|
|
13 |
|
|
|
24 |
|
|
|
24 |
|
|
|
|
Total recoveries
|
|
|
51 |
|
|
|
36 |
|
|
|
102 |
|
|
|
83 |
|
|
|
|
Net charge-offs
|
|
|
(149 |
) |
|
|
(207 |
) |
|
|
(335 |
) |
|
|
(430 |
) |
|
|
Impacts of foreign currency
translation
|
|
|
5 |
|
|
|
(1 |
) |
|
|
7 |
|
|
|
(12 |
) |
|
|
Securitization activity
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
Allowance at June 30,
|
|
|
$1,467 |
|
|
|
$1,819 |
|
|
|
$1,467 |
|
|
|
$1,819 |
|
|
|
Allowance coverage (a)
|
|
|
2.35 |
% |
|
|
2.33 |
% |
|
|
2.35 |
% |
|
|
2.33 |
% |
|
|
|
|
|
|
(a) |
Represents the related allowance for credit losses as a
percentage of total on-balance sheet consumer automotive retail
contracts. |
|
The overall credit performance of the consumer portfolio has
deteriorated from the prior year consistent with the decline in
the level of overall managed and on balance sheet receivables as
we continue to execute more whole loan sales. Similar to
securitizations, the process of creating a pool of retail
finance receivables for whole loan sales typically involves
excluding retail contracts that are greater than 30 days
delinquent at such time and selecting from a pool of receivables
currently outstanding which, therefore represents seasoned
contracts. A seasoned portfolio that excludes delinquent
contracts historically results in better credit performance and,
as a result, the increase in whole loan activity over the past
year has impacted the charge-offs as a percentage of the managed
and on-balance sheet portfolio, when compared to the comparable
period in the prior year. In addition to the impact of whole
loan activity, delinquencies in the North American Operations
managed and on balance sheet portfolio has been negatively
impacted by an aging of the overall portfolio as consumer
serviced assets continue to decrease as compared to prior year
levels. International consumer credit portfolio performance
remains strong as both delinquencies and charge-offs have
declined as compared to prior year levels.
The allowance for credit losses as a percentage of the total
on-balance sheet consumer portfolio remained stable in
comparison to the prior period as the consumer allowance quarter
over quarter increased along with automotive retail asset levels.
27
Managements Discussion and Analysis
GMAC LLC
Commercial Credit
Our credit risk on the commercial portfolio is markedly
different than that of our consumer portfolio. Whereas the
consumer portfolio represents a homogenous pool of retail
contracts that exhibit fairly predictable and stable loss
patterns, the commercial portfolio exposures are less
predictable. In general, the credit risk of the commercial
portfolio is tied to overall economic conditions in the
countries in which we operate.
At June 30, 2006, the only commercial receivables that had
been securitized and accounted for as off-balance sheet
transactions represent wholesale lines of credit extended to
automotive dealerships, which historically experience low
charge-offs. Since only wholesale accounts have historically
been securitized, the amount of charge-offs on our managed
portfolio is the same as the on-balance sheet portfolio. As a
result, only the on-balance sheet commercial portfolio credit
experience is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
Impaired loans (a) |
|
|
|
|
|
|
|
June 30, |
|
June 30, |
|
Dec 31, |
|
June 30, |
|
|
($ in millions) |
|
2006 |
|
2006 |
|
2005 |
|
2005 |
|
|
|
Wholesale
|
|
|
23,425 |
|
|
|
$286 |
|
|
|
$299 |
|
|
|
$585 |
|
|
|
|
|
|
|
|
|
|
1.22 |
% |
|
|
1.45 |
% |
|
|
2.65 |
% |
|
|
Other commercial financing
|
|
|
3,995 |
|
|
|
43 |
|
|
|
142 |
|
|
|
158 |
|
|
|
|
|
|
|
|
|
|
1.08 |
% |
|
|
1.36 |
% |
|
|
1.49 |
% |
|
|
|
Total on-balance sheet
|
|
|
27,420 |
|
|
|
$329 |
|
|
|
$441 |
|
|
|
$743 |
|
|
|
|
|
|
|
|
|
|
1.20 |
% |
|
|
1.42 |
% |
|
|
2.27 |
% |
|
|
|
|
|
|
(a) |
Includes loans where it is probable that we will be unable to
collect all amounts due according to the terms of the loan. |
|
The commercial allowance for credit losses was $70 million
and $122 million as of June 30, 2006 and 2005,
respectively. Charge-off activity in the commercial portfolio
was a net charge-off of $1 million and $2 million for
the six months ended June 30, 2006 and 2005, respectively.
Decreases in the level of allowance from 2005 levels are
reflective of proportional decreases in the on-balance sheet
commercial portfolio over the same time period.
28
Managements Discussion and Analysis
GMAC LLC
The principal activities of our ResCap operations involve the
origination, purchase, servicing, sale and securitization of
consumer (i.e., residential) and commercial mortgage loans and
mortgage related products (e.g., real estate services).
Typically, mortgage loans are originated and sold to investors
in the secondary market, including securitization transactions
in which the assets are legally sold but are accounted for as
secured financings. For additional information, please refer to
ResCaps quarterly report on
Form 10-Q for the
period ended June 30, 2006, filed separately with the SEC,
which report is not deemed incorporated into any of our filings
under the Securities Act or the Exchange Act.
Results of Operations
The following table summarizes the operating results for ResCap
for the periods indicated. The amounts presented are before the
elimination of balances and transactions with our other
reporting segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter | |
|
Six Months |
|
|
| |
|
|
Period ended June 30, ($ in millions) |
|
2006 | |
|
2005 | |
|
Change | |
|
% | |
|
2006 | |
|
2005 | |
|
Change | |
|
% | |
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing revenue
|
|
|
$1,821 |
|
|
|
$1,225 |
|
|
|
$596 |
|
|
|
49 |
|
|
|
$3,521 |
|
|
|
$2,410 |
|
|
|
$1,111 |
|
|
|
46 |
|
|
|
Interest and discount expense
|
|
|
(1,558 |
) |
|
|
(850 |
) |
|
|
(708 |
) |
|
|
(83 |
) |
|
|
(2,993 |
) |
|
|
(1,616 |
) |
|
|
(1,377 |
) |
|
|
(85 |
) |
|
|
Provision for credit losses
|
|
|
(123 |
) |
|
|
(145 |
) |
|
|
22 |
|
|
|
15 |
|
|
|
(245 |
) |
|
|
(278 |
) |
|
|
33 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing revenue
|
|
|
140 |
|
|
|
230 |
|
|
|
(90 |
) |
|
|
(39 |
) |
|
|
283 |
|
|
|
516 |
|
|
|
(233 |
) |
|
|
(45 |
) |
|
|
Mortgage servicing fees
|
|
|
387 |
|
|
|
351 |
|
|
|
36 |
|
|
|
10 |
|
|
|
761 |
|
|
|
700 |
|
|
|
61 |
|
|
|
9 |
|
|
|
MSR amortization and impairment
|
|
|
|
|
|
|
(306 |
) |
|
|
306 |
|
|
|
100 |
|
|
|
|
|
|
|
(447 |
) |
|
|
447 |
|
|
|
100 |
|
|
|
Servicing asset valuation and hedge
activities, net
|
|
|
(171 |
) |
|
|
117 |
|
|
|
(288 |
) |
|
|
(246 |
) |
|
|
(356 |
) |
|
|
94 |
|
|
|
(450 |
) |
|
|
(479 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loan servicing income
|
|
|
216 |
|
|
|
162 |
|
|
|
54 |
|
|
|
33 |
|
|
|
405 |
|
|
|
347 |
|
|
|
58 |
|
|
|
17 |
|
|
|
Gains on sale of loans
|
|
|
375 |
|
|
|
151 |
|
|
|
224 |
|
|
|
148 |
|
|
|
642 |
|
|
|
480 |
|
|
|
162 |
|
|
|
34 |
|
|
|
Other income
|
|
|
843 |
|
|
|
553 |
|
|
|
290 |
|
|
|
52 |
|
|
|
1,186 |
|
|
|
878 |
|
|
|
308 |
|
|
|
35 |
|
|
|
Noninterest expense
|
|
|
(695 |
) |
|
|
(637 |
) |
|
|
(58 |
) |
|
|
(9 |
) |
|
|
(1,297 |
) |
|
|
(1,233 |
) |
|
|
(64 |
) |
|
|
(5 |
) |
|
|
Income tax expense
|
|
|
(331 |
) |
|
|
(159 |
) |
|
|
(172 |
) |
|
|
(108 |
) |
|
|
(469 |
) |
|
|
(366 |
) |
|
|
(103 |
) |
|
|
(28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$548 |
|
|
|
$300 |
|
|
|
$248 |
|
|
|
83 |
|
|
|
$750 |
|
|
|
$622 |
|
|
|
$128 |
|
|
|
21 |
|
|
|
|
Total assets
|
|
|
$124,552 |
|
|
|
$98,571 |
|
|
|
$25,981 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ResCap net income increased 83% and 21% to $548 million and
$750 million for the second quarter and first six months of
2006. These increases in net income were primarily the result of
the sale of our equity interest in a regional homebuilder during
the second quarter 2006 which we recorded an after-tax gain of
approximately $259 million in the three months ended
June 30, 2006. Our net income for the three months ended
June 30, 2006, was also impacted by an increase in
financing revenues from higher asset levels due to higher loan
production as well as continued favorable trends in credit loss
provisions. However, these increases were partially offset by
higher interest and discount expense driven by increases in
short-term market interest rates and debt outstanding.
