Subprime Fallout Hits General Motors

Eddy Elfenbein submits: How’s this for subprime fallout? Profits at General Motors Corporation (GM) dropped 90% from last year due to bad loans at its GMAC unit.

This is sad because GM was improving so nicely. Last year, the company only lost $2 billion compared with the $10 billion it lost in 2005.

But now the subprime mess has caught up with GM. Last year, GMAC’s Residential Capital earned $201 million. This year, it lost $905 million. GM had recently sold 49% of its stake in GMAC to Cerberus Capital Management.

Bloomberg noted that the yield on GM bonds due in 2033 fell to 9.2%.

GM 1-yr chart: