e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
|
|
[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2006, or |
|
[ ] |
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)
|
|
|
Delaware
(State or other
jurisdiction of
incorporation or organization)
|
|
38-0572512
(I.R.S. Employer
Identification No.)
|
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.
(PAGE INTENTIONALLY LEFT BLANK)
Explanatory Note
GMAC LLC
GMAC LLCs (GMAC) net loss for the third quarter of
2006, preliminarily indicated as $348 million as furnished
in a Form 8-K
dated October 25, 2006, has been reduced by
$24 million to $324 million. The reduction in net loss
is attributable primarily to process improvements that
identified amounts related to loan sales that had not been
recorded. These items have been recorded and are reflected in
this Form 10-Q.
INDEX
GMAC LLC
|
|
* |
Item is omitted pursuant to the Reduced Disclosure Format, as
set forth on the cover page of this filing. |
Condensed Consolidated Statement of Income (unaudited)
GMAC LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
|
|
|
|
|
Period ended September 30, ($ in millions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
$2,647 |
|
|
|
$2,448 |
|
|
|
$7,760 |
|
|
|
$7,438 |
|
Commercial
|
|
|
802 |
|
|
|
638 |
|
|
|
2,311 |
|
|
|
2,009 |
|
Loans held for sale
|
|
|
419 |
|
|
|
451 |
|
|
|
1,270 |
|
|
|
1,179 |
|
Operating leases
|
|
|
2,080 |
|
|
|
1,787 |
|
|
|
6,034 |
|
|
|
5,202 |
|
|
|
Total financing revenue
|
|
|
5,948 |
|
|
|
5,324 |
|
|
|
17,375 |
|
|
|
15,828 |
|
Interest expense
|
|
|
4,257 |
|
|
|
3,320 |
|
|
|
11,637 |
|
|
|
9,370 |
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
1,691 |
|
|
|
2,004 |
|
|
|
5,738 |
|
|
|
6,458 |
|
Provision for credit losses
|
|
|
486 |
|
|
|
385 |
|
|
|
906 |
|
|
|
915 |
|
|
|
Net financing revenue
|
|
|
1,205 |
|
|
|
1,619 |
|
|
|
4,832 |
|
|
|
5,543 |
|
Servicing fees
|
|
|
459 |
|
|
|
439 |
|
|
|
1,377 |
|
|
|
1,282 |
|
Amortization and impairment of
servicing rights
|
|
|
|
|
|
|
(95 |
) |
|
|
(23 |
) |
|
|
(594 |
) |
Servicing asset valuation and hedge
activities, net
|
|
|
(331 |
) |
|
|
(1 |
) |
|
|
(688 |
) |
|
|
92 |
|
|
|
Net loan servicing income
|
|
|
128 |
|
|
|
343 |
|
|
|
666 |
|
|
|
780 |
|
Insurance premiums and service
revenue earned
|
|
|
1,045 |
|
|
|
975 |
|
|
|
3,107 |
|
|
|
2,822 |
|
Gain on sale of mortgage and
automotive loans, net
|
|
|
352 |
|
|
|
499 |
|
|
|
1,220 |
|
|
|
1,244 |
|
Investment income
|
|
|
525 |
|
|
|
264 |
|
|
|
1,079 |
|
|
|
918 |
|
Gain on sale of equity method
investments, net
|
|
|
|
|
|
|
|
|
|
|
411 |
|
|
|
|
|
Other income
|
|
|
1,033 |
|
|
|
1,207 |
|
|
|
3,051 |
|
|
|
3,149 |
|
|
|
Total net financing revenue and
other income
|
|
|
4,288 |
|
|
|
4,907 |
|
|
|
14,366 |
|
|
|
14,456 |
|
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense on operating
lease assets
|
|
|
1,400 |
|
|
|
1,329 |
|
|
|
4,185 |
|
|
|
3,888 |
|
Compensation and benefits expense
|
|
|
613 |
|
|
|
845 |
|
|
|
1,996 |
|
|
|
2,428 |
|
Insurance losses and loss
adjustment expenses
|
|
|
580 |
|
|
|
593 |
|
|
|
1,830 |
|
|
|
1,779 |
|
Other operating expenses
|
|
|
1,109 |
|
|
|
1,089 |
|
|
|
3,452 |
|
|
|
2,995 |
|
Impairment of goodwill and other
intangible assets
|
|
|
840 |
|
|
|
|
|
|
|
840 |
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
4,542 |
|
|
|
3,856 |
|
|
|
12,303 |
|
|
|
11,090 |
|
(Loss) income before income tax
expense
|
|
|
(254 |
) |
|
|
1,051 |
|
|
|
2,063 |
|
|
|
3,366 |
|
Income tax expense
|
|
|
70 |
|
|
|
376 |
|
|
|
815 |
|
|
|
1,147 |
|
|
Net (loss) income
|
|
|
($324 |
) |
|
|
$675 |
|
|
|
$1,248 |
|
|
|
$2,219 |
|
|
The Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
1
Condensed Consolidated Balance Sheet (unaudited)
GMAC LLC
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
($ in millions) |
|
2006 |
|
2005 |
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$9,125 |
|
|
|
$15,424 |
|
Investment securities
|
|
|
19,262 |
|
|
|
18,207 |
|
Loans held for sale
|
|
|
24,996 |
|
|
|
21,865 |
|
Assets held for sale
|
|
|
|
|
|
|
19,030 |
|
Finance receivables and loans, net
of unearned income
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
140,121 |
|
|
|
140,411 |
|
|
Commercial
|
|
|
45,180 |
|
|
|
44,574 |
|
Allowance for credit losses
|
|
|
(2,986 |
) |
|
|
(3,116 |
) |
|
|
Total finance receivables and
loans, net
|
|
|
182,315 |
|
|
|
181,869 |
|
Investment in operating leases, net
|
|
|
35,755 |
|
|
|
31,211 |
|
Notes receivable from General Motors
|
|
|
5,698 |
|
|
|
4,565 |
|
Mortgage servicing rights
|
|
|
4,828 |
|
|
|
4,015 |
|
Premiums and other insurance
receivables
|
|
|
2,052 |
|
|
|
1,873 |
|
Other assets
|
|
|
25,817 |
|
|
|
22,457 |
|
|
Total assets
|
|
|
$309,848 |
|
|
|
$320,516 |
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
Unsecured
|
|
|
$118,081 |
|
|
|
$133,269 |
|
|
Secured
|
|
|
131,429 |
|
|
|
121,138 |
|
|
|
Total debt
|
|
|
249,510 |
|
|
|
254,407 |
|
Interest payable
|
|
|
3,012 |
|
|
|
3,057 |
|
Liabilities related to assets held
for sale
|
|
|
|
|
|
|
10,941 |
|
Unearned insurance premiums and
service revenue
|
|
|
5,149 |
|
|
|
5,054 |
|
Reserves for insurance losses and
loss adjustment expenses
|
|
|
2,611 |
|
|
|
2,534 |
|
Accrued expenses and other
liabilities
|
|
|
23,763 |
|
|
|
18,381 |
|
Deferred income taxes
|
|
|
4,647 |
|
|
|
4,364 |
|
|
Total liabilities
|
|
|
288,692 |
|
|
|
298,738 |
|
Equity
|
|
|
|
|
|
|
|
|
Common stock and paid-in capital
|
|
|
|
|
|
|
5,760 |
|
Members interest
|
|
|
5,760 |
|
|
|
|
|
Retained earnings
|
|
|
14,475 |
|
|
|
15,190 |
|
Accumulated other comprehensive
income
|
|
|
921 |
|
|
|
828 |
|
|
Total equity
|
|
|
21,156 |
|
|
|
21,778 |
|
|
Total liabilities and equity
|
|
|
$309,848 |
|
|
|
$320,516 |
|
|
The Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
2
Condensed Consolidated Statement of Changes in
Equity (unaudited)
GMAC LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
Stock |
|
|
|
|
|
|
|
Other |
|
|
|
|
and Paid- |
|
Members |
|
Retained |
|
Comprehensive |
|
Comprehensive |
|
|
($ in millions) |
|
in Capital |
|
Interest |
|
Earnings |
|
Income |
|
Income |
|
Total |
|
Balance at January 1,
2005
|
|
|
$5,760 |
|
|
|
$ |
|
|
|
$15,491 |
|
|
|
|
|
|
|
$1,166 |
|
|
|
$22,417 |
|
Net income
|
|
|
|
|
|
|
|
|
|
|
2,219 |
|
|
|
$2,219 |
|
|
|
|
|
|
|
2,219 |
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(1,500 |
) |
|
|
|
|
|
|
|
|
|
|
(1,500 |
) |
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(309 |
) |
|
|
(309 |
) |
|
|
(309 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,910 |
|
|
|
|
|
|
|
|
|
|
Balance at September 30,
2005
|
|
|
$5,760 |
|
|
|
$ |
|
|
|
$16,210 |
|
|
|
|
|
|
|
$857 |
|
|
|
$22,827 |
|
|
Balance at January 1,
2006
|
|
|
$5,760 |
|
|
|
$ |
|
|
|
$15,190 |
|
|
|
|
|
|
|
$828 |
|
|
|
$21,778 |
|
Conversion of common stock to
members interest on July 20, 2006
|
|
|
(5,760 |
) |
|
|
5,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
1,248 |
|
|
|
$1,248 |
|
|
|
|
|
|
|
1,248 |
|
Cumulative effect of a change in
accounting principle, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer of unrealized loss for
certain available for sale securities to trading securities
|
|
|
|
|
|
|
|
|
|
|
(17 |
) |
|
|
|
|
|
|
17 |
|
|
|
|
|
|
Recognize mortgage servicing rights
at fair value
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(1,950 |
) |
|
|
|
|
|
|
|
|
|
|
(1,950 |
) |
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76 |
|
|
|
76 |
|
|
|
76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,328 |
|
|
|
|
|
|
|
|
|
|
Balance at September 30,
2006
|
|
|
$ |
|
|
|
$5,760 |
|
|
|
$14,475 |
|
|
|
|
|
|
|
$921 |
|
|
|
$21,156 |
|
|
The Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
3
Condensed Consolidated Statement of Cash Flows (unaudited)
GMAC LLC
|
|
|
|
|
|
|
|
|
Nine months ended September 30, ($ in millions) |
|
2006 | |
|
2005 | |
|
Operating activities
|
|
|
|
|
|
|
|
|
Net cash used in operating
activities
|
|
|
($12,526 |
) |
|
|
($10,895 |
) |
|
Investing activities
|
|
|
|
|
|
|
|
|
Purchases of available for sale
securities
|
|
|
(10,423 |
) |
|
|
(14,100 |
) |
Proceeds from sales of available
for sale securities
|
|
|
3,242 |
|
|
|
3,899 |
|
Proceeds from maturities of
available for sale securities
|
|
|
6,508 |
|
|
|
6,800 |
|
Net increase in finance receivables
and loans
|
|
|
(75,345 |
) |
|
|
(68,483 |
) |
Proceeds from sales of finance
receivables and loans
|
|
|
88,724 |
|
|
|
95,596 |
|
Purchases of operating lease assets
|
|
|
(13,538 |
) |
|
|
(12,372 |
) |
Disposals of operating lease assets
|
|
|
5,266 |
|
|
|
4,846 |
|
Change in notes receivable from
General Motors
|
|
|
(322 |
) |
|
|
(435 |
) |
Purchases of mortgage servicing
rights, net
|
|
|
(66 |
) |
|
|
(100 |
) |
Acquisitions of subsidiaries, net
of cash acquired
|
|
|
(324 |
) |
|
|
|
|
Proceeds from sale of business
units, net (a)
|
|
|
8,556 |
|
|
|
|
|
Settlement of residual support and
risk sharing obligations with GM (b)
|
|
|
1,074 |
|
|
|
|
|
Other, net (c)
|
|
|
4 |
|
|
|
(796 |
) |
|
Net cash provided by investing
activities
|
|
|
13,356 |
|
|
|
14,855 |
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Net change in short-term debt
|
|
|
1,450 |
|
|
|
(6,572 |
) |
Proceeds from issuance of long-term
debt
|
|
|
66,000 |
|
|
|
49,097 |
|
Repayments of long-term debt
|
|
|
(76,043 |
) |
|
|
(50,813 |
) |
Other financing activities
|
|
|
2,931 |
|
|
|
5,020 |
|
Dividends paid
|
|
|
(1,900 |
) |
|
|
(1,500 |
) |
|
Net cash used in financing
activities
|
|
|
(7,562 |
) |
|
|
(4,768 |
) |
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
61 |
|
|
|
(84 |
) |
|
Net decrease in cash and cash
equivalents
|
|
|
(6,671 |
) |
|
|
(892 |
) |
Cash and cash equivalents at
beginning of year (d)
|
|
|
15,796 |
|
|
|
22,718 |
|
|
Cash and cash equivalents at
September 30,
|
|
|
$9,125 |
|
|
|
$21,826 |
|
|
|
|
(a) |
Includes proceeds from the March 23, 2006 sale of GMAC
Commercial Mortgage of approximately $1.5 billion and
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 $570 and $767 for the nine months ended
September 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 $372 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.
4
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 between 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, as well as all variable
interest entities in which we are the primary beneficiary, after
eliminating intercompany balances and transactions.
The Condensed Consolidated Financial Statements as of
September 30, 2006, and for the third quarter and nine
months ended September 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 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 earnings and cash flows
were fully consolidated in our Condensed Consolidated Statement
of Income and Statement of Cash Flows. The assets and
liabilities of GMACs Commercial Mortgage segment were
classified as held for sale separately in our Condensed
Consolidated Balance Sheet at September 30, 2005.
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 12 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) that: (1) provides
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 the majority of
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
members 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
5
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
liabilities recorded on our balance sheet at January 1,
2006, the date of adoption, we identified three classes of
servicing rights: those 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 September 30, 2006, these assets were valued at
$4.8 billion and recorded separately on our Condensed
Consolidated Balance Sheet. Refer to Note 6 to the
Condensed Consolidated Financial Statements for further
information.
For 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 September 30, 2006. Our auto finance
servicing assets and liabilities at September 30, 2006,
totaled $13 million and $19 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; 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
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. Adoption of SFAS 155 is not
expected to have a material impact on our consolidated financial
position 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.
The guidance did not have a material impact on our consolidated
financial position 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 they are more-likely-than-not to
be sustained based solely on their 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
6
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
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.
FASB Staff Position (FSP)
No. 13-2
In July 2006 the FASB issued FSP
No. 13-2
Accounting for a Change or Projected Change in the Timing of
Cash Flows Relating to Income Taxes Generated by a Leveraged
Lease Transaction, (FSP 13-2), which amends
SFAS No. 13, Accounting for Leases, by
requiring lessors to recalculate the rate of return and periodic
income allocation for leveraged-lease transactions when there is
a change or projected change in the timing of income tax cash
flows related to the lease. FSP 13-2 requires lessors to
use the model in FIN 48 to determine the timing and amount
of expected tax cash flows in leveraged-lease calculations and
recalculations. FSP 13-2 is effective in the same period as
FIN 48. At the date of adoption, the lessor is required to
reassess projected income tax cash flows related to leveraged
leases using the FIN 48 model for recognition and
measurement. Revisions to the net investment in a leverage lease
required when FSP 13-2 is adopted would be recorded as an
adjustment to the beginning balance of retained earnings in the
period of adoption and reported as a change in accounting
principle. Management is assessing the potential impact on our
financial condition and results of operations.
SEC Staff Accounting
Bulletin No. 108 In September 2006 the
SEC issued Staff Accounting Bulletin (SAB) No. 108
Quantifying Financial Misstatements, which expresses the
Staffs views regarding the process of quantifying
financial statement misstatements. Registrants are required to
quantify the impact of correcting all misstatements, including
both the carryover and reversing effects of prior year
misstatements, on the current year financial statements. The
techniques most commonly used in practice to accumulate and
quantify misstatements are generally referred to as the
rollover (current year income statement perspective)
and iron curtain (year-end balance perspective)
approaches. The financial statements would require adjustment
when either approach results in quantifying a misstatement that
is material, after considering all relevant quantitative and
qualitative factors. Management does not expect this guidance to
have a material effect on our current process for assessing and
quantifying financial statement misstatements.
SFAS No. 157 In September 2006 the
FASB issued SFAS No. 157 Fair Value
Measurements, which provides a definition of fair value,
establishes a framework for measuring fair value and requires
expanded disclosures about fair value measurements.
SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 12, 2007, and interim
periods within those years. The provisions of SFAS 157
should be applied prospectively. Management is assessing the
potential impact on our financial condition and results of
operations.
SFAS No. 158 In September 2006 the
FASB issued SFAS No. 158 Employers Accounting
for Defined Benefit Pension and Other Postretirement Plans,
which amends SFAS No. 87 Employers Accounting
for Pensions (SFAS No. 87), SFAS No. 88
Employers Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits
(SFAS No. 88), SFAS No. 106
Employers Accounting for Postretirements Benefits Other
Than Pensions (SFAS No. 106), and
SFAS No. 132(R) Employers Disclosures about
Pensions and Other Postretirement Benefits (revised 2003)
(SFAS 132(R)). This Statement requires companies to
recognize an asset or liability for the overfunded or
underfunded status of their benefit plans in their financial
statements. The asset or liability is the offset to other
comprehensive income, consisting of previously unrecognized
prior service costs and credits, actuarial gains or losses and
transition obligations and assets. SFAS 158 also requires
the measurement date for plan assets and liabilities to coincide
with the sponsors year end. The standard provides two
transition alternatives for companies to make the
measurement-date provisions. The recognition of asset and
liability related to funded status provision is effective for
fiscal years ending after December 15, 2006, and the change
in measurement is effective for fiscal years ending after
December 15, 2008. Management is assessing the potential
impact on our financial condition and results of operations.
|
|
|
|
|
|
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 (FIM
Holdings), a consortium of investors including Cerberus FIM
Investors LLC, the sole managing member, Citigroup Inc., Aozora
Bank Ltd. and a subsidiary of The PNC Financial Services
Group, Inc. GM and the consortium will invest $1.9 billion
of cash in new GMAC preferred limited liability company interest
in us, with $1.4 billion to be invested by GM and
$500 million to be invested by the consortium. The
transaction is subject to a number of U.S. and international
regulatory and other approvals. GM and GMAC expect to close the
transaction in the fourth quarter of 2006.
Prior to consummation of the transaction, (i) certain
assets with respect to automotive leases owned by us and our
affiliates having a net book value of approximately
$4.1 billion will be dividended to GM; (ii) GM will
assume or retain certain of our post-employment benefit
obligations; (iii) we will dividend to GM certain entities
that hold a fee interest in certain real properties;
(iv) we will pay dividends to GM in
7
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
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 the conversion by us and
certain of our subsidiaries to limited liability company form.
The total value of the cash proceeds and distributions to GM
after repayment of certain intercompany obligations and before
it purchases preferred limited liability company interests will
be approximately $14 billion over three years, comprised of
the $7.4 billion purchase price, $2.7 billion cash
dividend, and other transaction related cash flows including
monetization of certain retained assets over three years.
As part of the transaction, we will enter into a number of
agreements with GM that will require us to 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 our North American Operations and our
International Operations. GMs exercise of the option is
conditional on GMs credit rating being investment grade or
higher than our credit rating. 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) 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++;
(ii) 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; and
(iii) the receipt of required regulatory approvals and
licenses. The agreement may be terminated upon the occurrence of
certain events, including the failure to complete the
transaction by March 31, 2007.
As previously reported, 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 transaction, a notice was submitted to the FDIC. Since FDIC
regulatory approval is a condition of the Agreement, GM, GMAC
and representatives of FIM Holdings have been working with the
FDIC to develop a means to enable the parties to stay on target
for a closing of the transaction in the fourth quarter of 2006.
GM and GMAC expect to close the transaction in the fourth
quarter of 2006.
8
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
The following table presents the components of other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
|
|
|
|
|
Period ended September 30, ($ in millions) |
|
2006 | |
|
2005 | |
|
2006 | |
|
2005 | |
|
Interest and service fees on
transactions with GM (a)
|
|
|
$173 |
|
|
|
$118 |
|
|
|
$467 |
|
|
|
$350 |
|
Real estate services
|
|
|
162 |
|
|
|
202 |
|
|
|
493 |
|
|
|
527 |
|
Other interest revenue
|
|
|
158 |
|
|
|
119 |
|
|
|
406 |
|
|
|
314 |
|
Interest on cash equivalents
|
|
|
109 |
|
|
|
176 |
|
|
|
406 |
|
|
|
344 |
|
Full service leasing fees
|
|
|
70 |
|
|
|
44 |
|
|
|
205 |
|
|
|
131 |
|
Insurance service fees
|
|
|
45 |
|
|
|
9 |
|
|
|
103 |
|
|
|
85 |
|
Late charges and other
administrative fees
|
|
|
40 |
|
|
|
42 |
|
|
|
122 |
|
|
|
123 |
|
Mortgage processing fees
|
|
|
28 |
|
|
|
143 |
|
|
|
135 |
|
|
|
340 |
|
Interest on restricted cash deposits
|
|
|
27 |
|
|
|
32 |
|
|
|
86 |
|
|
|
81 |
|
Fair value adjustment on certain
derivatives (b)
|
|
|
17 |
|
|
|
(17 |
) |
|
|
(4 |
) |
|
|
(20 |
) |
Factoring commissions
|
|
|
16 |
|
|
|
19 |
|
|
|
45 |
|
|
|
56 |
|
Specialty lending fees
|
|
|
12 |
|
|
|
17 |
|
|
|
42 |
|
|
|
46 |
|
Equity interest in Capmark
|
|
|
10 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
Other
|
|
|
166 |
|
|
|
303 |
|
|
|
517 |
|
|
|
772 |
|
|
Total other income
|
|
|
$1,033 |
|
|
|
$1,207 |
|
|
|
$3,051 |
|
|
|
$3,149 |
|
|
|
|
|
(a) |
Refer to Note 9 to the Condensed Consolidated Financial
Statements for a description of transactions with GM. |
|
(b) |
Refer to Note 8 to the Condensed Consolidated Financial
Statements for a description of derivative instruments and
hedging activities. |
|
|
|
|
|
|
|
|
4 |
|
|
Other Operating
Expenses |
The following table presents the components of other operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
|
|
|
|
|
Period ended September 30, ($ in millions) |
|
2006 | |
|
2005 | |
|
2006 | |
|
2005 | |
|
Insurance commissions
|
|
|
$238 |
|
|
|
$247 |
|
|
|
$692 |
|
|
|
$715 |
|
Technology and communications
expense
|
|
|
144 |
|
|
|
155 |
|
|
|
408 |
|
|
|
437 |
|
Professional services
|
|
|
120 |
|
|
|
112 |
|
|
|
336 |
|
|
|
316 |
|
Advertising and marketing
|
|
|
84 |
|
|
|
71 |
|
|
|
260 |
|
|
|
282 |
|
Premises and equipment depreciation
|
|
|
64 |
|
|
|
70 |
|
|
|
191 |
|
|
|
210 |
|
Full service leasing vehicle
maintenance costs
|
|
|
66 |
|
|
|
60 |
|
|
|
188 |
|
|
|
179 |
|
Auto remarketing and repossession
|
|
|
89 |
|
|
|
51 |
|
|
|
212 |
|
|
|
131 |
|
Rent and storage
|
|
|
59 |
|
|
|
66 |
|
|
|
180 |
|
|
|
198 |
|
Lease and loan administration
|
|
|
58 |
|
|
|
54 |
|
|
|
166 |
|
|
|
148 |
|
Operating lease disposal loss (gain)
|
|
|
27 |
|
|
|
(83 |
) |
|
|
(1 |
) |
|
|
(297 |
) |
Other
|
|
|
160 |
|
|
|
286 |
|
|
|
820 |
|
|
|
676 |
|
|
Total other operating expenses
|
|
$ |
1,109 |
|
|
$ |
1,089 |
|
|
$ |
3,452 |
|
|
$ |
2,995 |
|
|
9
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 activity, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2006 |
|
December 31, 2005 |
|
|
|
|
|
($ in millions) |
|
Domestic |
|
Foreign |
|
Total |
|
Domestic |
|
Foreign |
|
Total |
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail automotive
|
|
|
$46,355 |
|
|
|
$19,607 |
|
|
|
$65,962 |
|
|
|
$53,789 |
|
|
|
$17,663 |
|
|
|
$71,452 |
|
|
Residential mortgages
|
|
|
70,484 |
|
|
|
3,675 |
|
|
|
74,159 |
|
|
|
65,040 |
|
|
|
3,919 |
|
|
|
68,959 |
|
|
Total consumer
|
|
|
116,839 |
|
|
|
23,282 |
|
|
|
140,121 |
|
|
|
118,829 |
|
|
|
21,582 |
|
|
|
140,411 |
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
|
12,962 |
|
|
|
7,866 |
|
|
|
20,828 |
|
|
|
13,202 |
|
|
|
7,372 |
|
|
|
20,574 |
|
|
|
Leasing and lease financing
|
|
|
343 |
|
|
|
802 |
|
|
|
1,145 |
|
|
|
461 |
|
|
|
767 |
|
|
|
1,228 |
|
|
|
Term loans to dealers and other
|
|
|
1,988 |
|
|
|
738 |
|
|
|
2,726 |
|
|
|
2,397 |
|
|
|
719 |
|
|
|
3,116 |
|
|
Commercial and industrial
|
|
|
14,899 |
|
|
|
2,422 |
|
|
|
17,321 |
|
|
|
14,908 |
|
|
|
2,028 |
|
|
|
16,936 |
|
|
Real estate construction and
other (a)
|
|
|
2,982 |
|
|
|
178 |
|
|
|
3,160 |
|
|
|
2,601 |
|
|
|
119 |
|
|
|
2,720 |
|
|
Total commercial
|
|
|
33,174 |
|
|
|
12,006 |
|
|
|
45,180 |
|
|
|
33,569 |
|
|
|
11,005 |
|
|
|
44,574 |
|
|
Total finance receivables and
loans (b)
|
|
|
$150,013 |
|
|
|
$35,288 |
|
|
|
$185,301 |
|
|
|
$152,398 |
|
|
|
$32,587 |
|
|
|
$184,985 |
|
|
|
|
(a) |
At December 31, 2005, $3.0 billion ($2.1 billion domestic
and $949 foreign) in Capmark finance receivables and loans were
transferred to assets held for sale in our Consolidated Balance
Sheet. |
(b) |
Net of unearned income of $6.3 billion and $5.9 billion as of
September 30, 2006, and December 31, 2005,
respectively. |
The following tables present an analysis of the activity as of
September 30 in the allowance for credit losses on finance
receivables and loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
|
|
|
|
|
Third quarter ended September 30, ($ in millions) |
|
Consumer |
|
Commercial |
|
Total |
|
Consumer |
|
Commercial |
|
Total |
|
Allowance at beginning of
period (a)
|
|
|
$2,509 |
|
|
|
$374 |
|
|
|
$2,883 |
|
|
|
$2,752 |
|
|
|
$468 |
|
|
|
$3,220 |
|
|
Provision for credit losses
|
|
|
388 |
|
|
|
97 |
|
|
|
485 |
|
|
|
375 |
|
|
|
10 |
|
|
|
385 |
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(364 |
) |
|
|
(30 |
) |
|
|
(394 |
) |
|
|
(351 |
) |
|
|
(3 |
) |
|
|
(354 |
) |
|
|
Foreign
|
|
|
(47 |
) |
|
|
(4 |
) |
|
|
(51 |
) |
|
|
(50 |
) |
|
|
(5 |
) |
|
|
(55 |
) |
|
|
Total charge-offs
|
|
|
(411 |
) |
|
|
(34 |
) |
|
|
(445 |
) |
|
|
(401 |
) |
|
|
(8 |
) |
|
|
(409 |
) |
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
44 |
|
|
|
|
|
|
|
44 |
|
|
|
47 |
|
|
|
|
|
|
|
47 |
|
|
|
Foreign
|
|
|
10 |
|
|
|
2 |
|
|
|
12 |
|
|
|
11 |
|
|
|
2 |
|
|
|
13 |
|
|
|
Total recoveries
|
|
|
54 |
|
|
|
2 |
|
|
|
56 |
|
|
|
58 |
|
|
|
2 |
|
|
|
60 |
|
|
|
Net charge-offs
|
|
|
(357 |
) |
|
|
(32 |
) |
|
|
(389 |
) |
|
|
(343 |
) |
|
|
(6 |
) |
|
|
(349 |
) |
|
Transfer to assets held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
(27 |
) |
|
Impacts of foreign currency
translation
|
|
|
4 |
|
|
|
3 |
|
|
|
7 |
|
|
|
6 |
|
|
|
(1 |
) |
|
|
5 |
|
|
Securitization activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
Allowance at September 30,
|
|
|
$2,544 |
|
|
|
$442 |
|
|
|
$2,986 |
|
|
|
$2,791 |
|
|
|
$446 |
|
|
|
$3,237 |
|
|
|
|
(a) |
At September 30, 2005, $3.4 billion in Capmark finance
receivables and loans and the related allowance of
$27.0 million were transferred to assets held for sale on
the Condensed Consolidated Balance Sheet. |
10
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
Nine months ended September 30, |
|
|
|
|
($ in millions) |
|
Consumer |
|
Commercial |
|
Total |
|
Consumer |
|
Commercial |
|
Total |
|
Allowance at beginning of
period (a)
|
|
|
$2,683 |
|
|
|
$433 |
|
|
|
$3,116 |
|
|
|
$2,951 |
|
|
|
$471 |
|
|
|
$3,422 |
|
|
Provision for credit losses
|
|
|
802 |
|
|
|
104 |
|
|
|
906 |
|
|
|
854 |
|
|
|
61 |
|
|
|
915 |
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(1,005 |
) |
|
|
(101 |
) |
|
|
(1,106 |
) |
|
|
(1,020 |
) |
|
|
(27 |
) |
|
|
(1,047 |
) |
|
|
Foreign
|
|
|
(131 |
) |
|
|
(8 |
) |
|
|
(139 |
) |
|
|
(148 |
) |
|
|
(18 |
) |
|
|
(166 |
) |
|
|
Total charge-offs
|
|
|
(1,136 |
) |
|
|
(109 |
) |
|
|
(1,245 |
) |
|
|
(1,168 |
) |
|
|
(45 |
) |
|
|
(1,213 |
) |
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
147 |
|
|
|
8 |
|
|
|
155 |
|
|
|
126 |
|
|
|
4 |
|
|
|
130 |
|
|
|
Foreign
|
|
|
34 |
|
|
|
4 |
|
|
|
38 |
|
|
|
35 |
|
|
|
3 |
|
|
|
38 |
|
|
|
Total recoveries
|
|
|
181 |
|
|
|
12 |
|
|
|
193 |
|
|
|
161 |
|
|
|
7 |
|
|
|
168 |
|
|
|
Net charge-offs
|
|
|
(955 |
) |
|
|
(97 |
) |
|
|
(1,052 |
) |
|
|
(1,007 |
) |
|
|
(38 |
) |
|
|
(1,045 |
) |
|
Transfer to assets held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
(27 |
) |
|
Impacts of foreign currency
translation
|
|
|
12 |
|
|
|
2 |
|
|
|
14 |
|
|
|
(6 |
) |
|
|
(18 |
) |
|
|
(24 |
) |
|
Securitization activity
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
|
Allowance at September 30,
|
|
|
$2,544 |
|
|
|
$442 |
|
|
|
$2,986 |
|
|
|
$2,791 |
|
|
|
$446 |
|
|
|
$3,237 |
|
|
|
|
(a) |
At September 30, 2005, $3.4 billion in Capmark finance
receivables and loans and the related allowance of
$27.0 million were transferred to assets held for sale on
the Condensed Consolidated Balance Sheet. |
11
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
|
|
|
|
|
|
6 |
|
|
Mortgage
Servicing Rights |
The following table summarizes 2006 activity related to mortgage
servicing rights (MSRs) carried at fair value.
|
|
|
|
|
|
Period ended September 30, 2006 ($ in millions) |
|
Total |
|
Estimated fair value at
January 1, 2006
|
|
$ |
4,021 |
|
Additions obtained from sales of
financial assets
|
|
|
1,269 |
|
Additions from purchases of
servicing rights
|
|
|
12 |
|
Changes in fair value:
|
|
|
|
|
|
Due to changes in valuation inputs
or
assumptions used in the valuation model
|
|
|
79 |
|
|
Other changes in fair value
|
|
|
(553 |
) |
|
Estimated fair value at
September 30, 2006
|
|
$ |
4,828 |
|
|
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:
|
|
|
|
|
September 30, 2006 |
|
Total |
|
Range of prepayment speeds
|
|
|
5.2 - 43.2% |
|
Range of discount rate
|
|
|
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
September 30, 2006, the fair value of derivative financial
instruments and non-derivative financial instruments used to
mitigate these risks amounted to $344 million and
$2.0 billion, respectively. The change in the fair value of
the derivative financial instruments amounted to a loss of
$218 million for the nine months ended September 30,
2006, and is included in servicing asset valuation and hedge
activities, net in the Condensed Consolidated Statement of
Income.
The components of servicing fees were as follows for the nine
months ended September 30, 2006:
|
|
|
|
|
($ in millions) |
|
Total |
|
Contractual servicing fees, net of
guarantee fees and including subservicing
|
|
|
$972 |
|
Late fees
|
|
|
96 |
|
Ancillary fees
|
|
|
94 |
|
|
Total
|
|
$ |
1,162 |
|
|
At September 30, 2006, we pledged MSRs of $2.4 billion
as collateral for borrowings.