Net loan servicing income remained relatively flat as the
favorable impacts of higher mortgage servicing fees and MSR
valuation due to slower prepayment speeds, as a result of the
rising interest rate environment, were offset by negative
hedging results.
Gain on sales of loans increased due to higher overall loan
production and the increased volume of off-balance sheet
securitizations versus on-balance sheet secured financings.
Other income increased due to the sale of our equity interest in
a regional homebuilder and higher residential real estate income
due to strong performance and continued growth in residential
real estate investments, slightly offset by losses on U.S.
Treasury and principal-only securities.
29
Managements Discussion and Analysis
GMAC LLC
Mortgage Loan Production, Sales and Servicing
Our mortgage loan production increased to $47.0 billion for
the three months ended June 30, 2006, compared to
$42.6 billion for the same period in 2005. These increases
were primarily a result of increases in domestic market share.
The domestic mortgage origination markets was estimated to be
$1.3 trillion for the six months ended June 30, 2006,
a decline of 6.1% compared to the comparable period in 2005. The
market share growth continues to be achieved through effectively
changing our product offerings and pricing in our market.
The following summarizes mortgage loan production for the
periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Six Months |
|
|
|
|
|
Period ended June 30, ($ in millions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal amount by product type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime conforming
|
|
|
$11,965 |
|
|
|
$10,512 |
|
|
|
$20,534 |
|
|
|
$24,700 |
|
|
|
Prime nonconforming
|
|
|
14,638 |
|
|
|
14,998 |
|
|
|
26,365 |
|
|
|
25,066 |
|
|
|
Government
|
|
|
1,081 |
|
|
|
1,044 |
|
|
|
1,942 |
|
|
|
2,241 |
|
|
|
Nonprime
|
|
|
6,060 |
|
|
|
8,321 |
|
|
|
15,156 |
|
|
|
13,937 |
|
|
|
Prime second-lien
|
|
|
6,585 |
|
|
|
3,186 |
|
|
|
12,400 |
|
|
|
5,674 |
|
|
|
|
Total U.S. production
|
|
|
40,329 |
|
|
|
38,061 |
|
|
|
76,397 |
|
|
|
71,618 |
|
|
|
International
|
|
|
6,693 |
|
|
|
4,547 |
|
|
|
12,205 |
|
|
|
7,451 |
|
|
|
Total
|
|
|
$47,022 |
|
|
|
$42,608 |
|
|
|
$88,602 |
|
|
|
$79,069 |
|
|
|
Principal amount by origination
channel:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail and direct channels
|
|
|
$7,424 |
|
|
|
$9,696 |
|
|
|
$14,102 |
|
|
|
$18,177 |
|
|
|
Correspondent and broker channels
|
|
|
32,905 |
|
|
|
28,365 |
|
|
|
62,295 |
|
|
|
53,441 |
|
|
|
|
Total U.S. production
|
|
|
$40,329 |
|
|
|
$38,061 |
|
|
|
$76,397 |
|
|
|
$71,618 |
|
|
|
Number of loans (in units):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail and direct channels
|
|
|
65,011 |
|
|
|
76,569 |
|
|
|
125,899 |
|
|
|
142,970 |
|
|
|
Correspondent and broker channels
|
|
|
208,747 |
|
|
|
150,385 |
|
|
|
399,599 |
|
|
|
303,634 |
|
|
|
|
Total U.S. production
|
|
|
273,758 |
|
|
|
226,954 |
|
|
|
525,498 |
|
|
|
446,604 |
|
|
The following table summarizes the primary domestic mortgage
loan servicing portfolio for which we hold the corresponding
mortgage servicing rights:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. mortgage loan servicing portfolio |
|
|
|
|
|
June 30, 2006 |
|
December 31, 2005 |
|
|
|
|
|
|
|
Number |
|
Dollar amount |
|
Number |
|
Dollar amount |
($ in millions) |
|
of loans |
|
of loans |
|
of loans |
|
of loans |
|
Principal conforming
|
|
|
1,421,361 |
|
|
|
$194,907 |
|
|
|
1,393,379 |
|
|
|
$186,405 |
|
Prime non-conforming
|
|
|
293,923 |
|
|
|
89,415 |
|
|
|
257,550 |
|
|
|
76,980 |
|
Government
|
|
|
179,721 |
|
|
|
18,342 |
|
|
|
181,679 |
|
|
|
18,098 |
|
Nonprime
|
|
|
472,491 |
|
|
|
55,168 |
|
|
|
493,486 |
|
|
|
56,373 |
|
Prime second-lien
|
|
|
621,689 |
|
|
|
24,234 |
|
|
|
500,534 |
|
|
|
17,073 |
|
|
Total primary servicing
portfolio (a)
|
|
|
2,989,185 |
|
|
|
$382,066 |
|
|
|
2,826,628 |
|
|
|
$354,929 |
|
|
|
|
|
(a) |
Excludes loans for which we acted as a subservicer. Subserviced
loans totaled 304,749 with an unpaid principal balance of
$45.4 billion at June 30, 2006, and 271,489 with an
unpaid balance of $38.9 billion at December 31, 2005. |
|
Our international servicing portfolio was comprised of
$27.8 billion of mortgage loans as of June 30, 2006.
30
Managements Discussion and Analysis
GMAC LLC
Allowance for Loan Losses
The following table summarizes the activity related to the
allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Six Months |
|
|
|
|
|
Period ended June 30, ($ in millions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
Allowance at beginning of period
|
|
|
$1,261 |
|
|
|
$1,075 |
|
|
|
$1,253 |
|
|
|
$1,015 |
|
|
|
Provision for loan losses
|
|
|
123 |
|
|
|
145 |
|
|
|
245 |
|
|
|
298 |
|
|
|
Charge-offs
|
|
|
(164 |
) |
|
|
(134 |
) |
|
|
(294 |
) |
|
|
(242 |
) |
|
|
Recoveries
|
|
|
10 |
|
|
|
8 |
|
|
|
26 |
|
|
|
23 |
|
|
|
|
Allowance at June 30
|
|
|
$1,230 |
|
|
|
$1,094 |
|
|
|
$1,230 |
|
|
|
$1,094 |
|
|
|
Allowance as a percentage of total
mortgage loans held for investment and lending receivables
|
|
|
1.42 |
% |
|
|
1.63 |
% |
|
|
1.42 |
% |
|
|
1.63 |
% |
|
|
|
Nonperforming Assets
The following table summarizes the nonperforming assets.
