GM says that GMAC's falling ability to offer finance has dented sales

US car financing firm GMAC, which has received a $6bn bail-out, has returned to profit in the fourth quarter after more than a year of losses.

The company's fourth-quarter profit of $7.46bn (£5.2bn) compares with a loss of $724m a year earlier.

However, there has been no recovery in its core businesses, with its car financing arm reporting a $1.3bn loss.

GMAC is owned by struggling car maker General Motors and Cerberus, a private equity firm and Chrysler's owner.

It also has a home loan business, which lost $981m.

The unexpected profit is largely down to a $11.4bn gain from a debt swap to strengthen the firm's balance sheet and avoid default, which has reduced its interest payments.

Bail-out

In December, GMAC won permission from regulators to become a bank and therefore gained access to the Treasury's financial industry rescue fund.

The bail-out was aimed at helping revive car industry sales by offering cheaper loans to a wider range of buyers who may have lower credit scores.

GMAC has traditionally provided the bulk of financing for car buyers at GM dealerships and the loans that dealers rely on for their inventories of GM cars and trucks.

But its ability to provide both kinds of financing has been sharply limited over the past several months because of the broader credit crisis which weakened GMAC's ability to borrow.





