Fourth-Quarter Restructuring Charge Expected
MINNEAPOLIS, Oct. 17 /CNW/ -- GMAC Financial Services today announced it
is restructuring its mortgage operations, Residential Capital, LLC (ResCap),
as severe weakness in the housing market and mortgage industry continues to
prevail. ResCap will streamline its operations and revise its cost structure,
which will enhance its flexibility, allowing it to scale operations up or down
more rapidly to meet changing market conditions.
On Oct. 15, 2007, a restructuring plan was approved that will include
ResCap reducing its current worldwide workforce of 12,000 associates by
approximately 25 percent, or by approximately 3,000 associates, with the
majority of reductions occurring in the fourth quarter of 2007. This
reduction in workforce is in addition to the measures undertaken in the first
half of 2007 in which 2,000 positions were eliminated.
"We deeply respect and value all of our associates. While workforce
reductions are very difficult, we will treat our departing associates with
sensitivity in keeping with our values," said Jim Jones, ResCap chief
The reduction in ResCap's workforce was influenced by sharp downturns in
the U.S. residential real estate markets and the global dislocation of the
mortgage finance and credit markets. The mortgage industry continues to
experience lower overall origination volumes; illiquidity in the secondary
market; and adverse trends in home price appreciation.
As a result of the actions announced today, ResCap will incur
restructuring charges, which are expected to range from $90 to $110 million,
which will include costs related to severance and other employee-related
costs of approximately $55 to $65 million and the closure of facilities of
approximately $35 to $45 million. The majority of these charges will be
incurred in the fourth quarter of 2007. Consolidated charges are expected to
result in future cash expenditures of approximately $85 to $95 million.
The workforce reductions will include a range of administrative and
managerial positions. Business units most affected by lower mortgage market
origination volumes will incur the most reductions. All eligible associates
affected by this workforce reduction will be provided severance packages and
ResCap will continue to modify its product offerings based on market
conditions, and has sharply reduced its exposure to nonprime and prime non-
conforming loans this year. Nevertheless, ResCap will continue to offer a
broad and competitive menu of high quality products and will pursue growth
plans opportunistically in areas where the company maintains a competitive
advantage. In addition, ResCap will continue to leverage its relationship
with GMAC Bank and its efficient, dependable sources of funding.
About GMAC Financial Services
GMAC Financial Services (http://www.gmacfs.com) is a global, diversified
financial services company that operates in approximately 40 countries in
automotive finance, real estate finance, insurance and commercial finance
businesses. GMAC was established in 1919 and currently employs about 31,000
people worldwide. At Dec. 31, 2006, GMAC held more than $287 billion in assets
and earned net income for 2006 of $2.1 billion on net revenue of $18.2
About Residential Capital, LLC
Residential Capital, LLC (https://www.rescapholdings.com) is a leading
real estate finance company, focused primarily on the residential real estate
market in the United States, Canada, Europe, Latin America and Australia. The
company's diversified businesses cover the spectrum of the U.S. residential
finance industry, from origination and servicing of mortgage loans through
their securitization in the secondary market. It also provides capital to
other originators of mortgage loans, residential real estate developers, and
resort and timeshare developers.
In this press release and comments by GMAC LLC ("GMAC"), and Residential
Capital, LLC ("ResCap") management, the use of the words "expect,"
"anticipate," "estimate," "forecast," "initiative," "objective," "plan,"
"goal," "project," "outlook," "priorities," "target," "intend," "evaluate,"
"pursue," "seek," "may," "would," "could," "should," "believe," "potential,"
"continue," or the negative of any of those words or similar expressions is
intended to identify forward-looking statements. All statements herein and
management comments, other than statements of historical fact, including
without limitation, statements about future events and financial performance,
are forward-looking statements that involve certain risks and uncertainties.
While these statements represent our current judgment on what the future
may hold, and we believe these judgments are reasonable, these statements are
not guarantees of any events or financial results, and GMAC's or ResCap's
actual results may differ materially due to numerous important factors that
are described in the most recent reports on SEC Form 10-K for GMAC and ResCap,
each of which may be revised or supplemented in subsequent reports on SEC
Forms 10-Q and 8-K. Such factors include, among others, the following:
securing low cost funding to sustain growth for GMAC and ResCap; the ability
to maintain an appropriate level of debt; recent developments in the
residential mortgage market, especially in the nonprime sector; the impact on
ResCap of the continuing decline in the U.S. housing market; changes in U.S.
government-sponsored mortgage programs or disruptions in the markets in which
our mortgage subsidiaries operate; changes in our contractual servicing
rights; costs and risks associated with litigation; changes in our accounting
assumptions that may require or that result from changes in the accounting
rules or their application, which could result in an impact on earnings;
failure to remediate a material weakness in ResCap's internal controls that
could result in material misstatements in its financial statements in future
periods; changes in the credit ratings of GMAC or ResCap; changes in economic
conditions, currency exchange rates or political stability in the markets in
which we operate; and changes in the existing or the adoption of new laws,
regulations, policies or other activities of governments, agencies and similar
Investors are cautioned not to place undue reliance on forward-looking
statements. Neither GMAC nor ResCap undertake any obligation to update
publicly or otherwise revise any forward-looking statements, whether as a
result of new information, future events or other such factors that affect the
subject of these statements, except where expressly required by law.
For further information:
For further information: Gina Proia of GMAC Financial Services,
+1-917-369-2364; or, Stephen Dupont of ResCap, +1-952-857-6643 Web Site: