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UAW chief worried about GMAC exposure
By Jui Chakravorty
DETROIT (Reuters) - United Auto Workers union President Ron Gettelfinger said on Tuesday he was concerned by General Motors Corp's <GM.N> exposure to the mortgage lending arm of former finance unit GMAC and would seek a meeting with executives at the automaker for more information.
"It's a concern," Gettelfinger told the Reuters Autos Summit in Detroit. "It's a pretty big concern. There's no question it's an issue."
GM shares closed down almost 8.5 percent on the New York Stock Exchange on Monday -- the largest one-day percentage decline for GM shares in more than two years -- amid investor concern over GM's exposure to the subprime market through GMAC, in which it retains a 49 percent stake.
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GMAC's residential mortgage unit, ResCap, lost $2.26 billion in the third quarter.
ResCap bonds also plunged on Monday, and the cost to insure GMAC bonds rose. Investors said ResCap, the No. 2 independent U.S. mortgage lender, may need further capital injection to avoid violating loan agreements.
The decline in GM stock wiped out the last gains from a rally that began in September in anticipation of a cost-cutting labor deal between GM and the United Auto Workers union and was matched by a sell-off in bonds issued by GMAC's ResCap unit.
GM shares were off 10 cents, or 0.4 percent, to $26.69 in Tuesday afternoon trade on the New York Stock Exchange, around their lowest levels in 16 months.
Gettelfinger said union members were worried about the drop in shares and he would call GM Chief Financial Officer Fritz Henderson to talk about the automaker's exposure to GMAC.
"The teams will be meeting at the lower level in the next few weeks," he said. "But I'll be picking up the phone and calling Fritz in the next week to get some clarity on all of this."
An investor group led by Cerberus Capital Management <CBS.UL> bought a 51 percent stake in GMAC last November from GM in a deal worth around $14 billion.
At the time, analysts said ResCap was the crown jewel in the deal. GMAC's other subsidiaries provide automotive financing, commercial finance, insurance and real-estate services.
Gettelfinger said he was not clear on all of the terms of the agreement between Cerberus and GM. When asked about GM's fiscal responsibilities toward GMAC, he said: "I think there are some issues there. I'm not real clear on it."
"Things have kind of unfolded here pretty quickly," Gettelfinger said.
JP Morgan analyst Himanshu Patel said a ResCap bankruptcy could cost GM shareholders about $2.65 per share, adding it was doubtful whether GM would take part in a bailout for the company.
(Additional reporting by Kevin Krolicki; Editing by Tim Dobbyn)