Nonperforming assets are nonaccrual loans, foreclosed assets and
restructured loans. Mortgage loans and lending receivables are
generally placed on nonaccrual status when they
are 60 days or more past due, or when the timely
collection of the principal of the loan, in whole or in part, is
doubtful. Managements classification of a loan as
nonaccrual does not necessarily indicate that the principal of
the loan is uncollectible in whole or in part.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
June 30, |
|
|
($ in millions) |
|
2006 |
|
2005 |
|
2005 |
|
|
|
Nonaccrual loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime conforming
|
|
|
$9 |
|
|
|
$10 |
|
|
|
$19 |
|
|
|
|
|
Prime nonconforming
|
|
|
328 |
|
|
|
361 |
|
|
|
176 |
|
|
|
|
|
Government
|
|
|
|
|
|
|
|
|
|
|
32 |
|
|
|
|
|
Prime second-lien
|
|
|
70 |
|
|
|
85 |
|
|
|
58 |
|
|
|
|
|
Nonprime (a)
|
|
|
5,587 |
|
|
|
5,731 |
|
|
|
4,841 |
|
|
|
Lending receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse
|
|
|
21 |
|
|
|
42 |
|
|
|
4 |
|
|
|
|
|
Construction
|
|
|
13 |
|
|
|
8 |
|
|
|
9 |
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
Total nonaccrual loans
|
|
|
$6,028 |
|
|
|
$6,254 |
|
|
|
$5,139 |
|
|
|
Restructured loans
|
|
|
17 |
|
|
|
23 |
|
|
|
9 |
|
|
|
Foreclosed assets
|
|
|
728 |
|
|
|
506 |
|
|
|
525 |
|
|
|
|
Total nonperforming assets
|
|
|
$6,773 |
|
|
|
$6,783 |
|
|
|
$5,673 |
|
|
|
|
Total nonaccrual loans as a
percentage of total mortgage loans held for investment and
lending receivables
|
|
|
7.0 |
% |
|
|
7.6 |
% |
|
|
7.6 |
% |
|
|
|
Total nonperforming assets as a
percentage of total ResCap assets
|
|
|
5.4 |
% |
|
|
5.7 |
% |
|
|
5.7 |
% |
|
|
|
|
|
|
(a) |
Includes $180 as of June 30, 2006, $374 as of
December 31, 2005, and $843 as of June 30, 2005, of
loans that were purchased distressed and already in
nonaccrual status. |
|
Our classification of a loan as nonperforming does not
necessarily indicate that the principal amount of the loan is
ultimately uncollectible in whole or in part. In certain cases,
borrowers make payments to bring their loans contractually
current and, in all cases, our mortgage loans are collateralized
by residential real estate. As a result, our experience has been
that any amount of ultimate loss is substantially less than the
unpaid principal balance of a nonperforming loan.
31
Managements Discussion and Analysis
GMAC LLC
Our Insurance operations insure automobile service contracts and
underwrite personal automobile insurance coverages (ranging from
preferred to non-standard risks) and selected commercial
insurance and reinsurance coverages. Refer to pages 42-45
of our 2005 Annual Report on Form 10-K for further
discussion of the business profile of our Insurance operations.
Results of Operations
The following table summarizes the operating results of GMAC
Insurance for the periods indicated. The amounts presented are
before the elimination of balances and transactions with our
other operating segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Six Months |
|
|
|
|
|
|
|
|
|
Period ended June 30, ($ in millions) |
|
2006 |
|
2005 |
|
Change |
|
% |
|
2006 |
|
2005 |
|
Change |
|
% |
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance premiums and service
revenue earned
|
|
|
$1,042 |
|
|
|
$919 |
|
|
|
$123 |
|
|
|
13 |
|
|
|
$2,046 |
|
|
|
$1,830 |
|
|
|
$216 |
|
|
|
12 |
|
|
|
Investment income
|
|
|
84 |
|
|
|
96 |
|
|
|
(12 |
) |
|
|
(13 |
) |
|
|
189 |
|
|
|
186 |
|
|
|
3 |
|
|
|
2 |
|
|
|
Other income
|
|
|
31 |
|
|
|
39 |
|
|
|
(8 |
) |
|
|
(21 |
) |
|
|
63 |
|
|
|
76 |
|
|
|
(13 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
1,157 |
|
|
|
1,054 |
|
|
|
103 |
|
|
|
10 |
|
|
|
2,298 |
|
|
|
2,092 |
|
|
|
206 |
|
|
|
10 |
|
|
|
Insurance losses and loss
adjustment expenses
|
|
|
(653 |
) |
|
|
(597 |
) |
|
|
(56 |
) |
|
|
(9 |
) |
|
|
(1,250 |
) |
|
|
(1,185 |
) |
|
|
(65 |
) |
|
|
(5 |
) |
|
|
Acquisition and underwriting expense
|
|
|
(363 |
) |
|
|
(291 |
) |
|
|
(72 |
) |
|
|
(25 |
) |
|
|
(693 |
) |
|
|
(575 |
) |
|
|
(118 |
) |
|
|
(21 |
) |
|
|
Premium tax and other expense
|
|
|
(24 |
) |
|
|
(21 |
) |
|
|
(3 |
) |
|
|
(14 |
) |
|
|
(52 |
) |
|
|
(44 |
) |
|
|
(8 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
117 |
|
|
|
145 |
|
|
|
(28 |
) |
|
|
(19 |
) |
|
|
303 |
|
|
|
288 |
|
|
|
15 |
|
|
|
5 |
|
|
|
Income tax expense
|
|
|
(37 |
) |
|
|
(45 |
) |
|
|
8 |
|
|
|
18 |
|
|
|
(94 |
) |
|
|
(93 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$80 |
|
|
|
$100 |
|
|
|
($20 |
) |
|
|
(20 |
) |
|
|
$209 |
|
|
|
$195 |
|
|
|
$14 |
|
|
|
7 |
|
|
|
|
Total assets
|
|
|
$13,475 |
|
|
|
$12,173 |
|
|
|
$1,302 |
|
|
|
11 |
|
|
|
$13,475 |
|
|
|
$12,173 |
|
|
|
$1,302 |
|
|
|
11 |
|
|
|
|
Insurance premiums and service
revenue written
|
|
|
$1,030 |
|
|
|
$1,038 |
|
|
|
($8 |
) |
|
|
(1 |
) |
|
|
$2,131 |
|
|
|
$2,156 |
|
|
|
($25 |
) |
|
|
(1 |
) |
|
|
|
Combined
ratio (a)
|
|
|
96.2 |
% |
|
|
94.4 |
% |
|
|
|
|
|
|
|
|
|
|
93.8 |
% |
|
|
94.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Management uses combined ratio as a primary measure of
underwriting profitability, with its components measured using
Generally Accepted Accounting Principles. Underwriting
profitability is indicated by a combined ratio under 100% and is
calculated as the sum of all reported losses and expenses
(excluding interest and income tax expense) divided by the total
of premiums and service revenues earned and other income. |
Net income from Insurance operations totaled $80 million
and $209 million for the second quarter and first six
months of 2006, respectively, as compared to $100 million
and $195 million for the same periods in 2005. Net income
fell quarter over quarter due to unfavorable underwriting
results driven by a higher level of losses and loss adjustment
expenses, as exhibited by the increase in combined ratio to
96.2% from 94.4% and a lower level of realized capital gains.
Underwriting results declined due to higher weather losses in
the auto dealer physical damage business and increased loss
experience in international personal lines. The decrease in
underwriting results was favorably impacted by increases in
insurance premiums and service revenue earned and favorable loss
experience in the extended service contract product line and
favorable results in domestic personal lines. Net income
year-to-date increased due to favorable underwriting results in
the first quarter resulting from a lower level of incurred
losses and an increase in recognized capital gains. This
increase was offset by lower underwriting results and capital
gains realized in the second quarter. In addition, year-to-date
results benefited from the strategic acquisition of MEEMIC, a
personal lines business that offers automobile and homeowners
insurance in the Midwest.
Insurance premiums and service revenue written totaled
$1.0 billion and $2.1 billion for the second quarter
and first six months of 2006, respectively, as compared to
$1.0 billion and $2.2 billion for the same periods in
2005. The decrease in the first six months as compared to the
same period last year is primarily attributable to a lower
volume of policies in the extended service contract business due
to lower penetration and retail vehicle sales. The decrease in
insurance premiums and service revenue written was partially
offset by the inclusion of MEEMIC and growth in the reinsurance
assumed business.
The combination of investment and other income decreased 15% and
4% in the second quarter and first six months of 2006,
respectively, as compared to the same 2005 periods. The decline
is primarily attributable to lower capital gains recognized,
somewhat offset by an
32
Managements Discussion and Analysis
GMAC LLC
increase in interest and dividend income in our portfolio of
invested assets. The market value of the investment portfolio
was $7.7 billion at June 30, 2006, compared to
$7.5 billion at June 30, 2005.
Total expenses increased 14% in the second quarter of 2006 as
compared to the same period in 2005, and 11% for the first six
months of 2005 over the same period in 2005. The increases were
commensurate with higher insurance premiums and service revenue
earned and an increase in amortization of deferred acquisition
costs.
Other operations is comprised of our Commercial Finance Group,
equity interest in Capmark, certain corporate activities related
to the Mortgage Group, and reclassifications and elimination
between the reporting segments.
Results of Operations
Net income for GMACs Other operations is summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Six Months |
|
|
|
|
|
Period ended June 30, ($ in millions) |
|
2006 |
|
2005 |
|
Change |
|
% |
|
2006 |
|
2005 |
|
Change |
|
% |
|
|
|
Commercial Finance Group
|
|
|
$1 |
|
|
|
$12 |
|
|
|
($11 |
) |
|
|
(92 |
) |
|
|
$11 |
|
|
|
$26 |
|
|
|
($15 |
) |
|
|
(58 |
) |
|
|
Capmark
|
|
|
19 |
|
|
|
38 |
|
|
|
(19 |
) |
|
|
(50 |
) |
|
|
48 |
|
|
|
101 |
|
|
|
(53 |
) |
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$20 |
|
|
|
$50 |
|
|
|
($30 |
) |
|
|
(60 |
) |
|
|
$59 |
|
|
|
$127 |
|
|
|
($68 |
) |
|
|
(54 |
) |
|
|
|
|
|
Total assets (a)
|
|
|
$6,804 |
|
|
|
$24,347 |
|
|
|
($17,543 |
) |
|
|
(72 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Represents assets of Commercial Finance Group and Capmark. |
|
Commercial Finance Group
The Commercial Finance Group earned $1 million and
$11 million for the second quarter and first six months of
2006, respectively, as compared to $12 million and
$26 million earned in the same periods of the prior year.
The decrease is primarily due to increases in provisions for
credit losses. Additionally, net income has been negatively
impacted by a decline in average earning assets and factored
sales volume, which declined by 6% and 12%, respectively, during
the second quarter in comparison to the prior year. For the six
months ended June 30, 2006, the volume declined by 2% and
10% in comparison to the same period in 2005.
During the second quarter, our Commercial Finance Group
experienced a certain amount of attrition of key personnel,
including their President and CEO. As a result, the Commercial
Finance Group reporting unit has initiated a goodwill impairment
test, outside the normal fourth quarter cycle, which is expected
to be completed during the third quarter of 2006.
Equity Interest in Capmark
On March 23, 2006, we closed on the sale of approximately
78 percent of our equity in Capmark for approximately
$1.5 billion in cash. At the closing, Capmark also repaid
to us approximately $7.3 billion in intercompany loans,
bringing the total cash proceeds from the sale to
$8.8 billion.
We retained an equity voting interest in Capmark and have
representation on its Board of Directors. We no longer have a
majority ownership or a majority controlling interest in Capmark
but do have the ability to exercise significant influence and
have accounted for our remaining interest under the equity
method of accounting. In addition to our equity investment, we
have an investment of $250 million of subordinated
indenture notes issued by Capmark. Both investments are
reflected in Other assets in the Condensed Consolidated Balance
Sheet.
Our net after-tax earnings in Capmark decreased 50% and 52% to
$19 million and $48 million for the second quarter and
first six months of 2006. These decreases are primarily a result
of a loss on the sale and a decline in earnings for the quarter
as we are no longer fully consolidating the results of Capmark
but instead reflect our 22% equity share of Capmark earnings
effective March 23, 2006.
|
|
|
Critical Accounting Estimates |
We have identified critical accounting estimates that, as a
result of judgments, uncertainties, uniqueness and complexities
of the underlying accounting standards and operations involved
could result in material changes to our financial condition,
results of operations or cash flows under different conditions
or using different assumptions.
33
Managements Discussion and Analysis
GMAC LLC
Our most critical accounting estimates are:
|
|
|
|
|
Determination of the allowance for credit losses |
|
|
|
Valuation of automotive lease residuals |
|
|
|
Valuation of mortgage servicing rights |
|
|
|
Valuation of interests in securitized assets |
|
|
|
Determination of reserves for insurance losses and loss
adjustment expenses |
The adoption of SFAS 156 as of January 1, 2006,
requires us to present our servicing rights at fair value for
those classes of servicing rights for which we have elected the
fair value method.
There have been no other significant changes in the
methodologies and processes used in developing these estimates
from what is described in our 2005 Annual Report on
Form 10-K. Refer
to Note 1 for further discussion of the impact of adopting
this standard.
Funding Sources and Strategy
Our liquidity and our ongoing profitability is, in large part,
dependent upon our timely access to capital and the costs
associated with raising funds in different segments of the
capital markets. Over the past several years, our funding
strategy has focused on the development of diversified funding
sources across a global investor base, both public and private
and, as appropriate, the extension of debt maturities. In
addition, we maintain a large cash reserve ($22.7 billion
at June 30, 2006) including certain marketable securities
that can be utilized to meet our obligations in the event of any
market disruption. From time to time, we repurchase previously
issued debt as part of our cash and liquidity management
strategy. This multi-faceted strategy, combined with a
continuous prefunding of requirements, is designed to enhance
our ability to meet our obligations.
The diversity of our funding sources enhances funding
flexibility, limits dependence on any one source of funds and
results in a more cost effective strategy over the longer term.
In developing this approach, management considers market
conditions, prevailing interest rates, liquidity needs and the
desired maturity profile of our liabilities. This strategy has
helped us maintain liquidity during periods of weakness in the
capital markets, changes in our business or changes in our
credit ratings. Despite our diverse funding sources and
strategies, our ability to maintain liquidity may be affected by
certain risk factors. Refer to Risk Factors for further
discussion on risk factors.
34
Managements Discussion and Analysis
GMAC LLC
The following table summarizes our outstanding debt by funding
source, excluding Capmark balances, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
|
|
|
|
June 30, |
|
December 31, |
($ in millions) |
|
2006 |
|
2005 |
|
Commercial paper
|
|
|
$850 |
|
|
|
$524 |
|
Institutional term debt
|
|
|
77,621 |
|
|
|
82,557 |
|
Retail debt programs
|
|
|
32,047 |
|
|
|
34,482 |
|
Secured financings
|
|
|
124,945 |
|
|
|
121,138 |
|
Bank loans, and other
|
|
|
13,512 |
|
|
|
15,704 |
|
|
|
Total debt (a)
|
|
|
248,975 |
|
|
|
254,405 |
|
Customer deposits (b)
|
|
|
9,143 |
|
|
|
6,855 |
|
Off-balance sheet
securitizations (c)
|
|
|
|
|
|
|
|
|
|
Retail finance receivables
|
|
|
6,476 |
|
|
|
3,165 |
|
|
Wholesale loans
|
|
|
20,881 |
|
|
|
20,724 |
|
|
Mortgage loans
|
|
|
92,361 |
|
|
|
77,573 |
|
|
|
Total funding
|
|
|
377,836 |
|
|
|
362,722 |
|
Less: cash reserves (d)
|
|
|
(22,703 |
) |
|
|
(19,605 |
) |
|
|
Net funding
|
|
|
$355,133 |
|
|
|
$343,117 |
|
|
Leverage ratio covenant (e)
|
|
|
6.8:1 |
|
|
|
7.5:1 |
|
|
Funding Commitments
($ in billions)
|
|
|
|
|
|
|
|
|
|
Bank liquidity facilities (f)
|
|
|
$44.4 |
|
|
|
$44.1 |
|
|
Secured funding facilities (g)
|
|
|
$109.3 |
|
|
|
$114.9 |
|
|
|
|
|
(a) |
Excludes fair value adjustment as described in Note 7 to
the Condensed Consolidated Financial Statements. |
|
|
|
(b) |
Includes consumer and commercial bank deposits and dealer
wholesale deposits. |
(c) |
Represents net funding from securitizations of retail and
wholesale automotive receivables and mortgage loans accounted
for as sales, further described in Note 8 to the
Consolidated Financial Statements in our 2005 Annual Report on
Form 10-K. |
(d) |
Includes $17.2 billion in cash and cash equivalents and
$5.5 billion invested in marketable securities at
June 30, 2006, and $15.4 billion and
$4.2 billion at December 31, 2005, respectively. |
(e) |
As described in Note 7 to the Condensed Consolidated
Financial Statements, our liquidity facilities and certain other
funding facilities contain a leverage ratio covenant of 11.0:1
which excludes from debt, securitization transactions that are
accounted for on-balance sheet as secured financings (totaling
$97,841 and $94,346 at June 30, 2006, and December 31,
2005, respectively). Our debt to equity ratio was 11.2:1 and
11.9:1, at June 30, 2006, and December 31, 2005,
respectively, as determined by accounting principles generally
accepted in the United States of America, which was the former
basis for the leverage ratio covenant. |
|
|
(f) |
Represents both committed and uncommitted bank liquidity
facilities. Refer to Note 7 to the Condensed Consolidated
Financial Statements for details. |
|
|
(g) |
Represents both committed and uncommitted secured funding
facilities. Includes commitments with third-party asset-backed
commercial paper conduits as well as forward flow sale
agreements with third parties and repurchase facilities. Refer
to Note 7 to the Condensed Consolidated Financial
Statements for details. |
In the second and third quarters of 2005 our unsecured debt
ratings (excluding ResCap) were lowered to a non-investment
grade rating by three of the four nationally recognized rating
agencies that rate us (refer to the Credit Ratings section of
this MD&A for further information). These downgrades were a
continuation of a series of credit rating actions over the past
few years caused by concerns as to the financial outlook of GM,
including its overall market position in the automotive industry
and its burdensome health care obligations, as well as the
uncertainty surrounding the auto parts supplier Delphi
Corporation and its impact on GMs financial condition. As
a result of these rating actions, our unsecured credit spreads
widened to unprecedented levels in 2005. In anticipation of, and
as a result of, these credit rating actions, we modified our
diversified funding strategy to focus on secured funding and
automotive whole loan sales. These funding sources are generally
not directly affected by ratings on unsecured debt and therefore
offer both stability in spread and access to the market. For the
six months of 2006, secured funding and automotive whole loan
sales represented 94% of our U.S. automotive term funding
volume. The increased use of automotive whole loan sales is part
of our migration to an originate and sell model for our
U.S. automotive finance business. In the second quarter of
2006, we executed $5.5 billion in automotive whole loan
sales.