12
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
The following table summarizes activity and related amortization
of MSRs, which prior to January 1, 2006, were carried at
lower of cost or fair value:
|
|
|
|
|
($ in millions) |
|
2005 |
|
Balance at January 1, 2005
|
|
|
$4,819 |
|
Originations and purchases, net of
sales
|
|
|
1,296 |
|
Amortization
|
|
|
(823 |
) |
Sales
|
|
|
(208 |
) |
SFAS 133 hedge valuation
adjustments
|
|
|
(18 |
) |
Transfers to assets held for
sale (a)
|
|
|
(603 |
) |
Other than temporary impairment
|
|
|
(37 |
) |
|
Balance at September 30, 2005
|
|
|
4,426 |
|
Valuation allowance
|
|
|
(663 |
) |
|
Carrying value at
September 30, 2005
|
|
|
$3,763 |
|
|
|
|
|
(a) |
At September 30, 2005, $603 in Capmark mortgage servicing
rights, net were transferred to assets held for sale on our
Condensed Consolidated Balance Sheet. |
|
The following table summarizes the change in the valuation
allowance for mortgage servicing rights.
|
|
|
|
|
($ in millions) |
|
Total |
|
Valuation allowance at
January 1, 2005
|
|
|
$929 |
|
Deductions (a)
|
|
|
(229 |
) |
Other than temporary impairment
|
|
|
(37 |
) |
|
Valuation allowance at
September 30, 2005
|
|
|
$663 |
|
|
|
|
|
(a) |
Changes to the valuation allowance are reflected as a component
of amortization and impairment of servicing rights on our
Condensed Consolidated Statement of Income. |
|
For a description of MSRs and the related hedging strategy,
refer to Notes 1 and 10 to our 2005 Annual Report on
Form 10-K.
The presentation of debt in the following table is classified
between domestic and foreign based on the location of the office
recording the transaction.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2006 | |
|
December 31, 2005 | |
|
|
| |
|
| |
($ in millions) |
|
Domestic | |
|
Foreign | |
|
Total | |
|
Domestic | |
|
Foreign | |
|
Total | |
| |
Short-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
$556 |
|
|
|
$772 |
|
|
|
$1,328 |
|
|
|
$227 |
|
|
|
$297 |
|
|
|
$524 |
|
|
Demand notes
|
|
|
5,638 |
|
|
|
142 |
|
|
|
5,780 |
|
|
|
5,928 |
|
|
|
119 |
|
|
|
6,047 |
|
|
Bank loans and overdrafts
|
|
|
957 |
|
|
|
4,728 |
|
|
|
5,685 |
|
|
|
1,165 |
|
|
|
5,487 |
|
|
|
6,652 |
|
|
Repurchase agreements and
other (a)
|
|
|
23,287 |
|
|
|
8,248 |
|
|
|
31,535 |
|
|
|
22,330 |
|
|
|
5,954 |
|
|
|
28,284 |
|
|
Total short-term debt
|
|
|
30,438 |
|
|
|
13,890 |
|
|
|
44,328 |
|
|
|
29,650 |
|
|
|
11,857 |
|
|
|
41,507 |
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior indebtedness:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within one year (b)
|
|
|
27,263 |
|
|
|
13,858 |
|
|
|
41,121 |
|
|
|
31,286 |
|
|
|
10,443 |
|
|
|
41,729 |
|
|
|
Due after one year
|
|
|
141,099 |
|
|
|
23,302 |
|
|
|
164,401 |
|
|
|
147,307 |
|
|
|
23,862 |
|
|
|
171,169 |
|
|
Total long-term debt
|
|
|
168,362 |
|
|
|
37,160 |
|
|
|
205,522 |
|
|
|
178,593 |
|
|
|
34,305 |
|
|
|
212,898 |
|
Fair value adjustment (c)
|
|
|
(250 |
) |
|
|
(90 |
) |
|
|
(340 |
) |
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
Total debt
|
|
|
$198,550 |
|
|
|
$50,960 |
|
|
|
$249,510 |
|
|
|
$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) |
Includes $1 billion of deferred interest debentures
repurchased in October 2006. |
(c) |
To adjust designated fixed rate debt to fair value in accordance
with SFAS 133. |
13
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
The following summarizes assets that are restricted as
collateral for the payment of the related debt obligation
primarily arising from securitization transactions accounted for
as secured borrowings and repurchase agreements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, | |
|
December 31, | |
|
|
2006 | |
|
2005 | |
|
|
| |
|
| |
|
|
|
|
Related | |
|
|
|
Related | |
|
|
|
|
secured | |
|
|
|
secured | |
($ in millions) |
|
Assets | |
|
debt (a) | |
|
Assets | |
|
debt (a) | |
| |
Loans held for sale
|
|
|
$20,271 |
|
|
|
$18,156 |
|
|
|
$16,147 |
|
|
|
$12,647 |
|
Mortgage assets held for investment
and lending receivables
|
|
|
84,524 |
|
|
|
71,967 |
|
|
|
78,820 |
|
|
|
71,083 |
|
Retail automotive finance
receivables
|
|
|
17,861 |
|
|
|
16,465 |
|
|
|
20,427 |
|
|
|
18,888 |
|
Wholesale automotive finance
receivables
|
|
|
436 |
|
|
|
302 |
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
3,599 |
|
|
|
4,712 |
|
|
|
3,631 |
|
|
|
4,205 |
|
Investment in operating leases, net
|
|
|
19,358 |
|
|
|
16,538 |
|
|
|
13,136 |
|
|
|
11,707 |
|
Real estate investments and other
assets
|
|
|
6,150 |
|
|
|
3,290 |
|
|
|
4,771 |
|
|
|
2,608 |
|
|
|
Total
|
|
|
$152,199 |
|
|
|
$131,430 |
|
|
|
$136,932 |
|
|
|
$121,138 |
|
|
|
|
|
(a) |
Included as part of secured debt are repurchase agreements of
$10.0 billion and $9.9 billion where we have pledged
assets, reflected as investment securities, as collateral for
approximately the same amount of debt at September 30,
2006, and December 31, 2005, respectively. |
|
Liquidity Facilities
Liquidity facilities represent additional funding sources, if
required. The financial institutions providing the uncommitted
facilities are not legally obligated to fund such amounts. The
following table summarizes the liquidity facilities maintained
by us.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed | |
|
Uncommitted | |
|
Total liquidity | |
|
Unused liquidity | |
|
|
facilities | |
|
facilities | |
|
facilities | |
|
facilities | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Sep 30, | |
|
Dec 31, | |
|
Sep 30, | |
|
Dec 31, | |
|
Sep 30, | |
|
Dec 31, | |
|
Sep 30, | |
|
Dec 31, | |
($ 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 |
|
ResCap (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)
|
|
|
3.1 |
|
|
|
2.9 |
|
|
|
8.3 |
|
|
|
7.5 |
|
|
|
11.4 |
|
|
|
10.4 |
|
|
|
2.7 |
|
|
|
1.7 |
|
|
Total bank liquidity facilities
|
|
|
35.9 |
|
|
|
35.7 |
|
|
|
9.2 |
|
|
|
8.4 |
|
|
|
45.1 |
|
|
|
44.1 |
|
|
|
34.1 |
|
|
|
32.8 |
|
|
Secured funding facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing (e)
|
|
|
34.2 |
|
|
|
28.1 |
|
|
|
|
|
|
|
|
|
|
|
34.2 |
|
|
|
28.1 |
|
|
|
9.1 |
|
|
|
5.6 |
|
|
ResCap
|
|
|
28.2 |
|
|
|
22.6 |
|
|
|
|
|
|
|
|
|
|
|
28.2 |
|
|
|
22.6 |
|
|
|
12.2 |
|
|
|
9.3 |
|
|
Whole loan forward flow agreements
|
|
|
48.0 |
|
|
|
64.2 |
|
|
|
|
|
|
|
|
|
|
|
48.0 |
|
|
|
64.2 |
|
|
|
48.0 |
|
|
|
64.2 |
|
|
Other (f)
|
|
|
1.4 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
1.4 |
|
|
|
0.6 |
|
|
|
0.4 |
|
|
|
0.1 |
|
|
Total secured funding
facilities (g)
|
|
|
111.8 |
|
|
|
115.5 |
|
|
|
|
|
|
|
|
|
|
|
111.8 |
|
|
|
115.5 |
|
|
|
69.7 |
|
|
|
79.2 |
|
|
Total
|
|
|
$147.7 |
|
|
|
$151.2 |
|
|
|
$9.2 |
|
|
|
$8.4 |
|
|
|
$156.9 |
|
|
|
$159.6 |
|
|
|
$103.8 |
|
|
|
$112.0 |
|
|
|
|
(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) |
Relates mainly to $3.5 of syndicated bank facilities in the
U.S., consisting of a $1.75 syndication term loan committed
through July 2008, an $875 million syndication line of
credit committed through July 2008 and an $875 million
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 September 30, 2006,
NCAT had commercial paper outstanding of $8.4, which is not
consolidated in the Condensed Consolidated Balance Sheet. At
September 30, 2006, MINT had commercial paper outstanding
of $0.4, 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) |
In August 2006, we closed a three-year, $10 billion
facility with a subsidiary of Citigroup. |
(f) |
Consists primarily of Commercial Finance committed conduits. |
(g) |
Consists of committed 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, securities purchase commitments
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. |
14
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
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
$1.74 billion will be transferred to the NCAT secured
committed facility. Provided that such announcement has not been
made, the facility also includes a term out option which, if
exercised by us prior to expiration, carries a one-year term.
Additionally, a leverage covenant in the liquidity facilities
and certain other funding facilities restricts the ratio of
consolidated borrowed funds (excluding certain obligations of
bankruptcy remote special purpose entities) to consolidated net
worth to no greater than 11.0:1 under certain conditions. More
specifically, the covenant is only applicable on the last day of
any fiscal quarter (other than the fiscal quarter during which a
change in rating occurs) during such times that we have senior
unsecured long-term debt outstanding, without third-party
enhancement, which is rated BBB+ or less (by Standard &
Poors), or Baa1 or less (by Moodys). Our leverage
ratio covenant was 7.4:1 at September 30, 2006, and we are,
therefore, in compliance with this covenant.
|
|
|
|
|
|
8 |
|
|
Derivative
Instruments and Hedging Activities |
We enter into interest rate and foreign currency futures,
forwards, options and swaps in connection with our market risk
management activities. In accordance with SFAS 133, as
amended, we record derivative financial instruments on the
balance sheet as assets or liabilities at fair value. Changes in
fair value are accounted for depending on the use of the
derivative financial instrument and whether it qualifies for
hedge accounting treatment. Refer to our 2005 Annual Report on
Form 10-K for a
more detailed description of our use of and accounting for
derivative financial instruments.
The following table summarizes the pre-tax earnings effect for
each type of accounting hedge classification, segregated by the
asset or liability being hedged.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
|
|
Period ended September 30, |
|
|
|
|
|
|
($ in millions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Income Statement Classification |
|
Fair value hedge ineffectiveness
gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt obligations
|
|
|
$27 |
|
|
|
($15 |
) |
|
|
($17 |
) |
|
|
$19 |
|
|
Interest expense
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
35 |
|
|
Servicing asset valuation and hedge
activities, net
|
|
Loans held for sale
|
|
|
(1 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
(28 |
) |
|
Gain on sale of mortgage and
automotive loans, net
|
Cash flow hedge ineffectiveness
gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt obligations
|
|
|
|
|
|
|
5 |
|
|
|
1 |
|
|
|
3 |
|
|
Interest expense
|
Economic hedge change in fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance sheet securitization
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing operations
|
|
|
17 |
|
|
|
(17 |
) |
|
|
(4 |
) |
|
|
(20 |
) |
|
Other income
|
|
|
Mortgage operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
Other income
|
|
Foreign currency debt (a)
|
|
|
(9 |
) |
|
|
7 |
|
|
|
49 |
|
|
|
(156 |
) |
|
Interest expense
|
|
Loans held for sale or investment
|
|
|
(174 |
) |
|
|
56 |
|
|
|
(16 |
) |
|
|
16 |
|
|
Gain on sale of mortgage and
automotive loans, net
|
|
Mortgage servicing rights
|
|
|
437 |
|
|
|
(35 |
) |
|
|
(219 |
) |
|
|
4 |
|
|
Servicing asset valuation and hedge
activities, net
|
|
Mortgage related securities
|
|
|
30 |
|
|
|
1 |
|
|
|
|
|
|
|
(32 |
) |
|
Investment income
|
|
Other
|
|
|
(3 |
) |
|
|
20 |
|
|
|
24 |
|
|
|
2 |
|
|
Other income
|
|
|
|
Total gain (loss)
|
|
|
$324 |
|
|
|
$35 |
|
|
|
($182 |
) |
|
|
($156 |
) |
|
|
|
|
|
|
(a) |
Amount represents the difference between the changes in the fair
values of the currency swap, net of the reevaluation of the
related foreign denominated debt. |
|
In addition, net gains on fair value hedges, excluded from
assessment of effectiveness, totaled $0 and $8 million for
the third quarter of 2006 and 2005, respectively, and $0 and
$53 million for the nine months ended 2006 and 2005,
respectively.
15
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
|
|
|
|
|
|
|
9 |
|
|
Transactions
with Affiliates |
As a wholly owned subsidiary, we enter into various operating
and financing arrangements with our parent GM. A master
intercompany operating agreement governs the nature of these
transactions to ensure that they are done on an
arms-length basis, in accordance with commercially
reasonable standards and in our best interest as a diversified
financial services company. In addition, GM and we agree that
our total members equity, as reflected in our consolidated
financial statements at the end of any quarter, will be
maintained at a commercially reasonable level appropriate to
support the amount, quality and mix of our assets.
Balance Sheet
A summary of the balance sheet effect of transactions with GM
and affiliated companies is as follows:
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
September 30, 2006 |
|
December 31, 2005 |
|
Assets:
|
|
|
|
|
|
|
|
|
Finance receivables and loans, net
of unearned income (a)
|
|
|
|
|
|
|
|
|
|
Wholesale auto financing
|
|
|
$892 |
|
|
|
$1,159 |
|
|
Term loans to dealers
|
|
|
203 |
|
|
|
207 |
|
Investment in operating leases,
net (b)
|
|
|
288 |
|
|
|
286 |
|
Notes receivable from GM (c)
|
|
|
5,698 |
|
|
|
4,565 |
|
Other assets
|
|
|
|
|
|
|
|
|
|
Real estate synthetic lease (d)
|
|
|
1,038 |
|
|
|
1,005 |
|
|
Receivable related to taxes due
from GM (e)
|
|
|
1,137 |
|
|
|
690 |
|
Liabilities:
|
|
|
|
|
|
|
|
|
Unsecured debt
|
|
|
|
|
|
|
|
|
|
Notes payable to GM
|
|
|
1,874 |
|
|
|
1,190 |
|
Accrued expenses and
liabilities (f)
|
|
|
|
|
|
|
|
|
|
Wholesale payable
|
|
|
527 |
|
|
|
802 |
|
|
Subvention receivables (rate and
residual support)
|
|
|
(438 |
) |
|
|
(133 |
) |
|
Insurance premium and contract
receivable, net
|
|
|
(59 |
) |
|
|
(81 |
) |
|
Lease pull ahead receivable
|
|
|
(50 |
) |
|
|
(189 |
) |
|
Other receivable
|
|
|
(48 |
) |
|
|
(246 |
) |
Equity:
|
|
|
|
|
|
|
|
|
|
Dividends paid (g)
|
|
|
1,950 |
|
|
|
2,500 |
|
|
|
|
(a) |
Represents wholesale financing and term loans to certain
dealerships wholly owned by GM or in which GM has an interest.
All of these amounts are included in finance receivables and
loans. |
(b) |
Includes net balance of vehicles, 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 at December 31, 2005. 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 we 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 September 30, 2006, and December 31,
2005, were $1,007 and $971, respectively. On October 31,
2006, we made a dividend to GM of these leased assets. Refer to
Note 13 to the Condensed Consolidated Financial Statements
for a description of the transaction with GM. Subsequently, the
lease arrangement was terminated, and no further lease payments
or advances will be made. |
(e) |
At September 30, 2006, we carried an intercompany tax
receivable from GM of $1.1 billion. 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 $981, charitable
contributions carryforwards of $16 and foreign tax credit
carryforwards of $140. 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 other (receivables) payables due to/from GM, which
are included in accrued expenses, and other liabilities and
debt, respectively. |
|
|
(g) |
The 2005 amount represents cash dividends of $500 million
in each of the first three quarters and $1.0 billion in the
fourth quarter. The 2006 amount represents cash dividends of
$1.4 billion in the second quarter and $500 million in
the third quarter. In addition, the 2006 amounts include
non-cash dividends of $11 in the second quarter and $39 in the
third quarter. |
16
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, are noted in the table below.
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
2006 |
|
2005 |
|
GM and affiliates subvented
contracts acquired:
|
|
|
|
|
|
|
|
|
|
North American operations (a)
|
|
|
91 |
% |
|
|
77 |
% |
|
International operations
|
|
|
54 |
% |
|
|
57 |
% |
|
|
|
|
(a) |
The increase in 2006 is primarily due to the 72-hour sale that
occurred in July 2006. Contracts were sold at 0% financing for
72 months. |
|
GM also provides payment guarantees on certain commercial assets
we have outstanding with certain third-party customers. As of
September 30, 2006, and December 31, 2005, commercial
obligations guaranteed by GM were $263 million and
$934 million, respectively. In addition, we have a
consignment arrangement with GM for commercial inventories in
Europe. As of September 30, 2006, and December 31,
2005, commercial inventories related to this arrangement were
$298 million and $303 million, respectively, and are
reflected in Other assets in the Condensed Consolidated Balance
Sheet.
