GMAC Financial Services said Thursday it swung to a $2.48 billion second-quarter loss, pulled down by a steep drop in the values of used trucks and sport utility vehicles.

The loss, which exceeded GMAC's losses for all of 2007, compared with a profit of $293 million in the same quarter last year.
GMAC Chief Financial Officer Robert Hull called the results disappointing, blaming turmoil in the credit and housing industries and a weak U.S. economy, coupled with a drop used vehicle prices and soaring fuel costs.

"This is the perfect storm for our business and we see no signs of it blowing over," Hull told analysts and journalists in a conference call.
GMAC is majority owned by private equity firm Cerberus Capital Management, but Detroit-based General Motors Corp. still holds a large minority of the business. That stake is expected to be a drag on GM's results when it reports second-quarter figures Friday morning.

Losses at GMAC's mortgage lending division, ResCap, widened to $1.86 billion from $254 million, as a result of losses from asset sales. Meanwhile, GMAC's automotive finance division swung to a loss of $717 million. The loss included a $716 million impairment charge resulting from lower used vehicle residual values, especially related to SUVs, GMAC said.

Deutsche Bank's Rod Lache said that charge would have been significantly higher without $1.5 billion in leasing support payments from GM. Lache expects the automaker to take a $1.2 billion loss related to GMAC, along with the $1.5 billion charge, when it reports Friday.
"Overall, results were weaker than expected due to one-time charges and asset sale writeoffs in both ResCap and GMAC Auto," Lache wrote in a note to investors. "We expect weak results in both businesses to continue at least through the end 2008."

Also on Thursday, Standard & Poor's cut its ratings for GMAC, along with all there Detroit-based automakers and their respective finance arms, to "B-" from "B," citing mounting cash losses at the automakers and the continued deterioration of the U.S. automotive market. Both ratings are considered "junk" status.

Surging gas prices have pulled down the values of large pickups and SUVs this year, making automakers' lease portfolios less attractive and forcing them to take big losses when they try to sell the formerly leased vehicles.

Hull said the company is taking a number of steps to lower its lease-related losses, including cutting the volume of new leases in the United States and putting in place a program that will encourage customers to keep their vehicles once their leases expire.

GMAC also said earlier this week that it was eliminating leasing incentives in Canada at the end of July. Meanwhile, GM told its dealers this week that it would continue U.S. leasing incentives in August, despite the tough market conditions.

GMAC isn't the only company taking steps to lessen its lease-related risks. Ford Motor Credit, which took a $2.1 billion charge during the second quarter because of the drop used vehicle values, has said it will raise leasing prices on some models.

And Chrysler LLC said last week that its own finance arm would get out of the leasing business altogether by the end of July.

William Muir, president of GMAC Financial Services, said leases accounted for about 18 percent of GM sales during the first six months of 2008, but GMAC expects that percentage to fall by half in the "very near term."

Down the road, lease sales could trend below that percentage depending on market conditions, Muir said.

GM shares fell 33 cents, or 2.9 percent, to $11.07 Thursday.