In addition, through our banking activities in our mortgage and
automotive operations, bank deposits (certificates of deposits
and brokered deposits) have become an important funding source
for us. We have also been able to diversify our unsecured
funding through the
35
Managements Discussion and Analysis
General Motors Acceptance Corporation
formation of ResCap. ResCap, an indirect wholly owned
subsidiary, was formed as the holding company of our residential
mortgage businesses and in the second quarter of 2005
successfully achieved an investment grade rating (separate from
GMAC). To date, ResCap has issued $12.2 billion in public
and private unsecured debt and closed a $3.5 billion
syndication of its bank facilities. The syndication, which
closed in July 2005, consisted of a $1.75 billion
syndicated term loan; an $875 million syndicated line of
credit committed through July 2008 and an $875 million
syndicated line of credit committed through July 2007. In the
fourth quarter of 2005, ResCap filed a $12 billion shelf
registration statement in order to offer senior and/or
subordinated debt securities and has issued $7.2 billion in
unsecured debt to date from this shelf. In May 2006
$1.7 billion was issued off of this shelf which was
comprised of two tranches, GBP 400 million and EUR
750 million. The proceeds from bond transactions were used
to repay the intercompany subordinated note to us, thus
providing additional liquidity.
As previously disclosed, on March 23, 2006, we completed
the sale of 78% of our equity in GMAC Commercial Mortgage.
Under the terms of the transaction, we received
$8.8 billion at closing which is comprised of sale proceeds
and repayment of intercompany debt, thereby increasing our
liquidity position and reducing the amount of funding required.
Please refer to Note 1 of our Condensed Consolidated
Financial Statements for further details.
The change in focus in the funding strategy has allowed us to
maintain adequate access to capital and a sufficient liquidity
position despite reductions in and limited access to traditional
unsecured funding sources (i.e., commercial paper, term debt,
bank loans and lines of credit) due to the deterioration in our
unsecured credit rating. Unsecured sources most impacted by the
reduction in our credit rating have been our commercial paper
programs, the term debt markets, certain bank loan arrangements
primarily at ResCap and our International Automotive operations,
as well as Fannie Mae custodial borrowing arrangements at ResCap.
A further reduction of our credit rating could increase
borrowing costs and further constrain our access to unsecured
debt markets, including capital markets for retail debt. In
addition, a further reduction of our credit ratings could
increase the possibility of additional terms and conditions in
any new or replacement financing arrangements and impact
elements of certain existing secured borrowing arrangements.
However, our funding strategy has increased our focus on
expanding and developing diversified secured funding sources and
increased use of automotive whole loan sales that are not
directly impacted by ratings on our unsecured debt.
With limited access to traditional unsecured funding sources,
management will continue to diversify and expand our use of
asset-backed funding and we believe that our funding strategy
will provide sufficient access to the capital markets to meet
our short- and medium-term funding needs. Notwithstanding the
foregoing, management believes that the current ratings
situation and outlook increases the level of risk to our
long-term ability to sustain the current level of asset
originations. In an effort to mitigate this risk, on
April 3, 2006, GM announced that it agreed to sell a
51 percent controlling interest in us to a consortium led
by Cerberus Capital Management, which is expected to close in
the fourth quarter of this year. In addition to continuing to
enable us to support the sale of GM vehicles, the transaction is
intended to support our strategic goal of a stable investment
grade rating and profitable growth. In connection with the
targeted fourth quarter sale closing, we expect to arrange two
asset-backed funding facilities that total up to
$25 billion, which will support our ongoing business and
enhance our liquidity position. A $10 billion facility is
expected to be available before closing and the other facility
is expected to be available on or after closing. Citigroup has
committed $12.5 billion in the aggregate to these two
facilities. The funding facilities are in addition to
Citigroups initial equity investment in us. There can be
no assurance that the sale transaction will be successful in
achieving a stable investment grade rating and therefore we plan
to maintain the current conservative funding strategy until
risks to closing the transaction are reduced.
Credit Ratings
The cost and availability of unsecured financing is influenced
by credit ratings, which are intended to be an indicator of the
creditworthiness of a particular company, security, or
obligation. Lower ratings generally result in higher borrowing
costs as well as reduced access to capital markets. This is
particularly true for certain term debt institutional investors
whose investment guidelines require investment grade term
ratings and for short-term institutional investors (money
markets in particular) whose investment guidelines require the
two highest rating categories for short-term debt. Substantially
all of our debt has been rated by nationally recognized
statistical rating organizations. Concerns over the competitive
and financial strength of GM, including how it will fund its
burdensome health care liabilities and uncertainties at Delphi
Corporation, have resulted in a series of credit rating actions,
which commenced late in 2001. In the second and third quarters
of 2005, Standard & Poors, Fitch and Moodys
downgraded GMACs (excluding ResCap) senior debt to a
non-investment grade
rating with DBRS continuing to maintain an investment grade
rating on our senior debt. As a result of GMs announcement
on October 17, 2005, that it was exploring the possible
sale of a controlling interest in us to a strategic partner, the
four rating agencies changed our review status to either
evolving or developing. Most recently, on March 16, 2006,
Moodys placed our senior unsecured ratings under review
for a possible downgrade following GMs announcement that
it would delay filing its annual report on
36
Managements Discussion and Analysis
GMAC LLC
Form 10-K with the SEC. Following the April 3, 2006,
announcement by GM that it agreed to sell a 51 percent
controlling interest in us, Fitch revised our rating watch
status to Positive from Evolving, indicating that the ratings
may be upgraded or maintained at current levels.
The following summarizes our current ratings, outlook and the
date of last rating action by the respective nationally
recognized rating agencies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rating |
|
Commercial |
|
Senior |
|
|
|
|
Agency |
|
Paper |
|
Debt |
|
Outlook |
|
Date of Last Action |
|
Fitch
|
|
|
B |
|
|
|
BB |
|
|
|
Positive |
|
|
|
September 26, 2005 (a) |
|
|
|
|
|
|
|
|
|
|
|
|
Possible |
|
|
|
|
|
Moodys
|
|
|
Not-Prime |
|
|
|
Ba1 |
|
|
|
downgrade |
|
|
|
August 24, 2005 (b) |
|
S&P
|
|
|
B-1 |
|
|
|
BB |
|
|
|
Developing |
|
|
|
May 5, 2005 (c) |
|
DBRS
|
|
|
R-2 (low) |
|
|
|
BBB (low) |
|
|
|
Developing |
|
|
|
August 2, 2005 (d) |
|
|
|
|
|
(a) |
Fitch downgraded our senior debt to BB from BB+, affirmed the
commercial paper rating of B and on October 17, 2005,
placed the ratings on Rating Watch Evolving and on April 3,
2006, changed the rating watch status to Positive. |
|
(b) |
Moodys lowered our senior debt to Ba1 from Baa2,
downgraded the commercial paper rating to Not-Prime from
Prime-2 and on
October 17, 2005, changed the review status of the
long-term debt ratings to direction uncertain and on
March 16, 2006, changed the review status of the senior
debt ratings to possible downgrade. |
|
(c) |
Standard & Poors downgraded our senior debt to BB from
BBB-, downgraded the commercial paper rating to
B-1 from
A-3 and on
October 10, 2005, changed the outlook to CreditWatch with
developing implications. |
|
(d) |
DBRS downgraded our senior debt to BBB (low) from BBB,
downgraded the commercial paper rating to
R-2 (low) from
R-2 (middle), and on
October 11, 2005, placed the ratings under review with
developing implications and affirmed the review status on
October 17, 2005. |
|
In addition, ResCap, our indirect wholly owned subsidiary, has
investment grade ratings (separate from GMAC) from the
nationally recognized rating agencies. The following table
summarizes ResCaps current ratings, outlook and the date
of the last rating or outlook change by the respective agency.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rating |
|
Commercial |
|
Senior |
|
|
|
|
Agency |
|
Paper |
|
Debt |
|
Outlook |
|
Date of Last Action |
|
Fitch
|
|
|
F3 |
|
|
|
BBB- |
|
|
|
Positive |
|
|
|
September 26, 2005 (a) |
|
|
|
|
|
|
|
|
|
|
|
|
Possible |
|
|
|
|
|
Moodys
|
|
|
P-3 |
|
|
|
Baa3 |
|
|
|
downgrade |
|
|
|
August 24, 2005 (b) |
|
S&P
|
|
|
A-3 |
|
|
|
BBB- |
|
|
|
Developing |
|
|
|
June 9, 2005 (c) |
|
DBRS
|
|
|
R-2 (middle) |
|
|
|
BBB |
|
|
|
Developing |
|
|
|
June 9, 2005 (d) |
|
|
|
|
|
(a) |
Fitch downgraded the senior debt of ResCap to BBB- from BBB,
downgraded the commercial paper rating to F3 from F2, and on
October 17, 2005, placed the ratings on Rating Watch
Evolving and on April 3, 2006, changed the rating watch
status to Positive. |
|
(b) |
Moodys downgraded the senior debt of ResCap to Baa3 from
Baa2, downgraded the commercial paper rating to P3 from P2, on
October 17, 2005, changed the review status of the
long-term debt ratings to direction uncertain and on
March 16, 2006, changed the review status of the senior
debt ratings to possible downgrade. |
|
(c) |
Standard & Poors initial ratings for ResCap were
assigned, and on October 10, 2005, S&P changed the
outlook to CreditWatch with developing implications. |
|
(d) |
DBRS initial ratings for ResCap were assigned and on
October 11, 2005, DBRS placed the ratings under review with
developing implications and affirmed the review status on
October 17, 2005. |
|
37
Managements Discussion and Analysis
GMAC LLC
|
|
|
Off-balance Sheet
Arrangements |
We use off-balance sheet entities as an integral part of our
operating and funding activities. For further discussion of our
use of off-balance sheet entities, refer to the Off-balance
Sheet Arrangements section in our 2005 Annual Report on
Form 10-K.
The following table, which excludes Capmark balances, summarizes
assets carried off-balance sheet in these entities.
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
($ in billions) |
|
2006 |
|
2005 |
|
Securitization (a)
|
|
|
|
|
|
|
|
|
|
Retail finance receivables
|
|
|
$7.2 |
|
|
|
$6.0 |
|
|
Wholesale loans
|
|
|
21.6 |
|
|
|
21.4 |
|
|
Mortgage loans
|
|
|
94.7 |
|
|
|
79.4 |
|
|
Total securitization
|
|
|
123.5 |
|
|
|
106.8 |
|
Other off-balance sheet activities
|
|
|
|
|
|
|
|
|
|
Mortgage warehouse
|
|
|
0.8 |
|
|
|
0.6 |
|
|
Other mortgage
|
|
|
0.1 |
|
|
|
0.2 |
|
|
Total off-balance sheet
activities
|
|
|
$124.4 |
|
|
|
$107.6 |
|
|
|
|
|
(a) |
Includes only securitizations accounted for as sales under
SFAS 140, as further described in Note 9 to the
Consolidated Financial Statements in our 2005 Annual Report on
Form 10-K. |
|
|
|
|
Accounting and Reporting
Developments |
Statement of Position
05-1 In
September 2005 the AICPA issued Statement of
Position 05-1,
Accounting by Insurance Enterprises for Deferred Acquisition
Costs in Connection with Modifications or Exchanges of Insurance
Contracts
(SOP 05-1).
SOP 05-1 provides
guidance on accounting for deferred acquisition costs on
internal replacements of insurance contracts.
SOP 05-1 defines
an internal replacement, and specifies the conditions that
determine whether the replacement contract is substantially or
unsubstantially changed from the replaced contract. An internal
replacement determined to result in a substantially changed
contract should be accounted for as an extinguishment of the
replaced contract, and unamortized deferred acquisition costs
and unearned revenue liabilities of the replaced contract should
no longer be deferred. An internal replacement determined to
result in an unsubstantially changed contract should be
accounted for as a continuation of the replaced asset.
SOP 05-01
introduces the terms integrated and non-integrated contract
features and specifies that non-integrated features do not
change the base contract and are to be accounted for in a manner
similar to a separately issued contract. Integrated features are
evaluated in conjunction with the base contract.
SOP 05-1 is
effective for internal replacements occurring in fiscal years
beginning after December 15, 2006. Management is assessing
the potential impact on our financial condition or results of
operations.
Statement of Financial Accounting Standards
No. 155 In February 2006 the Financial
Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 155 Accounting for Certain
Hybrid Financial Instruments an amendment of
FASB Statements No. 133 and 140 (SFAS 155).
This standard permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that
otherwise would require bifurcation. SFAS 155 allows an
entity to make an irrevocable election to measure such a hybrid
financial instrument at fair value on an
instrument-by-instrument basis. The standard eliminates the
prohibition on a QSPE from holding a derivative financial
instrument that pertains to a beneficial instrument other than
another derivative financial instrument. SFAS 155 also
clarifies which interest-only and principal-only strips are not
subject to the requirements of SFAS 133 as well as
determines that concentrations of credit risk in the form of
subordination are not embedded derivatives. SFAS 155 is
effective for all financial instruments acquired or issued after
the beginning of the fiscal year that begins after
September 15, 2006. Management is assessing the potential
impact on our financial condition or results of operations.
FASB Staff Position
FIN 46(R)-6
In April 2006 the FASB issued
FIN 46(R)-6,
Determining the Variability to Be Considered in Applying FASB
Interpretation No. 46(R) which requires the variability
of an entity to be analyzed based on the design of the entity.
The nature and risks in the entity, as well as the purpose for
the entitys creation are examined to determine the
variability in applying FIN 46(R). The variability is used
in applying FIN 46(R) to determine whether an entity is a
variable interest entity, which interests are variable interests
in the entity and who is the primary beneficiary of the variable
interest entity. This statement is applied prospectively and is
effective for all reporting periods after June 15, 2006.
Management is assessing the potential impact on our financial
condition or results of operations.
FASB Interpretation No. 48 In June 2006
the FASB issued Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (FIN 48) which supplements
Statement of Financial Accounting Standard No. 109 by
defining the confidence level that a tax position must meet in
order to be recognized in the financial statements. The
Interpretation requires that the tax effects of a position be
recognized only if it is
38
Managements Discussion and Analysis
GMAC LLC
more-likely-than-not
to be sustained based solely on its technical merits as of the
reporting date. The
more-likely-than-not
threshold represents a positive assertion by management that a
company is entitled to the economic benefits of a tax position.
If a tax position is not considered
more-likely-than-not to
be sustained based solely on its technical merits, no benefits
of the position are to be recognized. Moreover, the
more-likely-than-not
threshold must continue to be met in each reporting period to
support continued recognition of a benefit. At adoption,
companies must adjust their financial statements to reflect only
those tax positions that are
more-likely-than-not to
be sustained as of the adoption date. Any necessary adjustment
would be recorded directly to retained earnings in the period of
adoption and reported as a change in accounting principle. This
Interpretation is effective as of the beginning of the first
fiscal year beginning after December 15, 2006. Management
is assessing the potential impact on our financial condition or
results of operations.
|
|
|
Consolidated Operating
Results |
The following section provides a discussion of our consolidated
results of operations as displayed in the Condensed Consolidated
Statement of Income. The individual business segment sections of
this MD&A provide a further discussion of the operating
results.
Revenues
Total revenue increased by $410 million and
$922 million, respectively, in the second quarter and first
six months of 2006, compared to the same period of 2005,
primarily due to increases in operating lease income, revenue
from mortgage loans held for sale and mortgage consumer interest
income. Mortgage originations increased to $47.0 billion in
the second quarter from $42.6 billion in the prior period.
These increases were partially offset by a decline in auto
consumer revenue.