Income Statement
A summary of the income statement effect of transactions with GM
and affiliated companies is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter | |
|
Nine Months | |
|
|
| |
|
| |
Period ended September 30, ($ in millions) |
|
2006 | |
|
2005 | |
|
2006 | |
|
2005 | |
| |
Net financing revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM and affiliates lease residual
value support (a)
|
|
|
$245 |
|
|
|
$136 |
|
|
|
$609 |
|
|
|
$390 |
|
|
Wholesale subvention and service
fees from GM
|
|
|
49 |
|
|
|
53 |
|
|
|
137 |
|
|
|
164 |
|
|
Interest paid on loans from GM
|
|
|
(17 |
) |
|
|
(11 |
) |
|
|
(45 |
) |
|
|
(30 |
) |
|
Consumer lease payments from
GM (b)
|
|
|
4 |
|
|
|
37 |
|
|
|
65 |
|
|
|
149 |
|
|
Insurance premiums earned from GM
|
|
|
72 |
|
|
|
97 |
|
|
|
229 |
|
|
|
300 |
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on notes receivable from
GM and affiliates
|
|
|
97 |
|
|
|
51 |
|
|
|
233 |
|
|
|
163 |
|
|
Interest on wholesale
settlements (c)
|
|
|
44 |
|
|
|
36 |
|
|
|
137 |
|
|
|
100 |
|
|
Revenues from GM leased properties,
net (d)
|
|
|
28 |
|
|
|
20 |
|
|
|
82 |
|
|
|
57 |
|
Service fee income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMAC of Canada operating lease
administration (e)
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
17 |
|
|
|
Rental car repurchases held for
resale (f)
|
|
|
4 |
|
|
|
5 |
|
|
|
15 |
|
|
|
15 |
|
Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement plan costs
allocated by GM
|
|
|
21 |
|
|
|
36 |
|
|
|
84 |
|
|
|
124 |
|
|
Off-lease vehicle selling expense
reimbursement (g)
|
|
|
(8 |
) |
|
|
(9 |
) |
|
|
(22 |
) |
|
|
(12 |
) |
|
Payments to GM for services, rent
and marketing expenses
|
|
|
23 |
|
|
|
14 |
|
|
|
70 |
|
|
|
105 |
|
|
|
|
(a) |
Represents total amount of residual support paid (or invoiced)
for the third 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 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) |
Includes net balance of vehicles, buildings and other equipment
classified as operating lease assets that are leased to GM
affiliated entities. |
(e) |
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. |
|
|
(f) |
We receive a transaction fee from GM related to the resale of
rental car repurchases. |
|
|
(g) |
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 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).
17
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
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 by GM
under these leases and balloon contracts 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 September 30, 2006
outstandings, the current amount that we would expect to be paid
by GM under residual support programs would be
$1.7 billion. The maximum that could be paid under the
residual support programs on this portion of the lease portfolio
is approximately $2.8 billion and would be paid only in the
unlikely event that the proceeds from this portion of the
operating lease portfolio are at or below our standard residual
rates. As disclosed in Note 2 to the Condensed Consolidated
Financial Statements, certain assets with respect to automotive
leases will be dividended to GM prior to consummation of the
agreement.
In addition, as it relates to those lease originations and all
U.S. balloon retail contract originations occurring after
April 30, 2006, that will remain with GMAC after the
majority sale transaction 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. After the sale of a
51 percent ownership interest in us 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 and third quarters of 2006, GM paid or
agreed to pay us a total of $234 million. The remaining
maximum exposure after consideration of these payments that
could be paid under these contracts for residual support is
approximately $140 million and would be paid only in the
unlikely event that the proceeds from this portion of the
operating lease portfolio are at or below our standard residual
rates.
The maximum amount that could be paid under the risk sharing
arrangement on all leases not subject to the payout arrangement
is approximately $1.5 billion and would only be paid in the
unlikely event that the proceeds from outstanding lease vehicles
would be lower than our standard residual rates. The expected
amount to be paid under the risk sharing arrangement is
approximately $0.2 billion.
In addition to the financing arrangements summarized in the
foregoing table, GM had a $4 billion revolving line of
credit from us that expired September 15, 2006.
Subsequently, this revolving line of credit was not renewed.
This credit line had previously been used for general operating
and seasonal working capital purposes and to reduce external
liquidity requirements.
|
|
|
|
|
|
|
10 |
|
|
Pension and
Other Postretirement Benefits |
Pension
Certain of our employees are eligible to participate in various
domestic and foreign pension plans of General Motors. On
March 7, 2006, GM announced that, effective March 7,
2006, it would freeze accrued pension benefits for U.S. salaried
employees and implement a new benefit structure for future
accruals.
Other employees (primarily at ResCap, the Commercial Finance
business, and certain subsidiaries of GMAC Insurance)
participate in separate retirement plans that provide for
pension payments to eligible employees upon retirement based on
factors such as length of service and salary.
During the second quarter, we approved the freezing of the
benefit accrual of a noncontributory defined benefit retirement
plan as of December 31, 2006 covering primarily ResCap
employees. No further participant benefits will accrue
subsequent to that date and no new entrants will be permitted in
the plan. A curtailment gain of $42.4 million was recorded
in compensation and benefits expense during the three months
ended September 30, 2006. After the curtailment gain, the
plans fair value of assets exceeded the plans
projected benefit obligation by $60.8 million.
In addition, our Commercial Finance business and Insurance
operations have made modifications and are in the process of
further modifying their pension arrangements, which are not
anticipated to have a material impact on our financial condition
or results of operations.
18
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
|
|
|
|
|
|
|
11 |
|
|
Goodwill and
Other Intangible Assets |
Following attrition of key personnel around the middle of the
year, our Commercial Finance reporting unit initiated a goodwill
impairment test, in accordance with Statement of Financial
Accounting Standards No. 142 Goodwill and Other
Intangible Assets (SFAS 142), outside the normal fourth
quarter cycle. A necessary precedent to such test was a thorough
review of the business by new leadership, with a particular
focus on long-term strategy. As a result of the review the
operating divisions were reorganized and the decision was made
to implement a different exit strategy for the workout portfolio
and to exit product lines with lower returns. These decisions
had a significant impact on expected asset levels and growth
rate assumptions used to estimate the fair value of the
business. In particular, the analysis performed during the third
quarter incorporates managements decision to discontinue
activity in the equipment finance business, which had a
portfolio of over $1 billion, representing approximately 20
percent of Commercial Finance businesss average commercial
loan portfolio during 2006.
Consistent with the prior analysis, the fair value of the
Commercial Finance business was determined using an internally
developed discounted cash flow analysis based on five-year
projected net income and a market driven terminal value
multiple. Based upon the results of the assessment, we concluded
that the carrying value of goodwill exceeded its fair value,
resulting in an impairment loss of $827 million during the
third quarter of 2006.
In connection with this analysis, Commercial Finance impaired
certain related intangible assets totaling approximately
$13 million. This amount is included in Impairment of
goodwill and other intangible assets on the Condensed
Consolidated Statement of Income.
Financial results for our reporting segments are summarized
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Finance operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
|
|
|
|
|
|
|
|
Third quarter ended September 30, |
|
American |
|
International |
|
|
|
Insurance |
|
|
|
|
($ in millions) |
|
Operations (a) |
|
Operations (a) |
|
ResCap (b) |
|
Operations |
|
Other (c) |
|
Consolidated |
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
$1,035 |
|
|
|
$338 |
|
|
|
$174 |
|
|
|
$ |
|
|
|
$144 |
|
|
|
$1,691 |
|
Provision for credit losses
|
|
|
(124 |
) |
|
|
(31 |
) |
|
|
(239 |
) |
|
|
|
|
|
|
(92 |
) |
|
|
(486 |
) |
Other revenue
|
|
|
848 |
|
|
|
219 |
|
|
|
858 |
|
|
|
1,258 |
|
|
|
(100 |
) |
|
|
3,083 |
|
|
Total net financing revenue and
other income
|
|
|
1,759 |
|
|
|
526 |
|
|
|
793 |
|
|
|
1,258 |
|
|
|
(48 |
) |
|
|
4,288 |
|
Impairment of goodwill and other
intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
840 |
|
|
|
840 |
|
Noninterest expense
|
|
|
1,631 |
|
|
|
396 |
|
|
|
644 |
|
|
|
977 |
|
|
|
54 |
|
|
|
3,702 |
|
|
Income (loss) before income tax
expense
|
|
|
128 |
|
|
|
130 |
|
|
|
149 |
|
|
|
281 |
|
|
|
(942 |
) |
|
|
(254 |
) |
Income tax expense (benefit)
|
|
|
42 |
|
|
|
47 |
|
|
|
66 |
|
|
|
98 |
|
|
|
(183 |
) |
|
|
70 |
|
|
Net income (loss)
|
|
|
$86 |
|
|
|
$83 |
|
|
|
$83 |
|
|
|
$183 |
|
|
|
($759 |
) |
|
|
($324 |
) |
|
Total assets
|
|
|
$150,340 |
|
|
|
$30,491 |
|
|
|
$132,490 |
|
|
|
$13,919 |
|
|
|
($17,392 |
) |
|
|
$309,848 |
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
$1,036 |
|
|
|
$377 |
|
|
|
$293 |
|
|
|
$ |
|
|
|
$298 |
|
|
|
$2,004 |
|
Provision for credit losses
|
|
|
(184 |
) |
|
|
(27 |
) |
|
|
(164 |
) |
|
|
|
|
|
|
(10 |
) |
|
|
(385 |
) |
Other revenue
|
|
|
767 |
|
|
|
183 |
|
|
|
1,044 |
|
|
|
1,070 |
|
|
|
224 |
|
|
|
3,288 |
|
|
Total net financing revenue and
other income
|
|
|
1,619 |
|
|
|
533 |
|
|
|
1,173 |
|
|
|
1,070 |
|
|
|
512 |
|
|
|
4,907 |
|
Noninterest expense
|
|
|
1,527 |
|
|
|
396 |
|
|
|
702 |
|
|
|
928 |
|
|
|
303 |
|
|
|
3,856 |
|
|
Income before income tax expense
|
|
|
92 |
|
|
|
137 |
|
|
|
471 |
|
|
|
142 |
|
|
|
209 |
|
|
|
1,051 |
|
Income tax expense
|
|
|
31 |
|
|
|
34 |
|
|
|
191 |
|
|
|
53 |
|
|
|
67 |
|
|
|
376 |
|
|
Net income
|
|
|
$61 |
|
|
|
$103 |
|
|
|
$280 |
|
|
|
$89 |
|
|
|
$142 |
|
|
|
$675 |
|
|
Total assets
|
|
|
$173,722 |
|
|
|
$30,226 |
|
|
|
$104,620 |
|
|
|
$12,489 |
|
|
|
($6,863 |
) |
|
|
$314,194 |
|
|
|
|
(a) |
North American Operations consist of automotive financing in the
U.S. and Canada and certain corporate activities. International
Operations consists of automotive financing and full service
leasing in all other countries and Puerto Rico through
March 31, 2006. Beginning April 1, 2006, Puerto Rico
is included in North American Operations. |
(b) |
Refer to Note 1 to the Condensed Consolidated Financial
Statements for a discussion on changes to the reportable
operating segments. |
(c) |
Represents our Commercial Finance business, Capmark, certain
corporate activities related to mortgage activities, and
reclassifications and elimination between the reporting
segments. The financial results for 2006 reflect our
approximately 22% equity interest in Capmark commencing
March 23, 2006, while the 2005 financial results represent
Capmark as wholly owned. |
19
Notes to Condensed Consolidated Financial Statements (unaudited)
GMAC LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Finance operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
American |
|
International |
|
|
|
Insurance |
|
|
|
|
($ in millions) |
|
Operations (a) |
|
Operations (a) |
|
ResCap (b) |
|
Operations |
|
Other (c) |
|
Consolidated |
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
$3,408 |
|
|
|
$1,024 |
|
|
|
$702 |
|
|
|
$ |
|
|
|
$604 |
|
|
|
$5,738 |
|
Provision for credit losses
|
|
|
(267 |
) |
|
|
(46 |
) |
|
|
(484 |
) |
|
|
|
|
|
|
(109 |
) |
|
|
(906 |
) |
Other revenue
|
|
|
2,417 |
|
|
|
637 |
|
|
|
3,090 |
|
|
|
3,556 |
|
|
|
(166 |
) |
|
|
9,534 |
|
|
Total net financing revenue and
other income
|
|
|
5,558 |
|
|
|
1,615 |
|
|
|
3,308 |
|
|
|
3,556 |
|
|
|
329 |
|
|
|
14,366 |
|
Impairment of goodwill and other
intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
840 |
|
|
|
840 |
|
Noninterest expense
|
|
|
4,946 |
|
|
|
1,197 |
|
|
|
1,941 |
|
|
|
2,972 |
|
|
|
407 |
|
|
|
11,463 |
|
|
Income (loss) before income tax
expense
|
|
|
612 |
|
|
|
418 |
|
|
|
1,367 |
|
|
|
584 |
|
|
|
(918 |
) |
|
|
2,063 |
|
Income tax expense (benefit)
|
|
|
176 |
|
|
|
129 |
|
|
|
534 |
|
|
|
192 |
|
|
|
(216 |
) |
|
|
815 |
|
|
Net income (loss)
|
|
|
$436 |
|
|
|
$289 |
|
|
|
$833 |
|
|
|
$392 |
|
|
|
($702 |
) |
|
|
$1,248 |
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
$3,420 |
|
|
|
$1,137 |
|
|
|
$1,087 |
|
|
|
$ |
|
|
|
$814 |
|
|
|
$6,458 |
|
Provision for credit losses
|
|
|
(350 |
) |
|
|
(89 |
) |
|
|
(440 |
) |
|
|
|
|
|
|
(36 |
) |
|
|
(915 |
) |
Other revenue
|
|
|
2,017 |
|
|
|
577 |
|
|
|
2,752 |
|
|
|
3,162 |
|
|
|
405 |
|
|
|
8,913 |
|
|
Total net financing revenue and
other income
|
|
|
5,087 |
|
|
|
1,625 |
|
|
|
3,399 |
|
|
|
3,162 |
|
|
|
1,183 |
|
|
|
14,456 |
|
Noninterest expense
|
|
|
4,428 |
|
|
|
1,194 |
|
|
|
1,940 |
|
|
|
2,732 |
|
|
|
796 |
|
|
|
11,090 |
|
|
Income before income tax expense
|
|
|
659 |
|
|
|
431 |
|
|
|
1,459 |
|
|
|
430 |
|
|
|
387 |
|
|
|
3,366 |
|
Income tax expense
|
|
|
206 |
|
|
|
120 |
|
|
|
557 |
|
|
|
146 |
|
|
|
118 |
|
|
|
1,147 |
|
|
Net income
|
|
|
$453 |
|
|
|
$311 |
|
|
|
$902 |
|
|
|
$284 |
|
|
|
$269 |
|
|
|
$2,219 |
|
|
|
|
(a) |
North American Operations consist of automotive financing in the
U.S. and 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
was 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 business, Capmark, certain
mortgage activities maintained at corporate, and
reclassifications and elimination between the reporting
segments. The financial results for 2006 reflect our
approximately 22% equity interest in Capmark commencing
March 23, 2006, while the 2005 financial results represent
Capmark as wholly owned. |
On October 31, 2006, in connection with the expected
closing of the sale by GM of a 51% controlling interest in us to
FIM Holdings, we made a dividend of certain Michigan
properties with a carrying value of approximately
$1.2 billion to GM. Separately, on
November 1, 2006, GM agreed to assume or retain
approximately $800 million of other liabilities related to
U.S. and Canadian based GM sponsored other postretirement
programs, as well as approximately $300 million of related
deferred tax assets.
20
Managements Discussion and Analysis
GMAC LLC
We are a leading global financial services firm with
approximately $310 billion of assets and operations in
approximately 40 countries. Founded in 1919 as a wholly owned
subsidiary of General Motors Corporation, GMAC was originally
established to provide GM dealers with the automotive financing
necessary to acquire and maintain vehicle inventories and to
provide retail customers the means by which to finance vehicle
purchases through GM dealers. Our products and services have
expanded beyond automotive financing as we currently operate in
the following lines of business Automotive Finance,
Mortgage (ResCap), and Insurance. Refer to our 2005 Annual
Report on
Form 10-K for a
more complete description of our business activities, along with
the products and services offered and the market competition.
Net income for our businesses is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
|
|
|
|
|
Period ended September 30, ($ in millions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
Automotive Finance (a)
|
|
|
$169 |
|
|
|
$164 |
|
|
|
$725 |
|
|
|
$764 |
|
|
|
ResCap
|
|
|
83 |
|
|
|
280 |
|
|
|
833 |
|
|
|
902 |
|
|
|
Insurance
|
|
|
183 |
|
|
|
89 |
|
|
|
392 |
|
|
|
284 |
|
|
|
Other (b)
|
|
|
(759 |
) |
|
|
142 |
|
|
|
(702 |
) |
|
|
269 |
|
|
|
|
Net (loss) income
|
|
|
($324 |
) |
|
|
$675 |
|
|
|
$1,248 |
|
|
|
$2,219 |
|
|
|
|
Return on average
equity
|
|
|
(5.9% |
) |
|
|
11.9 |
% |
|
|
7.5 |
% |
|
|
13.1 |
% |
|
|
|
|
|
|
(a) |
Includes our North America and International automotive finance
reporting segments, separately identified in Note 12 to the
Condensed Consolidated Financial Statements. |
|
(b) |
Includes our Commercial Finance business operating segment,
equity interest in Capmark and mortgage activities. |
|
We reported a net loss of $324 million in the third quarter
of 2006, as compared to third quarter 2005 net income of
$675 million. The third quarter net loss includes non-cash
goodwill and other intangible asset impairment charges of
$695 million after-tax related to our Commercial Finance
business.
