Fourth-Quarter Restructuring Charge Expected
MINNEAPOLIS, Oct. 17 /PRNewswire/ -- 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
executive officer.
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 outplacement assistance.
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 billion.
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.
Forward-Looking Statements
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 organizations.
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.
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SOURCE GMAC Financial Services
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Related links:
http://www.gmacfs.com
CONTACT:
Gina Proia of GMAC Financial Services,
+1-917-369-2364; or, Stephen Dupont of ResCap, +1-952-857-6643
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