Interest and discount expense increased by $769 million and
$1,329 million in the second quarter and first six months
of 2006, as compared to the same period of the prior year. This
increase is primarily the result of the negative impact of
higher funding costs due to an increase in overall market
interest rates. The provision for credit losses increased for
the second quarter of 2006 by $84 million.
Insurance premiums and service revenue earned increased by 13%
and 12% in the second quarter and first six months of 2006 as
compared with the same period in 2005, as a result of the
acquisition of MEEMIC, growth in the extended service contract
line, reinsurance assumed business and international personal
lines operations. Gain on sale of mortgage and automotive loans
increased due to higher overall loan production and increased
volume of off-balance
sheet securitizations versus on-balance secured financings.
Investment income decreased by $106 million and
$98 million in the second quarter and first six months of
2006, respectively, as compared to the same period in the prior
year. The decreases are primarily driven by lower capital gains
recognized and an increase in losses on U.S. Treasury and
principal-only securities during the first half of 2006. Gain on
sale of equity investments increased by $411 million in the
second quarter and first six months of 2006 as compared to the
same period in the prior year. The increase is primarily driven
due to the sale of our equity interest in a regional homebuilder
during the second quarter of 2006.
Expenses
Noninterest expense increased by $197 million, or 5% in the
second quarter of 2006 and $529 million, or 7% for the
first six months of 2006, as compared to the same period in the
prior year. Depreciation expense on operating lease assets
increased during the second quarter and first six months of
2006, as a result of higher average operating lease asset levels
as compared to the same period of 2005. In addition, other
operating expenses increased due to a decrease in the gains
realized on the disposal of off-lease vehicles.
39
Managements Discussion and Analysis
GMAC LLC
|
|
|
Forward Looking Statements |
The foregoing Managements Discussion and Analysis of
Financial Condition and Results of Operations and other portions
of this Form 10-Q
contains various forward-looking statements within the meaning
of applicable federal securities laws, including the Private
Securities Litigation Reform Act of 1995, that are based upon
our current expectations and assumptions concerning future
events, which are subject to a number of risks and uncertainties
that could cause actual results to differ materially from those
anticipated.
The words anticipate, estimate,
believe, expect, intend,
may, plan, project,
future and should and any similar
expressions are intended to identify forward-looking statements.
Forward-looking statements involve a number of risks,
uncertainties and other factors, including (but not limited to)
the Risk Factors described in Item 1A of our 2005
Form 10-K, as
updated in this
Form 10-Q, and
which may be revised or supplemented in subsequent reports on
SEC Forms 10-Q and
8-K. Such factors
include, among others, the following: the ability of GM to
complete the previously announced transaction with a strategic
investor regarding a controlling interest in us while
maintaining a significant stake in us, securing separate credit
ratings and low cost funding to sustain growth for us and ResCap
and maintaining the mutually beneficial relationship between us
and GM; changes in economic conditions, currency exchange rates,
significant terrorist attacks or political instability in the
major markets where we operate; changes in the laws,
regulations, policies or other activities of governments,
agencies and similar organizations where such actions may affect
the production, licensing, distribution or sale of our products,
the cost thereof or applicable tax rates; and the threat of
terrorism, the outbreak or escalation of hostilities between the
United States and any foreign power or territory and changes in
international political conditions may continue to affect both
the United States and the global economy and may increase other
risks.
40
Controls and Procedures
GMAC LLC
We maintain disclosure controls and procedures (as defined in
Rule 13a-15(e)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) designed to ensure that information
required to be disclosed in reports filed under the Exchange Act
is recorded, processed, summarized and reported within the
specified time periods. As of the end of the period covered by
this report, our Principal Executive Officer and our Principal
Financial Officer evaluated, with the participation of our
management, the effectiveness of our disclosure controls and
procedures. Based on managements evaluation, GMACs
Principal Executive and Principal Financial Officer each
concluded that our disclosure controls and procedures were not
effective as of June 30, 2006, solely because of the
material weakness in internal control over financial reporting
with respect to the preparation, review, presentation and
disclosure of the Consolidated Statement of Cash Flows as
disclosed in our report on
Form 10-K for year
ended December 31, 2005.
In order to remediate this material weakness in our internal
control over financial reporting, management is in the process
of designing and implementing and continuing to enhance controls
to aid in the correct preparation, review, presentation and
disclosure of our Consolidated Statement of Cash Flows. We are
continuing to monitor, evaluate and test the operating
effectiveness of these controls.
There were no other changes in our internal controls over
financial reporting (as defined in
Rule 13a-15(f)
under the Exchange Act) that occurred during our most recent
fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
41
Other Information
GMAC LLC
We are subject to potential liability under laws and government
regulations and various claims and legal actions that are
pending or may be asserted against us. The following update
supplements our Legal Proceedings section in our 2005 Annual
Report on
Form 10-K. Please
refer to the Legal Proceedings section in our 2005 Annual Report
on Form 10-K for
additional information regarding the items noted below and other
pending governmental proceedings, claims and legal actions.
The previously reported bondholder class actions,
J&R Marketing, et al. v. General Motors
Corporation, et al., Mager v. General Motors
Corporation, et al., and Zielezienski,
et al. v. General Motors, et al. have been
consolidated in the United States District Court for the Eastern
District of Michigan under the caption
J&R Marketing, et al. v. General Motors
Corporation, et al. and lead plaintiffs counsel
have been appointed by the court. On July 28, 2006,
plaintiffs filed a Consolidated Amended Complaint. The amended
complaint mainly differs from the initial complaint in that it
asserts claims for GMAC debt securities purchased during a
different time period (July 28, 2003 through November 9,
2005), and adds additional underwriter defendants. No
determination has been made that the case may be maintained as a
class action. The GM and GMAC defendants intend to vigorously
defend this action.
There have been no material changes to the Risk Factors section
of our 2005 Annual Report on Form 10-K as supplemented by
our March 31, 2006
Form 10-Q.
The following risk factors, which were disclosed in our 2005
Annual Report on
Form 10-K and
March 31, 2006
Form 10-Q, have
not materially changed since we filed those reports. See our
2005 Annual Report on
Form 10-K and
March 31, 2006
Form 10-Q for a
complete discussion of these risk factors.
Risks Related to Our Controlling Stockholder
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GM has agreed to sell a controlling interest in GMAC. There is a
risk that the sale may not occur or, if it does occur, may not
restore our investment grade rating or maintain ResCaps
investment grade ratings. |
Risks Related to Our Business
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We have recently experienced a series of credit rating actions,
resulting in the downgrade of our credit ratings to historically
low levels. Any further reduction of our credit ratings or
failure to restore our credit ratings to higher levels could
have a material adverse effect on our business. |
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Our business requires substantial capital and, if we are unable
to maintain adequate financing sources, our profitability and
financial condition will suffer and jeopardize our ability to
continue operations. |
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Our indebtedness and other obligations are significant and could
materially adversely affect our business. |
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The profitability and financial condition of our operations are
dependent upon the operations of our parent, General Motors. |
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We have substantial credit exposure to General Motors. |
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As a wholly owned subsidiary of GM, we are jointly and severally
responsible with GM and its other subsidiaries for funding
obligations under GMs and its subsidiaries qualified
U.S. defined benefit pension plans. Our financial condition
and our ability to repay unsecured debt could be impaired if we
were required to pay significant funding obligations for the GM
plans. |
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We are exposed to credit risk which could affect our
profitability and financial condition. |
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Our earnings may decrease because of increases or decreases in
interest rates. |
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Our hedging strategies may not be successful in mitigating our
risks associated with changes in interest rates and could affect
our profitability and financial condition. |
42
Other Information
GMAC LLC
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Our residential mortgage subsidiarys ability to pay
dividends and to prepay subordinated debt obligations to us is
restricted by contractual arrangements. |
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A failure of or interruption in the communications and
information systems on which we rely to conduct our business
could adversely affect our revenues and profitability. |
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We use estimates and assumptions in determining the fair value
of certain of our assets, in determining our allowance for
credit losses, in determining lease residual values and in
determining our reserves for insurance losses and loss
adjustment expenses. If our estimates or assumptions prove to be
incorrect, our cash flow, profitability, financial condition and
business prospects could be materially adversely affected. |
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Our business outside the United States exposes us to additional
risks that may cause our revenues and profitability to decline. |
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Our business could be adversely affected by changes in currency
exchange rates. |
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General business and economic conditions of the industries and
geographic areas in which we operate affect our revenues,
profitability and financial condition. |
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Our profitability and financial condition may be materially
adversely affected by decreases in the residual value of
off-lease vehicles. |
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Fluctuations in valuation of investment securities or
significant fluctuations in investment market prices could
negatively affect revenues. |
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Changes in existing U.S. government-sponsored mortgage
programs, or disruptions in the secondary markets in the United
States or in other countries in which our mortgage subsidiaries
operate, could adversely affect the profitability and financial
condition of our mortgage business. |
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We may be required to repurchase contracts and provide
indemnification if we breach representations and warranties from
our securitization and whole loan transactions, which could harm
our profitability and financial condition. |
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Significant indemnification payments or contract, lease or loan
repurchase activity of retail contracts or leases or mortgage
loans could harm our profitability and financial condition. |
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A loss of contractual servicing rights could have a material
adverse effect on our financial condition, liquidity and results
of operations. |
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The regulatory environment in which we operate could have a
material adverse effect on our business and earnings. |
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The worldwide financial services industry is highly competitive.