Excluding these charges, we earned $371 million. The
decrease in operating earnings was primarily driven by lower
income at our mortgage business, ResCap, resulting from softness
in the U.S. residential mortgage market, the unfavorable
effect on income from our recently concluded debt tender offers
as well as weakness in the Commercial Finance business.
We continue to be a significant source of cash flow to GM
through the payment of a $500 million cash dividend in the
third quarter, resulting in 2006 year to date cash
dividends of $1.9 billion. We continue to maintain adequate
liquidity with cash reserves at September 30, 2006, of
$14.1 billion, comprised of $9.1 billion in cash and
cash equivalents and $5.0 billion invested in marketable
securities. We have begun to prudently reduce high excess levels
of cash to more moderate levels, reflecting increased access to
liquidity.
Net income for Automotive Finance was $169 million, up
$5 million from $164 million earned in the same period
in the prior year. These results include an expense of
$135 million related to our third-quarter offer to
repurchase $1 billion of deferred interest debentures,
which will be positive to future period earnings as this debt
was among our most expensive. Automotive Finance results
otherwise benefited from an increase in net financing revenue as
a result of strong retail financing penetration as well as lower
provisions for credit losses.
ResCaps net income was $83 million in the third
quarter of 2006, down from $280 million earned in the third
quarter of 2005. The decrease in earnings was the result of a
number of factors in ResCaps U.S. residential
mortgage business. In particular, competitive pricing pressures
negatively impacted margins, which led to lower gains despite
year-over-year increases in production. Results were also
affected by higher credit loss provisions resulting from
increases in delinquencies, lower net interest margins as a
result of a flatter yield curve, and a decrease in net servicing
income, due to the effect of lower long-term rates on expected
prepayments of mortgages. Mortgage originations were
$51.5 billion for the third quarter of 2006, representing a
slight increase from $51.3 billion in the same period in
the prior year.
Our Insurance operations experienced record quarterly net income
of $183 million in the third quarter of 2006, up
$94 million from earnings of $89 million in the third
quarter of 2005, primarily attributable to a combination of
favorable loss performance and higher capital gains. In
addition, our Insurance operations maintained a strong
investment portfolio, with a market value of $8.0 billion
at September 30, 2006, including unrealized capital
gains of $604 million, net of tax.
21
Managements Discussion and Analysis
GMAC LLC
Excluding the goodwill and other intangible asset impairment
charges, our Other segment, which includes the Commercial
Finance business and our equity investment of approximately 22%
in Capmark, incurred a net operating loss of $64 million as
compared to $142 million earned in the same period last
year. Part of the third quarter decline relates to the change in
ownership of Capmark, following the first quarter sale of
approximately 78% of our commercial mortgage business. As a
result, the third quarter income includes the earnings on our
equity share of Capmark compared to a year ago when Capmark was
wholly owned and fully consolidated in our results. In addition,
the Other segment results were negatively affected by higher
credit provisions at Commercial Finance business, mostly related
to the workout portfolio.
The goodwill impairment charge of $685 million (after-tax)
at our Commercial Finance business was the result of our third
quarter impairment test which was triggered outside the normal
fourth quarter cycle as the business experienced attrition of
key personnel around the middle of the year. The charge results
from lower cash flow projections due to the decision by new
management at Commercial Finance business to exit certain low
return product lines and asset classes as well as a decline in
expected factored sales volume growth.
The sale of 51 percent of our equity to FIM Holdings 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 credit rating and profitable
growth.
|
|
|
Automotive Finance Operations |
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
Period ended September 30, |
|
|
|
|
($ in millions) |
|
2006 |
|
2005 |
|
Change |
|
% |
|
2006 |
|
2005 |
|
Change |
|
% |
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
$1,481 |
|
|
|
$1,605 |
|
|
|
($124 |
) |
|
|
(8 |
) |
|
|
$4,267 |
|
|
|
$4,991 |
|
|
|
($724 |
) |
|
|
(15 |
) |
Commercial
|
|
|
399 |
|
|
|
322 |
|
|
|
77 |
|
|
|
24 |
|
|
|
1,187 |
|
|
|
1,122 |
|
|
|
65 |
|
|
|
6 |
|
Operating leases
|
|
|
2,079 |
|
|
|
1,777 |
|
|
|
302 |
|
|
|
17 |
|
|
|
6,028 |
|
|
|
5,194 |
|
|
|
834 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing revenue
|
|
|
3,959 |
|
|
|
3,704 |
|
|
|
255 |
|
|
|
7 |
|
|
|
11,482 |
|
|
|
11,307 |
|
|
|
175 |
|
|
|
2 |
|
Interest expense
|
|
|
(2,518 |
) |
|
|
(2,258 |
) |
|
|
(260 |
) |
|
|
(12 |
) |
|
|
(6,865 |
) |
|
|
(6,659 |
) |
|
|
(206 |
) |
|
|
(3 |
) |
Provision for credit losses
|
|
|
(155 |
) |
|
|
(211 |
) |
|
|
56 |
|
|
|
27 |
|
|
|
(313 |
) |
|
|
(439 |
) |
|
|
126 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing revenue
|
|
|
1,286 |
|
|
|
1,235 |
|
|
|
51 |
|
|
|
4 |
|
|
|
4,304 |
|
|
|
4,209 |
|
|
|
95 |
|
|
|
2 |
|
Servicing fees
|
|
|
58 |
|
|
|
37 |
|
|
|
21 |
|
|
|
57 |
|
|
|
176 |
|
|
|
81 |
|
|
|
95 |
|
|
|
117 |
|
Net gains on sales
|
|
|
115 |
|
|
|
139 |
|
|
|
(24 |
) |
|
|
(17 |
) |
|
|
298 |
|
|
|
354 |
|
|
|
(56 |
) |
|
|
(16 |
) |
Investment income
|
|
|
152 |
|
|
|
54 |
|
|
|
98 |
|
|
|
181 |
|
|
|
387 |
|
|
|
162 |
|
|
|
225 |
|
|
|
139 |
|
Other income
|
|
|
673 |
|
|
|
686 |
|
|
|
(13 |
) |
|
|
(2 |
) |
|
|
2,004 |
|
|
|
1,903 |
|
|
|
101 |
|
|
|
5 |
|
Depreciation expense on operating
leases
|
|
|
(1,394 |
) |
|
|
(1,326 |
) |
|
|
(68 |
) |
|
|
(5 |
) |
|
|
(4,176 |
) |
|
|
(3,880 |
) |
|
|
(296 |
) |
|
|
(8 |
) |
Noninterest expense
|
|
|
(632 |
) |
|
|
(596 |
) |
|
|
(36 |
) |
|
|
(6 |
) |
|
|
(1,963 |
) |
|
|
(1,739 |
) |
|
|
(224 |
) |
|
|
(13 |
) |
Income tax expense
|
|
|
(89 |
) |
|
|
(65 |
) |
|
|
(24 |
) |
|
|
37 |
|
|
|
(305 |
) |
|
|
(326 |
) |
|
|
21 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$169 |
|
|
|
$164 |
|
|
|
5 |
|
|
|
3 |
|
|
|
$725 |
|
|
|
$764 |
|
|
|
($39 |
) |
|
|
(5 |
) |
|
Total assets
|
|
|
$174,748 |
|
|
|
$200,743 |
|
|
|
($25,995 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Finance operations net income increased 3% for the
third quarter and decreased 5% for the first nine months of
2006, respectively. Results for Automotive Finance include the
earnings impact of a third quarter 2006 $1 billion debt
tender offer to repurchase
22
Managements Discussion and Analysis
GMAC LLC
certain deferred interest debentures, which resulted in an
after-tax unfavorable impact of $135 million. Absent the
impact of the tender offer, Automotive Finance operating
earnings were $140 million higher than the third quarter of
2005.
Total financing revenue increased 7% in the third quarter of
2006, as compared to the prior year, with declines in consumer
revenue being more than offset by higher commercial and
operating lease revenues in the North American operations. 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
$13 billion, or approximately 16%, since September 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 20% since September 2005). The increase in the
portfolio is reflective of continued strong lease volumes in
North American operations and higher average customer balances.
The increase in interest expense for the third quarter as
compared to the third quarter of 2005 is primarily due to the
aforementioned $1 billion debt tender offer, which resulted
in a $220 million pre-tax unfavorable impact
($135 million after-tax). Absent the impact of the tender
offer, despite lower overall debt levels, interest expense is
relatively flat in comparison with 2005 due to an increased cost
of funds, as a result of higher market interest rates.
The provision for credit losses decreased in comparison to the
prior year largely due to the estimated provision, which was
necessary in the third quarter of 2005 due to Hurricane Katrina
losses. The provision decreases due to Hurricane Katrina were
somewhat offset by the overall credit performance of the
consumer portfolio. Refer to Credit Risk discussion within this
Automotive Finance Operations section of the MD&A for
further discussion.
Investment income increased for both the third quarter and first
nine months of 2006, as compared to the same periods in 2005.
The increases are largely a result of higher short-term interest
rates and asset balances in 2006 versus 2005. Other income
decreased in comparison to the third quarter of 2005 due to
lower revenue on intercompany loans. In addition, non-interest
expenses increased in comparison with 2005 levels due to an
overall decline in operating lease remarketing results as a
result of a softening in used vehicle prices and an overall
decrease in lease termination volume.
Total income tax expense increased by $24 million in the
third quarter and declined by $21 million for the first
nine months of 2006, respectively, as compared to the same
periods in 2005.
23
Managements Discussion and Analysis
GMAC LLC
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
|
|
|
|
|
|
|
|
|
Share of |
|
|
|
Share of |
|
|
GMAC volume |
|
GM sales |
|
GMAC volume |
|
GM sales |
Period ended September 30, |
|
|
|
|
|
|
|
|
(units in thousands) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
New vehicle consumer
financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail contracts
|
|
418 |
|
249
|
|
45% |
|
24%
|
|
825 |
|
838
|
|
32% |
|
29%
|
|
|
Leases
|
|
162 |
|
137
|
|
17% |
|
14%
|
|
495 |
|
449
|
|
19% |
|
15%
|
|
|
|
|
Total North America
|
|
580 |
|
386
|
|
62% |
|
38%
|
|
1,320 |
|
1,287
|
|
51% |
|
44%
|
|
International (retail contracts and
leases)
|
|
127 |
|
129
|
|
24% |
|
25%
|
|
390 |
|
398
|
|
24% |
|
27%
|
|
|
|
|
|
|
|
|
|
|
|
Total GM units financed
|
|
707 |
|
515
|
|
48% |
|
34%
|
|
1,710 |
|
1,685
|
|
41% |
|
38%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GM units financed
|
|
18 |
|
21
|
|
|
|
|
|
52 |
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer automotive financing
volume
|
|
725 |
|
536
|
|
|
|
|
|
1,762 |
|
1,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale financing of new
vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
785 |
|
899
|
|
76% |
|
81%
|
|
2,626 |
|
2,790
|
|
76% |
|
80%
|
|
International
|
|
606 |
|
598
|
|
84% |
|
83%
|
|
1,954 |
|
1,803
|
|
87% |
|
85%
|
|
|
|
|
|
|
|
|
|
|
|
Total GM units financed
|
|
1,391 |
|
1,497
|
|
79% |
|
82%
|
|
4,580 |
|
4,593
|
|
80% |
|
82%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GM units financed
|
|
34 |
|
48
|
|
|
|
|
|
107 |
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total wholesale volume
|
|
1,425 |
|
1,545
|
|
|
|
|
|
4,687 |
|
4,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
In the third quarter of 2006 our North American retail volume
and penetration levels were positively impacted by certain
consumer retail financing incentives. These incentives resulted
in significant volume increases in comparison with the third
quarter of 2005 and modest increases in comparison with the
first nine months of 2005. In our International Automotive
Finance Operations, financing volume has been comparable with
2005 levels. Our wholesale financing continues to be the primary
funding source for GM dealer inventories, as total penetration
levels in the third quarter of 2006 remained relatively
consistent with levels in the third quarter of 2005 and continue
to reflect traditionally strong levels.
Consumer Credit
The following tables summarize pertinent loss experience in the
consumer managed and on-balance sheet automotive retail contract
portfolio. The managed portfolio includes retail receivables
held on-balance sheet for investment and off-balance sheet
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.
The off-balance sheet portion of the managed 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
24
Managements Discussion and Analysis
GMAC LLC
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Charge-offs, |
|
|
|
|
retail |
|
net of |
|
Annualized net |
|
|
contracts |
|
recoveries(a) |
|
charge-off rate |
Third quarter ended September 30, |
|
|
|
|
|
|
($ in millions) |
|
2006 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Managed
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$55,329 |
|
|
$135 |
|
$199
|
|
0.98% |
|
1.12%
|
International
|
|
|
15,354 |
|
|
33 |
|
34
|
|
0.86% |
|
0.93%
|
|
|
|
|
|
Total managed
|
|
|
$70,683 |
|
|
$168 |
|
$233
|
|
0.95% |
|
1.09%
|
|
On-balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$50,595 |
|
|
$132 |
|
$195
|
|
1.04% |
|
1.22%
|
International
|
|
|
15,354 |
|
|
33 |
|
34
|
|
0.86% |
|
0.93%
|
|
|
|
|
|
Total on-balance sheet
|
|
|
$65,949 |
|
|
$165 |
|
$229
|
|
1.00% |
|
1.16%
|
|
|
|
|
(a) |
Net charge-offs exclude amounts related to the lump-sum payments
on balloon finance contracts. The amount totaled $7 for the
third quarter ended September 30, 2006. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Charge-offs, |
|
|
|
|
retail |
|
net of |
|
Annualized net |
|
|
contracts |
|
recoveries |
|
charge-off rate |
Nine months ended September 30, |
|
|
|
|
|
|
($ in millions) |
|
2006 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Managed
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$56,196 |
|
|
$416 |
|
$566
|
|
0.99% |
|
0.99%
|
International
|
|
|
15,081 |
|
|
82 |
|
103
|
|
0.72% |
|
0.93%
|
|
|
|
|
|
Total managed
|
|
|
$71,277 |
|
|
$498 |
|
$669
|
|
0.93% |
|
0.98%
|
|
On-balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$51,067 |
|
|
$409 |
|
$556
|
|
1.07% |
|
1.05%
|
International
|
|
|
15,081 |
|
|
82 |
|
103
|
|
0.72% |
|
0.93%
|
|
|
|
|
|
Total on-balance sheet
|
|
|
$66,148 |
|
|
$491 |
|
$659
|
|
0.99% |
|
1.03%
|
|
|
|
|
(a) |
Net charge-offs exclude amounts related to the lump-sum payments
on balloon finance contracts. The amount totaled $15 for the
nine months ended September 30, 2006. |
|
|
|
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 |
|
|
|
|
|
September 30, |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
North America
|
|
2.46% |
|
2.14%
|
|
2.68% |
|
2.29%
|
International
|
|
2.64% |
|
2.68%
|
|
2.64% |
|
2.68%
|
|
Total
|
|
2.51% |
|
2.28%
|
|
2.67% |
|
2.40%
|
|
|
|
|
(a) |
Past due contracts are calculated on the basis of the average
number of contracts delinquent during a month and exclude
accounts in bankruptcy. |
|
25
Managements Discussion and Analysis
GMAC LLC
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 |
|
|
| |
|
|
Third quarter ended September 30, |
|
2006 | |
|
2005 | |
|
2006 | |
|
2005 | |
|
|
|
Average retail contracts in
bankruptcy (in units)
|
|
|
83,103 |
|
|
|
99,542 |
|
|
|
82,680 |
|
|
|
95,610 |
|
|
|
Bankruptcies as a percent of
average number of contracts outstanding
|
|
|
2.49 |
% |
|
|
2.27 |
% |
|
|
2.63 |
% |
|
|
2.37 |
% |
|
|
Retail contract repossessions (in
units)
|
|
|
21,904 |
|
|
|
26,256 |
|
|
|
21,536 |
|
|
|
25,628 |
|
|
|
Annualized repossessions as a
percent of average number of contracts outstanding
|
|
|
2.61 |
% |
|
|
2.35 |
% |
|
|
2.71 |
% |
|
|
2.50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed |
|
On-balance sheet |
|
|
|
|
|
Nine months ended September 30, |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
Average retail contracts in
bankruptcy (in units)
|
|
|
93,433 |
|
|
|
98,386 |
|
|
|
92,403 |
|
|
|
94,044 |
|
|
|
Bankruptcies as a percent of
average number of contracts outstanding
|
|
|
2.70 |
% |
|
|
2.12 |
% |
|
|
2.83 |
% |
|
|
2.19 |
% |
|
|
Retail contract repossessions (in
units)
|
|
|
68,469 |
|
|
|
76,640 |
|
|
|
67,500 |
|
|
|
74,330 |
|
|
|
Annualized repossessions as a
percent of average number of contracts outstanding
|
|
|
2.62 |
% |
|
|
2.19 |
% |
|
|
2.74 |
% |
|
|
2.30 |
% |
|
|
|
The following table summarizes activity related to the consumer
allowance for credit losses for our Automotive Finance
operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
|
|
|
|
|
Period ended September 30, ($ in millions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
Allowance at beginning of period
|
|
|
$1,467 |
|
|
|
$1,819 |
|
|
|
$1,618 |
|
|
|
$2,035 |
|
|
|
|
Provision for credit losses
|
|
|
156 |
|
|
|
225 |
|
|
|
332 |
|
|
|
452 |
|
|
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(172 |
) |
|
|
(233 |
) |
|
|
(529 |
) |
|
|
(647 |
) |
|
|
|
Foreign
|
|
|
(45 |
) |
|
|
(48 |
) |
|
|
(124 |
) |
|
|
(147 |
) |
|
|
|
Total charge-offs
|
|
|
(217 |
) |
|
|
(281 |
) |
|
|
(653 |
) |
|
|
(794 |
) |
|
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
35 |
|
|
|
41 |
|
|
|
113 |
|
|
|
100 |
|
|
|
|
Foreign
|
|
|
10 |
|
|
|
11 |
|
|
|
34 |
|
|
|
35 |
|
|
|
|
Total recoveries
|
|
|
45 |
|
|
|
52 |
|
|
|
147 |
|
|
|
135 |
|
|
|
|
Net charge-offs
|
|
|
(172 |
) |
|
|
(229 |
) |
|
|
(506 |
) |
|
|
(659 |
) |
|
|
Impacts of foreign currency
translation
|
|
|
5 |
|
|
|
4 |
|
|
|
10 |
|
|
|
(9 |
) |
|
|
Securitization activity
|
|
|
|
|
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
|
|
|
Allowance at September 30,
|
|
|
$1,456 |
|
|
|
$1,820 |
|
|
|
$1,456 |
|
|
|
$1,820 |
|
|
|
Allowance coverage (a)
|
|
|
2.21 |
% |
|
|
2.32 |
% |
|
|
2.21 |
% |
|
|
2.32 |
% |
|
|
|
|
|
(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.
