GMAC, in which GM (NYSE:GM) sold a majority stake to Cerberus, posted another big loss. In the fourth quarter, the red ink flowed and hit $724 million.
According to Bloomberg "GMAC said it's talking to buyers for parts of the Residential Capital mortgage unit, which recorded a $921 million quarterly loss.". Moody's has downgraded the ResCap senior debt.
By spending time in Detroit, Cerberus has managed to get ownership of a car company, Chrysler, just before what may be the weakest year in domestic vehicle sales in over a decade. And, in ResCap it has picked up a mortgage operation which is being hurt by the same delinquency problems that are roiling the industry.
As mortgage companies face a difficult year, the question becomes whether Cerberus will have to put more money into GMAC and ResCap.
Private equity firms tend to do well because they negotiate deals which are particularly favorable due to their ability to bring larges sums of cash to the table. Their armies of analysts should give companies like Cerberus an advantage in picking companies which will do unusually well.
Cerberus needs to get some new analysts.
Douglas A. McIntyre is an editor at 247wallst.com.