If we are unable to compete successfully or if there is
increased competition in the automotive financing, mortgage
and/or insurance markets or generally in the markets for
securitizations or asset sales, our margins could be materially
adversely affected. |
None.
The exhibits listed on the accompanying Index of Exhibits are
filed as a part of this report. Such Index is incorporated
herein by reference.
43
Signatures
GMAC LLC
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, this
7th day of August, 2006.
GMAC LLC
(Registrant)
/s/ Sanjiv Khattri
Sanjiv Khattri
Executive Vice President and
Chief Financial Officer
/s/ Linda K. Zukauckas
Linda K. Zukauckas
Vice President and Corporate Controller
44
Index of Exhibits
GMAC LLC
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Exhibit | |
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Description |
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Method of Filing |
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2.1 |
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Purchase and Sale Agreement by and
among General Motors Corporation, General Motors Acceptance
Corporation, GM Finance Co. Holdings Inc. and FIM Holdings LLC
dated as of April 2, 2006
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Filed as Exhibit 2.1 to the
Companys Current Report on Form 8-K dated as of
April 2, 2006 (File No. 1-3754); incorporated
herein by reference.
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3.1 |
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Certificate of Formation of
GMAC LLC dated July 20, 2006
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Filed herewith.
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3.2 |
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Certificate of Conversion to
Limited Liability Company of General Motors Acceptance
Corporation to GMAC LLC dated July 20, 2006
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Filed herewith.
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3.3 |
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Limited Liability Company Agreement
of GMAC LLC dated July 21, 2006
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Filed herewith.
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4.1 |
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Form of Indenture dated as of
July 1, 1982, between the Company and Bank of New York
(Successor Trustee to Morgan Guaranty Trust Company of New
York), relating to Debt Securities
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Filed as Exhibit 4(a) to the
Companys Registration Statement No. 2-75115;
incorporated herein by reference.
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4.1.1 |
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Form of First Supplemental
Indenture dated as of
April 1, 1986, supplementing the Indenture designated as
Exhibit 4.1
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Filed as Exhibit 4(g) to the
Companys Registration Statement No. 33-4653;
incorporated herein by reference.
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4.1.2 |
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Form of Second Supplemental
Indenture dated as of
June 15, 1987, supplementing the Indenture designated as
Exhibit 4.1
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Filed as Exhibit 4(h) to the
Companys Registration Statement No. 33-15236;
incorporated herein by reference.
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4.1.3 |
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Form of Third Supplemental
Indenture dated as of September 30, 1996, supplementing the
Indenture designated as Exhibit 4.1
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Filed as Exhibit 4(i) to the
Companys Registration Statement No. 333-33183;
incorporated herein by reference.
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4.1.4 |
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Form of Fourth Supplemental
Indenture dated as of
January 1, 1998, supplementing the Indenture designated as
Exhibit 4.1
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Filed as Exhibit 4(j) to the
Companys Registration Statement No. 333-48705;
incorporated herein by reference.
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4.1.5 |
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Form of Fifth Supplemental
Indenture dated as of September 30, 1998, supplementing the
Indenture designated as Exhibit 4.1
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Filed as Exhibit 4(k) to the
Companys Registration Statement No. 333-75463;
incorporated herein by reference.
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4.2 |
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Form of Indenture dated as of
September 24, 1996, between the Company and The Chase
Manhattan Bank, Trustee, relating to SmartNotes
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Filed as Exhibit 4 to the
Companys Registration Statement No. 333-12023;
incorporated herein by reference.
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4.2.1 |
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Form of First Supplemental
Indenture dated as of
January 1, 1998, supplementing the Indenture designated as
Exhibit 4.2
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Filed as Exhibit 4(a)(1) to
the Companys Registration Statement No. 333-48207;
incorporated herein by reference.
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4.2.2 |
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Form of Second Supplemental
Indenture dated as of June 30, 2006, supplementing the
Indenture designated as Exhibit 4.2
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Filed as Exhibit 4(a)(2) to
the Companys Registration Statement No. 333-136021;
incorporated herein by reference.
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4.3 |
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Form of Indenture dated as of
October 15, 1985, between the Company and U.S. Bank
Trust (Successor Trustee to Comerica Bank), relating to Demand
Notes
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Filed as Exhibit 4 to the
Companys Registration Statement No. 2-99057;
incorporated herein by reference.
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4.3.1 |
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Form of First Supplemental
Indenture dated as of
April 1, 1986, supplementing the Indenture designated as
Exhibit 4.3
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Filed as Exhibit 4(a) to the
Companys Registration Statement No. 33-4661;
incorporated herein by reference.
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4.3.2 |
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Form of Second Supplemental
Indenture dated as of
June 24, 1986, supplementing the Indenture designated as
Exhibit 4.3
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Filed as Exhibit 4(b) to the
Companys Registration Statement No. 33-6717;
incorporated herein by reference.
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45
Index of Exhibits
GMAC LLC
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Exhibit | |
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Description |
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Method of Filing |
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4.3.3 |
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Form of Third Supplemental
Indenture dated as of February 15, 1987, supplementing the
Indenture designated as Exhibit 4.3
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Filed as Exhibit 4(c) to the
Companys Registration Statement No. 33-12059;
incorporated herein by reference.
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4.3.4 |
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Form of Fourth Supplemental
Indenture dated as of December 1, 1988, supplementing the
Indenture designated as Exhibit 4.3
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Filed as Exhibit 4(d) to the
Companys Registration Statement No. 33-26057;
incorporated herein by reference.
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4.3.5 |
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Form of Fifth Supplemental
Indenture dated as of
October 2, 1989, supplementing the Indenture designated as
Exhibit 4.3
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Filed as Exhibit 4(e) to the
Companys Registration Statement No. 33-31596;
incorporated herein by reference.
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4.3.6 |
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Form of Sixth Supplemental
Indenture dated as of
January 1, 1998, supplementing the Indenture designated as
Exhibit 4.3
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Filed as Exhibit 4(f) to the
Companys Registration Statement No. 333-56431;
incorporated herein by reference.
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4.3.7 |
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Form of Seventh Supplemental
Indenture dated as of
June 15, 1998, supplementing the Indenture designated as
Exhibit 4.3
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Filed as Exhibit 4(g) to the
Companys Registration Statement No. 333-56431;
incorporated herein by reference.
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4.4 |
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Form of Indenture dated as of
December 1, 1993, between the Company and Citibank, N.A.,
Trustee, relating to Medium-Term Notes
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Filed as Exhibit 4 to the
Companys Registration Statement No. 33-51381;
incorporated herein by reference.
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4.4.1 |
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Form of First Supplemental
Indenture dated as of
January 1, 1998, supplementing the Indenture designated as
Exhibit 4.4
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Filed as Exhibit 4(a)(1) to
the Companys Registration Statement No. 333-59551;
incorporated herein by reference.
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10 |
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Copy of agreement dated as of
October 22, 2001, between General Motors Corporation and
General Motors Acceptance Corporation.
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Filed as Exhibit 10 to the
Companys current report on Form 8-K dated as of
October 23, 2001 (File No. 1-3754); incorporated
herein by reference.
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12 |
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Computation of ratio of earnings to
fixed charges
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Filed herewith.
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31.1 |
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Certification of Principal
Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
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Filed herewith.
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31.2 |
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Certification of Principal
Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
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Filed herewith.
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The following exhibit shall not be
deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the
liability of that Section. In addition Exhibit No. 32
shall not be deemed incorporated into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934
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32 |
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Certification of Principal
Executive Officer and Principal Financial Officer pursuant to 18
U.S.C. Section 1350
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Filed herewith.
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46