26
Managements Discussion and Analysis
GMAC LLC
The allowance for credit losses as a percentage of the total
on-balance sheet consumer portfolio has experienced a slight
decrease in comparison with the third quarter of 2005. This
decrease is primarily related to improved credit performance in
our International operations consumer portfolio. The allowance
for credit losses as a percentage of the total on-balance sheet
consumer portfolio for our North American operations remained
stable in comparison to 2005 levels.
Commercial Credit
Our credit risk on the commercial portfolio is markedly
different from 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 September 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. As a result, the amount of charge-offs on our
managed portfolio is the same as the on-balance sheet portfolio,
and only the on-balance sheet commercial portfolio credit
experience is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
loans |
|
Impaired loans (a) |
|
|
|
|
|
|
|
Sep 30, |
|
Sep 30, |
|
Dec 31, |
|
Sep 30, |
|
|
($ in millions) |
|
2006 |
|
2006 |
|
2005 |
|
2005 |
|
|
|
Wholesale
|
|
|
20,828 |
|
|
|
$317 |
|
|
|
$299 |
|
|
|
$330 |
|
|
|
|
|
|
|
|
|
|
1.52 |
% |
|
|
1.45 |
% |
|
|
2.65 |
% |
|
|
Other commercial financing
|
|
|
3,878 |
|
|
|
46 |
|
|
|
142 |
|
|
|
162 |
|
|
|
|
|
|
|
|
|
|
1.19 |
% |
|
|
1.36 |
% |
|
|
1.49 |
% |
|
|
|
Total on-balance sheet
|
|
|
24,706 |
|
|
|
$363 |
|
|
|
$441 |
|
|
|
$492 |
|
|
|
|
|
|
|
|
|
|
1.47 |
% |
|
|
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 $66 million
and $102 million as of September 30, 2006 and 2005,
respectively. Charge-off activity in the commercial portfolio
was a net charge-off of $6 million and $3 million for
the nine months ended September 30, 2006 and 2005,
respectively. Decreases in the level of allowance from 2005
levels are reflective of proportional decreases in the
on-balance sheet commercial portfolio over the same period.
The principal activities of our ResCap operations involve the
origination, purchase, servicing, sale and securitization of
consumer (i.e., residential) and commercial mortgage loans and
mortgage-related products (e.g., real estate services).
Typically, mortgage loans are originated and sold to investors
in the secondary market, including securitization transactions
in which the assets are legally sold but are accounted for as
secured financings. For additional information, please refer to
ResCaps quarterly report on
Form 10-Q for the
period ended September 30, 2006, filed separately with the
SEC, which report is not deemed incorporated into any of our
filings under the Securities Act or the Exchange Act.
27
Managements Discussion and Analysis
GMAC LLC
Results of Operations
The following table summarizes the operating results for ResCap
for the periods indicated. The amounts presented are before the
elimination of balances and transactions with our other
reporting segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
Period ended September 30, |
|
|
|
|
($ in millions) |
|
2006 |
|
2005 |
|
Change |
|
% |
|
2006 |
|
2005 |
|
Change |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing revenue
|
|
|
$1,878 |
|
|
|
$1,330 |
|
|
|
$548 |
|
|
|
41 |
|
|
|
$5,399 |
|
|
|
$3,740 |
|
|
|
$1,659 |
|
|
|
44 |
|
Interest expense
|
|
|
(1,704 |
) |
|
|
(1,037 |
) |
|
|
(667 |
) |
|
|
(64 |
) |
|
|
(4,697 |
) |
|
|
(2,653 |
) |
|
|
(2,044 |
) |
|
|
(77 |
) |
Provision for credit losses
|
|
|
(239 |
) |
|
|
(164 |
) |
|
|
(75 |
) |
|
|
(46 |
) |
|
|
(484 |
) |
|
|
(440 |
) |
|
|
(44 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net financing revenue
|
|
|
(65 |
) |
|
|
129 |
|
|
|
(194 |
) |
|
|
(150 |
) |
|
|
218 |
|
|
|
647 |
|
|
|
(429 |
) |
|
|
(66 |
) |
Mortgage servicing fees
|
|
|
401 |
|
|
|
361 |
|
|
|
40 |
|
|
|
11 |
|
|
|
1,162 |
|
|
|
1,047 |
|
|
|
115 |
|
|
|
11 |
|
MSR amortization and impairment
|
|
|
|
|
|
|
(69 |
) |
|
|
69 |
|
|
|
100 |
|
|
|
|
|
|
|
(516 |
) |
|
|
516 |
|
|
|
100 |
|
Servicing asset valuation and hedge
activities, net
|
|
|
(332 |
) |
|
|
(1 |
) |
|
|
(331 |
) |
|
|
|
|
|
|
(688 |
) |
|
|
92 |
|
|
|
(780 |
) |
|
|
(848 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net loan servicing income
|
|
|
69 |
|
|
|
291 |
|
|
|
(222 |
) |
|
|
(76 |
) |
|
|
474 |
|
|
|
623 |
|
|
|
(149 |
) |
|
|
(24 |
) |
Gains on sale of loans
|
|
|
237 |
|
|
|
307 |
|
|
|
(70 |
) |
|
|
(23 |
) |
|
|
879 |
|
|
|
787 |
|
|
|
92 |
|
|
|
12 |
|
Other income
|
|
|
552 |
|
|
|
446 |
|
|
|
106 |
|
|
|
24 |
|
|
|
1,737 |
|
|
|
1,342 |
|
|
|
395 |
|
|
|
29 |
|
Noninterest expense
|
|
|
(644 |
) |
|
|
(702 |
) |
|
|
58 |
|
|
|
8 |
|
|
|
(1,941 |
) |
|
|
(1,940 |
) |
|
|
(1 |
) |
|
|
|
|
Income tax expense
|
|
|
(66 |
) |
|
|
(191 |
) |
|
|
125 |
|
|
|
65 |
|
|
|
(534 |
) |
|
|
(557 |
) |
|
|
23 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$83 |
|
|
|
$280 |
|
|
|
($197 |
) |
|
|
(70 |
) |
|
|
$833 |
|
|
|
$902 |
|
|
|
($69 |
) |
|
|
(8 |
) |
|
Total assets
|
|
|
$132,490 |
|
|
|
$104,620 |
|
|
|
$27,870 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ResCap net income decreased 70% and 8% to $83 million and
$833 million for the third quarter and first nine months of
2006. Net financing revenue was negatively impacted by higher
interest expense driven by an increase in short-term market
interest rates. In addition, the provision for credit losses
increased due to higher delinquencies. The increase in interest
expense and provision for credit losses was partially offset by
an increase in total financing revenues from higher asset levels
due to higher loan production.
Net loan servicing income decreased due to negative servicing
asset valuations, which were partially offset by an increase in
the size of the mortgage servicing rights portfolio. The
negative servicing asset valuation was primarily due to a
decline in interest rates in 2006. Gain on sales of loans
decreased as a result of lower margins due to competitive
pricing pressures. This decline was partially offset by an
increase in mortgage loan sales attributable to higher mortgage
loan originations.
Other income, for the third quarter of 2006, increased due to
higher residential real estate income as a result of continued
growth in residential real estate investments and gains on
U.S. Treasury and principal-only securities.
Noninterest expense decreased in the third quarter due to a
$42.6 million gain from the freezing of the benefit accrual
of GMAC Mortgage, Inc.s noncontributory defined benefit
plan as of December 31, 2006.
Mortgage Loan Production, Sales and Servicing
Our mortgage loan production increased to $51.5 billion for
the three months ended September 30, 2006, compared to
$51.3 billion for the same period in 2005. During the first
nine months of 2006, our loan production increased to
$140.1 billion from $130.3 billion in 2005. These
increases were due primarily to the continued expansion of our
international operations. Our domestic loan production declined
6% during the three months ended September 30, 2006, and
increased 1.7% for the first nine months of 2006, compared to
the same periods in 2005.
28
Managements Discussion and Analysis
GMAC LLC
The following summarizes mortgage loan production for the
periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
|
|
|
|
|
Period ended September 30, ($ in millions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal amount by product type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime conforming
|
|
|
$12,002 |
|
|
|
$14,832 |
|
|
|
$32,536 |
|
|
|
$39,532 |
|
|
|
Prime nonconforming
|
|
|
16,411 |
|
|
|
17,292 |
|
|
|
42,776 |
|
|
|
42,358 |
|
|
|
Government
|
|
|
942 |
|
|
|
1,141 |
|
|
|
2,884 |
|
|
|
3,382 |
|
|
|
Nonprime
|
|
|
8,467 |
|
|
|
9,884 |
|
|
|
23,623 |
|
|
|
23,821 |
|
|
|
Prime second-lien
|
|
|
6,100 |
|
|
|
3,588 |
|
|
|
18,500 |
|
|
|
9,262 |
|
|
|
|
Total U.S. production
|
|
|
43,922 |
|
|
|
46,737 |
|
|
|
120,319 |
|
|
|
118,355 |
|
|
|
International
|
|
|
7,531 |
|
|
|
4,535 |
|
|
|
19,736 |
|
|
|
11,932 |
|
|
|
Total
|
|
|
$51,453 |
|
|
|
$51,272 |
|
|
|
$140,055 |
|
|
|
$130,287 |
|
|
|
Principal amount by origination
channel:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail and direct channels
|
|
|
$7,012 |
|
|
|
$10,500 |
|
|
|
$21,114 |
|
|
|
$28,677 |
|
|
|
Correspondent and broker channels
|
|
|
36,910 |
|
|
|
36,237 |
|
|
|
99,205 |
|
|
|
89,678 |
|
|
|
|
Total U.S. production
|
|
|
$43,922 |
|
|
|
$46,737 |
|
|
|
$120,319 |
|
|
|
$118,355 |
|
|
|
Number of loans (in units):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail and direct channels
|
|
|
60,693 |
|
|
|
80,727 |
|
|
|
186,592 |
|
|
|
223,697 |
|
|
|
Correspondent and broker channels
|
|
|
222,196 |
|
|
|
196,222 |
|
|
|
621,795 |
|
|
|
499,856 |
|
|
|
|
Total U.S. production
|
|
|
282,889 |
|
|
|
276,949 |
|
|
|
808,387 |
|
|
|
723,553 |
|
|
The following table summarizes the primary domestic mortgage
loan servicing portfolio for which we hold the corresponding
mortgage servicing rights:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. mortgage loan servicing portfolio |
|
|
|
|
|
September 30, 2006 |
|
December 31, 2005 |
|
|
|
|
|
|
|
Number of |
|
Dollar amount |
|
Number of |
|
Dollar amount |
($ in millions) |
|
loans |
|
of loans |
|
loans |
|
of loans |
|
Prime nonconforming
|
|
|
310,937 |
|
|
|
$96,851 |
|
|
|
257,550 |
|
|
|
$76,980 |
|
Prime conforming
|
|
|
1,449,123 |
|
|
|
200,632 |
|
|
|
1,393,379 |
|
|
|
186,405 |
|
Government
|
|
|
183,058 |
|
|
|
18,866 |
|
|
|
181,679 |
|
|
|
18,098 |
|
Nonprime
|
|
|
478,130 |
|
|
|
57,494 |
|
|
|
493,486 |
|
|
|
56,373 |
|
Prime second-lien
|
|
|
694,654 |
|
|
|
28,584 |
|
|
|
500,534 |
|
|
|
17,073 |
|
|
Total primary servicing
portfolio (a)
|
|
|
3,115,902 |
|
|
|
$402,427 |
|
|
|
2,826,628 |
|
|
|
$354,929 |
|
|
|
|
|
(a) |
Excludes loans for which we acted as a subservicer. This
included 280,003 of loans with an unpaid principal balance of
$47.5 billion at September 30, 2006, and 271,489 loans
with an unpaid balance of $38.9 billion at
December 31, 2005. |
|
Our international servicing portfolio was comprised of
$31.5 billion of mortgage loans as of September 30,
2006.
29
Managements Discussion and Analysis
GMAC LLC
Allowance for Loan Losses
The following table summarizes the activity related to the
allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter | |
|
Nine Months |
|
|
| |
|
|
Period ended September 30, ($ in millions) |
|
2006 | |
|
2005 | |
|
2006 | |
|
2005 | |
|
|
|
Allowance at beginning of period
|
|
|
$1,230 |
|
|
|
$1,094 |
|
|
|
$1,253 |
|
|
|
$1,015 |
|
|
|
Provision for loan losses
|
|
|
239 |
|
|
|
164 |
|
|
|
484 |
|
|
|
462 |
|
|
|
Charge-offs
|
|
|
(194 |
) |
|
|
(117 |
) |
|
|
(488 |
) |
|
|
(359 |
) |
|
|
Recoveries
|
|
|
9 |
|
|
|
7 |
|
|
|
35 |
|
|
|
30 |
|
|
|
|
Allowance at September 30
|
|
|
$1,284 |
|
|
|
$1,148 |
|
|
|
$1,284 |
|
|
|
$1,148 |
|
|
|
Allowance as a percentage of total
mortgage loans held for investment and lending receivables
|
|
|
1.45 |
% |
|
|
1.62 |
% |
|
|
1.45 |
% |
|
|
1.62 |
% |
|
|
|
The provision for loan losses was $484 million for the nine
months ended September 30, 2006, compared to
$462 million in the same period in 2005, representing an
increase of $22 million. The increase in the provision was
primarily due to the increase in the mortgage loans held for
investment portfolio, which includes more delinquent loans than
the same period last year. Delinquent mortgage loans held for
investment totaled $12 million, or 16.4%, of total mortgage
loans held for investment at September 30, 2006, compared
to $9 million, or 16.2%, at September 30, 2005.
Nonperforming Assets
The following table summarizes the nonperforming assets.
Nonperforming assets are nonaccrual loans, foreclosed assets and
restructured loans. Mortgage loans and lending receivables are
generally placed on nonaccrual status when they are 60 and
90 days past due, respectively, or when the timely
collection of the principal of the loan, in whole or in part, is
doubtful. Managements classification of a loan as
nonaccrual does not necessarily indicate that the principal of
the loan is uncollectible in whole or in part.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sep 30, | |
|
Dec 31, | |
|
Sep 30, | |
|
|
($ in millions) |
|
2006 | |
|
2005 | |
|
2005 | |
|
|
|
Nonaccrual loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime conforming
|
|
|
$10 |
|
|
|
$10 |
|
|
|
$20 |
|
|
|
|
|
Prime nonconforming
|
|
|
371 |
|
|
|
361 |
|
|
|
239 |
|
|
|
|
|
Government
|
|
|
|
|
|
|
|
|
|
|
39 |
|
|
|
|
|
Prime second-lien
|
|
|
133 |
|
|
|
85 |
|
|
|
72 |
|
|
|
|
|
Nonprime (a)
|
|
|
6,275 |
|
|
|
5,731 |
|
|
|
5,110 |
|
|
|
Lending receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse
|
|
|
9 |
|
|
|
42 |
|
|
|
1 |
|
|
|
|
|
Construction
|
|
|
21 |
|
|
|
8 |
|
|
|
9 |
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
Total nonaccrual loans
|
|
|
$6,819 |
|
|
|
$6,254 |
|
|
|
$5,490 |
|
|
|
Restructured loans
|
|
|
12 |
|
|
|
23 |
|
|
|
|
|
|
|
Foreclosed assets
|
|
|
922 |
|
|
|
506 |
|
|
|
557 |
|
|
|
|
Total nonperforming assets
|
|
|
$7,753 |
|
|
|
$6,783 |
|
|
|
$6,047 |
|
|
|
|
|
Total nonaccrual loans as a
percentage of total mortgage loans held for investment and
lending receivables
|
|
|
7.7 |
% |
|
|
7.6 |
% |
|
|
7.8 |
% |
|
|
|
Total nonperforming assets as a
percentage of total ResCap assets
|
|
|
5.8 |
% |
|
|
5.7 |
% |
|
|
5.8 |
% |
|
|
|
|
|
|
(a) |
Includes $340 as of September 30, 2006, $374 as of
December 31, 2005, and $462 as of September 30, 2005,
of loans that were purchased distressed and already in
nonaccrual status. |
|
30
Managements Discussion and Analysis
GMAC LLC
Our classification of a loan as nonperforming does not
necessarily indicate that the principal amount of the loan is
ultimately uncollectible in whole or in part. In certain cases,
borrowers make payments to bring their loans contractually
current and, in all cases, our mortgage loans are collateralized
by residential real estate. As a result, our experience has been
that any amount of ultimate loss is substantially less than the
unpaid principal balance of a nonperforming loan.
Our Insurance operations insure automobile service contracts and
underwrite personal automobile insurance coverages (ranging from
preferred to non-standard risks) and selected commercial
insurance and reinsurance coverages. Refer to pages 42-45
of our 2005 Annual Report on
Form 10-K for
further discussion of the business profile of our Insurance
operations.
Results of Operations
The following table summarizes the operating results of GMAC
Insurance for the periods indicated. The amounts presented are
before the elimination of balances and transactions with our
other operating segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
|
|
|
|
|
Period ended September 30, ($ in millions) |
|
2006 |
|
2005 |
|
Change |
|
% |
|
2006 |
|
2005 |
|
Change |
|
% |
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance premiums and service
revenue earned
|
|
|
$1,037 |
|
|
|
$967 |
|
|
|
$70 |
|
|
|
7 |
|
|
|
$3,082 |
|
|
|
$2,797 |
|
|
|
$285 |
|
|
|
10 |
|
Investment income
|
|
|
172 |
|
|
|
89 |
|
|
|
83 |
|
|
|
93 |
|
|
|
361 |
|
|
|
275 |
|
|
|
86 |
|
|
|
31 |
|
Other income
|
|
|
49 |
|
|
|
14 |
|
|
|
35 |
|
|
|
250 |
|
|
|
113 |
|
|
|
90 |
|
|
|
23 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
Total financing revenue and other
income
|
|
|
1,258 |
|
|
|
1,070 |
|
|
|
188 |
|
|
|
18 |
|
|
|
3,556 |
|
|
|
3,162 |
|
|
|
394 |
|
|
|
12 |
|
Insurance losses and loss
adjustment expenses
|
|
|
(580 |
) |
|
|
(593 |
) |
|
|
13 |
|
|
|
2 |
|
|
|
(1,830 |
) |
|
|
(1,779 |
) |
|
|
(51 |
) |
|
|
(3 |
) |
Acquisition and underwriting expense
|
|
|
(380 |
) |
|
|
(313 |
) |
|
|
(67 |
) |
|
|
(21 |
) |
|
|
(1,074 |
) |
|
|
(888 |
) |
|
|
(186 |
) |
|
|
(21 |
) |
Premium tax and other expense
|
|
|
(17 |
) |
|
|
(22 |
) |
|
|
5 |
|
|
|
23 |
|
|
|
(68 |
) |
|
|
(65 |
) |
|
|
(3 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
281 |
|
|
|
142 |
|
|
|
139 |
|
|
|
98 |
|
|
|
584 |
|
|
|
430 |
|
|
|
154 |
|
|
|
36 |
|
Income tax expense
|
|
|
(98 |
) |
|
|
(53 |
) |
|
|
(45 |
) |
|
|
(85 |
) |
|
|
(192 |
) |
|
|
(146 |
) |
|
|
(46 |
) |
|
|
(32 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$183 |
|
|
|
$89 |
|
|
|
$94 |
|
|
|
106 |
|
|
|
$392 |
|
|
|
$284 |
|
|
|
$108 |
|
|
|
38 |
|
|
Total assets
|
|
|
$13,919 |
|
|
|
$12,489 |
|
|
|
$1,430 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance premiums and service
revenue written
|
|
|
$1,037 |
|
|
|
$1,053 |
|
|
|
($16 |
) |
|
|
(2 |
) |
|
|
$3,168 |
|
|
|
$3,209 |
|
|
|
($41 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
Combined
ratio (a)
|
|
|
89.4 |
% |
|
|
94.6 |
% |
|
|
|
|
|
|
|
|
|
|
92.3 |
% |
|
|
94.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
(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 $183 million
and $392 million for the third quarter and first nine
months of 2006, respectively, as compared to $89 million
and $284 million for the same periods in 2005. Net income
increased quarter over quarter and year over year due to a
higher level of realized capital gains and favorable
underwriting results driven by a lower level of losses and loss
adjustment expenses. The impact of the favorable underwriting
results is exhibited in the lower combined ratio for both
periods. In addition, quarter and
year-to-date results
benefited from the first quarter 2006 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 $3.2 billion for the third quarter
and first nine months of 2006, respectively, as compared to
$1.1 billion and $3.2 billion for the same periods in
2005. The slight decrease in both periods is primarily
attributable to a lower volume of policies in the extended
service contract business due to lower penetration and GM retail
vehicle sales. The decrease in insurance premiums and service
revenue written was partially offset by the inclusion of MEEMIC
and growth in the domestic and international reinsurance assumed
business.
Additionally, our extended service contract product line was
unfavorably impacted by $15 million of customer refunds due
to the recent announcement by GM to extend its powertrain
warranty. On September 6, 2006, GM extended its powertrain
limited warranty coverage across its entire 2007 car and
light-duty lineup in the United States and Canada. The warranty
extension provides coverage for up to five years or
100,000 miles. In addition, GM expanded its roadside
assistance and courtesy transportation programs to match the
powertrain
31
Managements Discussion and Analysis
GMAC LLC
warranty term. Going forward the GM warranty extension will have
a financial impact on our operations and management is currently
assessing the potential revenue impact.
Underwriting results increased in the third quarter 2006 due to
lower weather losses in the auto dealer physical damage business
combined with the hurricane losses incurred in 2005 (primarily
Hurricane Katrina) and continued favorable loss trends
experienced by the extended service contract product line.
The combination of investment and other income increased 115%
and 30% in the third quarter and first nine months of 2006,
respectively, as compared to the same 2005 periods. The increase
is primarily attributable to higher capital gains realized. The
market value of the investment portfolio was $8.0 billion,
comprised of $5.5 billion fixed income and $2.5 billion equity
investments at September 30, 2006, compared to
$7.8 billion, comprised of $5.4 billion fixed income
and $2.4 billion equity investments at September 30,
2005. The increase in market value was driven by a strong equity
portfolio and the reinvestment of positive cash flow.
During the fourth quarter, as part of our investment and capital
strategy, our Insurance operations is completing a securities
portfolio review and is in the process of rebalancing the mix of
equity and fixed income securities. The proceeds from these
sales will either be invested in fixed income securities or
remitted as dividends. It is expected that significant net
capital gains will be realized on these sales during the fourth
quarter.
Total expenses increased 5% in the third quarter of 2006, as
compared to the same period in 2005, and 9% for the first nine
months of 2006 over the same period in 2005. The increases were
commensurate with higher insurance premiums and service revenue
earned and an increase in amortization of deferred acquisition
costs, partially offset by favorable loss experience.
Other operations is comprised of our Commercial Finance
business, equity interest in Capmark, certain corporate
activities related to the Mortgage Group, and reclassifications
and elimination between the reporting segments.
Results of Operations
Net income for our Other operations is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Nine Months |
|
|
|
|
|
Period ended September 30, ($ in millions) |
|
2006 |
|
2005 |
|
Change |
|
% |
|
2006 |
|
2005 |
|
Change |
|
% |
|
Commercial Finance
|
|
|
($768 |
) |
|
|
$14 |
|
|
|
($782 |
) |
|
|
(5,586 |
) |
|
|
($756 |
) |
|
|
$40 |
|
|
|
($796 |
) |
|
|
(1,990 |
) |
Capmark
|
|
|
9 |
|
|
|
128 |
|
|
|
(119 |
) |
|
|
(93 |
) |
|
|
54 |
|
|
|
229 |
|
|
|
(175 |
) |
|
|
(76 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
($759 |
) |
|
|
$142 |
|
|
|
($901 |
) |
|
|
(635 |
) |
|
|
($702 |
) |
|
|
$269 |
|
|
|
($971 |
) |
|
|
(361 |
) |
|
Total assets (a)
|
|
|
$6,244 |
|
|
|
$26,688 |
|
|
|
($20,444 |
) |
|
|
(77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Represents assets of Commercial Finance business. |
Commercial Finance
The Commercial Finance business incurred a loss of
$768 million and $756 million for the third quarter
and first nine months of 2006, respectively, as compared to
earnings of $14 million and $40 million in the same
periods of the prior year. Excluding the non-cash goodwill
impairment charge of $685 million (after-tax) discussed
below, the decrease in earnings was driven primarily by
increases in the provision for credit losses. The additional
losses are primarily the result of a decline in the present
value of expected future cash flows or collateral value, for
collateral dependent loans, resulting from Commercial Finance
managements decision to liquidate versus hold approach to
many troubled legacy accounts. The change in approach was driven
by higher funding and maintenance costs on these primarily
non-earning loans.
During the quarter, we recognized a non-cash goodwill impairment
charge in accordance with Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible
Assets (SFAS 142). The initiation of a goodwill
impairment test, outside the normal fourth quarter cycle, was
triggered during the middle of the year as the Commercial
Finance business experienced attrition of key personnel,
including their President and CEO. The charge is primarily due
to the impact of the decision by new management to exit certain
low return product lines and assets classes which impacted
future growth assumptions used to measure the fair value of the
company plus a decline in forecasted factored sales volume.
32
Managements Discussion and Analysis
GMAC LLC
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
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 93% and 76% to
$9 and $54 million for the third quarter and first nine
months of 2006. The results for the third quarter were partially
offset as Capmark recognized a number of losses associated with
properties owned by a Capmark subsidiary. For the nine months
ended September 30, 2006, earnings declined due to a loss
recognized on the sale and a decline in the share of Capmark
income recognized as we no longer fully consolidate the results
of Capmark but instead reflect our approximate 22% equity
interest.
|
|
|
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.
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.
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 ($14.1 billion
at September 30, 2006), including certain marketable
securities that can be utilized to meet our obligations in the
event of any market disruption. During the quarter, we reduced
our cash reserves from $22.7 billion at June 30, 2006,
to $14.1 billion at September 30, 2006, reflecting our
increased access to liquidity. From time to time, we repurchase
previously issued debt as part of our cash and liquidity
management strategy. In October 2006 we successfully completed a
debt tender offer to retire $1 billion of deferred interest
debentures, which will generate significant interest savings
going forward. This multi-faceted strategy, combined with a
continuous prefunding of requirements, is designed to enhance
our ability to meet our obligations.
The diversity of our funding sources enhances funding
flexibility, limits dependence on any one source of funds and
results in a more cost effective strategy over the longer term.
In developing this approach, management considers market
conditions, prevailing interest rates, liquidity needs and the
desired maturity profile of our liabilities. This strategy has
helped us maintain liquidity during periods of weakness in the
capital markets, changes in our business or changes in our
credit ratings. Despite our diverse funding sources and
strategies, our ability to maintain liquidity may be affected by
certain risk factors. Refer to Risk Factors for further
discussion on risk factors.
33
Managements Discussion and Analysis
GMAC LLC
The following table summarizes our outstanding debt by funding
source, excluding Capmark balances, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
|
|
|
|
September 30, |
|
December 31, |
($ in millions) |
|
2006 |
|
2005 |
|
Commercial paper
|
|
|
$1,328 |
|
|
|
$524 |
|
Institutional term debt
|
|
|
71,650 |
|
|
|
82,557 |
|
Retail debt programs
|
|
|
31,333 |
|
|
|
34,482 |
|
Secured financings
|
|
|
131,429 |
|
|
|
121,138 |
|
Bank loans, and other
|
|
|
14,110 |
|
|
|
15,704 |
|
|
|
Total debt (a)
|
|
|
249,850 |
|
|
|
254,405 |
|
Customer deposits (b)
|
|
|
10,119 |
|
|
|
6,855 |
|
Off-balance sheet
securitizations (c)
|
|
|
|
|
|
|
|
|
|
Retail finance receivables
|
|
|
5,567 |
|
|
|
3,165 |
|
|
Wholesale loans
|
|
|
17,798 |
|
|
|
20,724 |
|
|
Mortgage loans
|
|
|
101,884 |
|
|
|
77,573 |
|
|
|
Total funding
|
|
|
385,218 |
|
|
|
362,722 |
|
Less: cash reserves (d)
|
|
|
(14,100 |
) |
|
|
(19,605 |
) |
|
|
Net funding
|
|
|
$371,118 |
|
|
|
$343,117 |
|
|
Leverage ratio covenant (e)
|
|
|
7.4:1 |
|
|
|
7.5:1 |
|
|
Funding Commitments ($ in
billions)
|
|
|
|
|
|
|
|
|
|
Bank liquidity facilities (f)
|
|
|
$45.1 |
|
|
|
$44.1 |
|
|
Secured funding facilities (g)
|
|
|
$111.8 |
|
|
|
$115.5 |
|
|
|
|
|
(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 $9.1 billion in cash and cash equivalents and
$5.0 billion invested in marketable securities at
September 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 certain securitization transactions
that are accounted for on-balance sheet as secured financings
(totaling $93,476 and $94,346 at September 30, 2006, and
December 31, 2005, respectively). Our debt to equity ratio
was 11.8:1 and 11.9:1, at September 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 committed secured funding facilities with third
parties. Includes commitments with third-party asset-backed
commercial paper conduits, as well as forward flow sale
agreements with third parties securities, purchase commitments
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
first nine months of 2006, approximately 94% of our U.S.
Automotive volume was funded through a secured funding
arrangement or automotive whole loan sale. 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 third quarter of
2006, we executed $1.8 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
34
Managements Discussion and Analysis
GMAC LLC
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
us). 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 from 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 to the 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 April 2006, in
conjunction with the announcement of the sale of 51% of GMAC, we
announced that we expected to arrange two asset-backed funding
facilities totaling up to $25 billion which would support
our ongoing business and enhance our liquidity position.
Citigroup has committed $12.5 billion in aggregate to these
two facilities. In August 2006, we closed on the first of the
two asset backed funding facilities, a three year,
$10 billion facility with a subsidiary of Citigroup. At
this time, GMAC is continuing to review its options for a second
asset-based facility, including the form of the facility, to
enhance our overall liquidity position. 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
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 our (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. 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
Form 10-K with the
SEC. Following
35
Managements Discussion and Analysis
GMAC LLC
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) |
|
Moodys
|
|
Not-Prime
|
|
Ba1
|
|
Possible downgrade
|
|
|
August 24, 2005 (b) |
|
S&P
|
|
B-1
|
|
BB
|
|
Developing
|
|
|
May 5, 2005 (c) |
|
DBRS
|
|
R-3
|
|
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), on October 11, 2005, placed the ratings
under review with developing implications and affirmed the
review status on October 17, 2005. On
September 15, 2006, DBRS modified their short-term
rating scale by changing the lowest investment-grade rating from
R-2 (low) to R-3. As a result of this technical change, our
rating was reclassified from R-2 (low) to R-3. |
|
In addition, ResCap, our indirect wholly owned subsidiary, has
investment grade ratings (separate from us) 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) |
|
Moodys
|
|
P-3
|
|
Baa3
|
|
Possible 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. |
|
36
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.
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
($ in billions) |
|
2006 |
|
2005 |
|
Securitization (a)
|
|
|
|
|
|
|
|
|
|
Retail finance receivables
|
|
|
$6.1 |
|
|
|
$6.0 |
|
|
Wholesale loans
|
|
|
18.5 |
|
|
|
21.4 |
|
|
Mortgage loans
|
|
|
105.3 |
|
|
|
79.4 |
|
|
Total securitization
|
|
|
129.9 |
|
|
|
106.8 |
|
Other off-balance sheet activities
|
|
|
|
|
|
|
|
|
|
Mortgage warehouse
|
|
|
0.6 |
|
|
|
0.6 |
|
|
Other mortgage
|
|
|
0.1 |
|
|
|
0.2 |
|
|
Total off-balance sheet
activities
|
|
|
$130.6 |
|
|
|
$107.6 |
|
|
|
|
|
(a) |
Includes only securitizations accounted for as sales under
SFAS 140, as further described in Note 8 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; 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 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. Adoption of SFAS 155 is not
expected to have a material impact on our financial position or
results of operation.
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.
The guidance did not have a material impact on our consolidated
financial position 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 they are more-likely-than-not to
be sustained based solely on its technical merits as of the
reporting date. The more-likely-than-not threshold
37
Managements Discussion and Analysis
GMAC LLC
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.
FASB Staff Position
(FSP) No. 13-2
In July 2006 the FASB issued FSP
No. 13-2
Accounting for a Change or Projected Change in the Timing of
Cash Flows Relating to Income Taxes Generated by a Leveraged
Lease Transaction,
(FSP 13-2), which
amends SFAS No. 13, Accounting for Leases, by
requiring lessors to recalculate the rate of return and periodic
income allocation for leveraged-lease transactions when there is
a change or projected change in the timing of income tax cash
flows related to the lease.
FSP 13-2 requires
lessors to use the model in FIN 48 to determine the timing
and amount of expected tax cash flows in leveraged-lease
calculations and recalculations.
FSP 13-2 is
effective in the same period as FIN 48. At the date of
adoption, the lessor is required to reassess projected income
tax cash flows related to leveraged leases using the FIN 48
model for recognition and measurement. Revisions to the net
investment in a leverage lease required when
FSP 13-2 is
adopted would be recorded as an adjustment to the beginning
balance of retained earnings in the period of adoption and
reported as a change in accounting principle. Management is
assessing the potential impact on our financial condition or
results of operations.
SEC Staff Accounting Bulletin No. 108 In
September 2006 the SEC issued Staff Accounting Bulletin
(SAB) No. 108 Quantifying Financial
Misstatements, which expresses the Staffs views
regarding the process of quantifying financial statement
misstatements. Registrants are required to quantify the impact
of correcting all misstatements, including both the carryover
and reversing effects of prior year misstatements, on the
current year financial statements. The techniques most commonly
used in practice to accumulate and quantify misstatements are
generally referred to as the rollover (current year
income statement perspective) and iron curtain
(year-end balance perspective) approaches. The financial
statements would require adjustment when either approach results
in quantifying a misstatement that is material, after
considering all relevant quantitative and qualitative factors.
Management does not expect this guidance to have a material
effect on our current process for assessing and quantifying
financial statement misstatements.
SFAS No. 157 In September 2006 the
FASB issued SFAS No. 157 Fair Value
Measurements, which provides a definition of fair value,
establishes a framework for measuring fair value and requires
expanded disclosures about fair value measurements.
SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 12, 2007, and interim
periods within those years. The provisions of SFAS 157
should be applied prospectively. Management is assessing the
potential impact on our financial condition and results of
operations.
SFAS No. 158 In September 2006 the
FASB issued SFAS No. 158 Employers Accounting
for Defined Benefit Pension and Other Postretirement Plans,
which amends SFAS No. 87 Employers Accounting
for Pensions (SFAS No. 87), SFAS No. 88
Employers Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits
(SFAS No. 88), SFAS No. 106
Employers Accounting for Postretirements Benefits Other
Than Pensions (SFAS No. 106), and
SFAS No. 132(R) Employers Disclosures about
Pensions and Other Postretirement Benefits (revised 2003)
(SFAS 132(R)). This Statement requires companies to
recognize an asset or liability for the overfunded or
underfunded status of their benefit plans in their financial
statements. The asset or liability is the offset to other
comprehensive income, consisting of previously unrecognized
prior service costs and credits, actuarial gains or losses and
transition obligations and assets. SFAS 158 also requires
the measurement date for plan assets and liabilities to coincide
with the sponsors year end. The standard provides two
transition alternatives for companies to make the
measurement-date provisions. The recognition of asset and
liability related to funded status provision is effective for
fiscal years ending after December 15, 2006, and the change
in measurement is effective for fiscal years ending after
December 15, 2008. Management is assessing the potential
impact on our financial condition and 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 financing revenue increased by $624 million and
$1,547 million, respectively, in the third quarter and
first nine months of 2006, compared to the same period of 2005,
due to increases in auto financing revenue, operating lease
income, and mortgage consumer
38
Managements Discussion and Analysis
GMAC LLC
interest income. Auto financing revenue benefited from strong
retail financing penetration and operating lease income
benefited due to the growth in the operating lease portfolio.
Mortgage consumer interest income benefited from mortgage
originations which increased slightly to $51.5 billion in
the third quarter from $51.3 billion in the prior period.
These increases were partially offset by a decline in mortgage
loans held for sale which declined due to the sale of Capmark.
Subsequent to the sale of Capmark on March 23, 2006, we
only recognize our approximately 22% equity interest versus a
year ago when Capmark was wholly-owned and fully consolidated in
our results.
Interest expense increased by $937 million and
$2,267 million in the third quarter and first nine months
of 2006, as compared with the same period in 2005. The increase
is primarily a result of the negative impact of higher funding
costs due to an increase in overall market interest rates. In
addition, a portion of the increase is due to an unfavorable
impact of $220 million related to our third-quarter debt
tender offer to repurchase $1 billion of zero coupon bonds.
The provision for credit losses increased for the third quarter
of 2006 by $101 million primarily due to increases in
provisions at both the Commercial Finance business and ResCap.
This increase was partially offset by lower provisions in the
auto finance business.
Insurance premiums and service revenue earned increased by 7%
and 10% in the third quarter and first nine months of 2006, as
compared with the same period in 2005. However, insurance
premiums and service revenue written declined slightly for the
third quarter and first nine months due to a lower volume of
policies written in the extended service contract business due
to lower penetration and GM retail vehicle sales.
Gains on sales of mortgage and automotive loans, net decreased
due to lower margins resulting from competitive pricing
pressures. Net loan servicing income decreased due to
unfavorable mortgage servicing asset valuations resulting from
lower long-term rates. The decline in net loan servicing was
partially offset by an increase in servicing fees resulting from
a higher volume of originations.
Investment income increased by $261 million and
$161 million in the third quarter and first nine months of
2006, as compared to the same period of the prior year. The
increase is primarily attributable to higher capital gains
recognized during the period at our Insurance operations. The
market value of the investment portfolio at our Insurance
operations was $8.0 billion at September 30, 2006,
compared to $7.8 billion at September 30, 2005. Gain
on sale of equity investments increased by $411 million in
the first nine months of 2006, as compared to the same period in
the prior year. The increase is primarily due to the sale of our
equity interest in a regional homebuilder during the second
quarter of 2006.
Expenses
Noninterest expense increased by 18% and 11%, in the third
quarter and first nine months of 2006, as compared to the same
period in the prior year. Depreciation expense on operating
lease assets increased during the third quarter and first nine
months of 2006, as a result of higher average operating lease
asset levels, as compared to the same period of 2005. In
addition, noninterest expense was negatively impacted in the
third quarter by non-cash goodwill and other intangible asset
impairment charges of $840 million related to the
Commercial Finance business. Part of the increase was offset by
lower compensation and benefits expenses at Capmark which was
fully consolidated in 2005 versus accounted for under the equity
method starting in March 2006.
|
|
|
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 of 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; |
39
Managements Discussion and Analysis
GMAC LLC
|
|
|
|
|
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
effective as of the end of the period covered by this report.
As previously disclosed in our
Form 10-K for the
year ended December 31, 2005, management had concluded that
the disclosure controls and procedures related to certain
mortgage loan operations of GMAC were not effective because of a
material weakness in internal control over financial reporting
with respect to the preparation, review, presentation and
disclosure of the consolidated statement of cash flows.
Subsequently, during 2006, management implemented enhancements
to our internal controls over financial reporting with respect
to the consolidated statement of cash flows. For example,
management is utilizing enhanced templates in the financial
reporting process which provide more detailed information about
cash flows and which facilitate identifying and isolating
non-cash amounts. GMAC
reporting units certify to the accuracy of cash flow data on a
quarterly basis, and internal quarterly accounting reviews have
been expanded to incorporate cash flow items. In addition, the
disclosure process for testing for GAAP compliance has been
revised to cover treatment of cash flows more thoroughly.
Management has assessed the operating effectiveness of these
enhanced internal controls and believe the material weakness has
been remediated.
There were no other changes in GMACs internal control 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, as
supplemented by our March 31 and June 30, 2006
Forms 10-Q, for
additional information regarding the items noted below and other
pending governmental proceedings, claims and legal actions.
In the previously reported bondholder class action, J&R
Marketing et al. v. General Motors Corporation,
et al., 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 and June 30, 2006
Forms 10-Q.
The following risk factors, which were disclosed in our 2005
Annual Report on
Form 10-K and
supplemented by our March 31 and June 30, 2006
Forms 10-Q have
not materially changed since we filed these reports. Please
refer to these reports for a complete discussion of these risk
factors.
Risks Related to Our Controlling Member
|
|
|
|
|
GM has agreed to sell a controlling interest in us. 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 rating. |
Risks Related to Our Business
|
|
|
|
|
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. |
|
|
|
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. |
|
|
|
Our indebtedness and other obligations are significant and could
materially adversely affect our business. |
|
|
|
The profitability and financial condition of our operations are
dependent upon the operations of our parent, General Motors. |
|
|
|
We have substantial credit exposure to General Motors. |
|
|
|
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. |
|
|
|
We are exposed to credit risk which could affect our
profitability and financial condition. |
|
|
|
Our earnings may decrease because of increases or decreases in
interest rates. |
|
|
|
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. |
|
|
|
Our residential mortgage subsidiarys ability to pay
dividends and to prepay subordinated debt obligations to us is
restricted by contractual arrangements. |
|
|
|
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. |
42
Other Information
GMAC LLC
|
|
|
|
|
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. |
|
|
|
Our business outside the United States exposes us to additional
risks that may cause our revenues and profitability to decline. |
|
|
|
Our business could be adversely affected by changes in currency
exchange rates. |
|
|
|
General business and economic conditions of the industries and
geographic areas in which we operate affect our revenues,
profitability and financial condition. |
|
|
|
Our profitability and financial condition may be materially
adversely affected by decreases in the residual value of
off-lease vehicles. |
|
|
|
Fluctuations in valuation of investment securities or
significant fluctuations in investment market prices could
negatively affect revenues. |
|
|
|
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. |
|
|
|
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. |
|
|
|
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. |
|
|
|
A loss of contractual servicing rights could have a material
adverse effect on our financial condition, liquidity and results
of operations. |
|
|
|
The regulatory environment in which we operate could have a
material adverse effect on our business and earnings. |
|
|
|
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 November, 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
|
|
|
|
|
Exhibit |
|
Description |
|
Method of Filing |
|
|
2.1
|
|
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
|
|
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.
|
|
3.1
|
|
Certificate of Formation of GMAC
LLC dated July 20, 2006
|
|
Filed as Exhibit 3.1 to the
Companys Quarterly Report for the Period Ended
June 30, 2006, on Form 10-Q (File No. 1-3754);
incorporated herein by reference.
|
|
3.2
|
|
Certificate of Conversion to
Limited Liability Company of General Motors Acceptance
Corporation to GMAC LLC dated July 20, 2006
|
|
Filed as Exhibit 3.2 to the
Companys Quarterly Report for the Period Ended
June 30, 2006, on Form 10-Q (File No. 1-3754);
incorporated herein by reference.
|
|
3.3
|
|
Limited Liability Company Agreement
of GMAC LLC dated July 21, 2006
|
|
Filed as Exhibit 3.3 to the
Companys Quarterly Report for the Period Ended
June 30, 2006, on Form 10-Q (File No. 1-3754);
incorporated herein by reference.
|
|
4.1
|
|
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
|
|
Filed as Exhibit 4(a) to the
Companys Registration Statement No. 2-75115;
incorporated herein by reference.
|
|
4.1.1
|
|
Form of First Supplemental
Indenture dated as of April 1, 1986, supplementing the
Indenture designated as Exhibit 4.1
|
|
Filed as Exhibit 4(g) to the
Companys Registration Statement No. 33-4653;
incorporated herein by reference.
|
|
4.1.2
|
|
Form of Second Supplemental
Indenture dated as of June 15, 1987, supplementing the
Indenture designated as Exhibit 4.1
|
|
Filed as Exhibit 4(h) to the
Companys Registration Statement No. 33-15236;
incorporated herein by reference.
|
|
4.1.3
|
|
Form of Third Supplemental
Indenture dated as of September 30, 1996, supplementing the
Indenture designated as Exhibit 4.1
|
|
Filed as Exhibit 4(i) to the
Companys Registration Statement No. 333-33183;
incorporated herein by reference.
|
|
4.1.4
|
|
Form of Fourth Supplemental
Indenture dated as of January 1, 1998, supplementing
the Indenture designated as Exhibit 4.1
|
|
Filed as Exhibit 4(j) to the
Companys Registration Statement No. 333-48705;
incorporated herein by reference.
|
|
4.1.5
|
|
Form of Fifth Supplemental
Indenture dated as of September 30, 1998, supplementing the
Indenture designated as Exhibit 4.1
|
|
Filed as Exhibit 4(k) to the
Companys Registration Statement No. 333-75463;
incorporated herein by reference.
|
|
4.2
|
|
Form of Indenture dated as of
September 24, 1996, between the Company and The Chase
Manhattan Bank, Trustee, relating to SmartNotes
|
|
Filed as Exhibit 4 to the
Companys Registration Statement No. 333-12023;
incorporated herein by reference.
|
|
4.2.1
|
|
Form of First Supplemental
Indenture dated as of January 1, 1998, supplementing
the Indenture designated as Exhibit 4.2
|
|
Filed as Exhibit 4(a)(1) to
the Companys Registration Statement No. 333-48207;
incorporated herein by reference.
|
|
4.2.2
|
|
Form of Second Supplemental
Indenture dated as of June 20, 2006, supplementing the
Indenture designated as Exhibit 4.2
|
|
Filed as Exhibit 4(a)(2) to
the Companys Registration Statement No. 333-136021;
incorporated herein by reference.
|
|
4.3
|
|
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
|
|
Filed as Exhibit 4 to the
Companys Registration Statement No. 2-99057;
incorporated herein by reference.
|
|
4.3.1
|
|
Form of First Supplemental
Indenture dated as of April 1, 1986, supplementing the
Indenture designated as Exhibit 4.3
|
|
Filed as Exhibit 4(a) to the
Companys Registration Statement No. 33-4661;
incorporated herein by reference.
|
45
Index of Exhibits
GMAC LLC
|
|
|
|
|
Exhibit |
|
Description |
|
Method of Filing |
|
|
4.3.2
|
|
Form of Second Supplemental
Indenture dated as of June 24, 1986, supplementing the
Indenture designated as Exhibit 4.3
|
|
Filed as Exhibit 4(b) to the
Companys Registration Statement No. 33-6717;
incorporated herein by reference.
|
|
4.3.3
|
|
Form of Third Supplemental
Indenture dated as of February 15, 1987, supplementing the
Indenture designated as Exhibit 4.3
|
|
Filed as Exhibit 4(c) to the
Companys Registration Statement No. 33-12059;
incorporated herein by reference.
|
|
4.3.4
|
|
Form of Fourth Supplemental
Indenture dated as of December 1, 1988, supplementing
the Indenture designated as Exhibit 4.3
|
|
Filed as Exhibit 4(d) to the
Companys Registration Statement No. 33-26057;
incorporated herein by reference.
|
|
4.3.5
|
|
Form of Fifth Supplemental
Indenture dated as of October 2, 1989, supplementing
the Indenture designated as Exhibit 4.3
|
|
Filed as Exhibit 4(e) to the
Companys Registration Statement No. 33-31596;
incorporated herein by reference.
|
|
4.3.6
|
|
Form of Sixth Supplemental
Indenture dated as of January 1, 1998, supplementing
the Indenture designated as Exhibit 4.3
|
|
Filed as Exhibit 4(f) to the
Companys Registration Statement No. 333-56431;
incorporated herein by reference.
|
|
4.3.7
|
|
Form of Seventh Supplemental
Indenture dated as of June 15, 1998, supplementing the
Indenture designated as Exhibit 4.3
|
|
Filed as Exhibit 4(g) to the
Companys Registration Statement No. 333-56431;
incorporated herein by reference.
|
|
4.4
|
|
Form of Indenture dated as of
December 1, 1993, between the Company and Citibank,
N.A., Trustee, relating to Medium-Term Notes
|
|
Filed as Exhibit 4 to the
Companys Registration Statement No. 33-51381;
incorporated herein by reference.
|
|
4.4.1
|
|
Form of First Supplemental
Indenture dated as of January 1, 1998, supplementing
the Indenture designated as Exhibit 4.4
|
|
Filed as Exhibit 4(a)(1) to
the Companys Registration Statement No. 333-59551;
incorporated herein by reference.
|
|
10
|
|
Copy of agreement dated as of
October 22, 2001, between General Motors Corporation
and General Motors Acceptance Corporation.
|
|
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.
|
|
12
|
|
Computation of ratio of earnings to
fixed charges
|
|
Filed herewith.
|
|
31.1
|
|
Certification of Principal
Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a)
|
|
Filed herewith.
|
|
31.2
|
|
Certification of Principal
Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a)
|
|
Filed herewith.
|
|
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.
|
|
32
|
|
Certification of Principal
Executive Officer and Principal Financial Officer pursuant to
18 U.S.C. Section 1350
|
|
Filed herewith.
|
46