General Motors Acceptance Corp. Consolidates Residential Mortgage Business Under One CEO

Strategic Insights -

Veteran executive Bruce Paradis was recently named the sole CEO of Residential Capital, a unit of General Motors Acceptance Corp., which generates about half of the profits from the finance businesses of General Motors Corp. The Consolidation is part of GMAC's efforts to focus on attacking market opportunities in real estate markets worldwide and to secure capital resources to fuel growth. Paradis, who has been CEO of GMAC's Residential Funding Corp. since 1994, has played a key role in launching ResCap, including raising $4 billion in a recent private bond offering.

Key Takeaways:

  • ResCap, one of the nation's 10 largest mortgage-finance firms, has been consolidated under one CEO, Bruce Paradis, who will drive growth in real estate markets worldwide.
  • ResCap generates about half of the profits from the finance businesses of General Motors Corp., which posted a $1.6 billion third-quarter loss on weak car and truck sales.
  • ResCap employs 1,700 in the Twin Cities and 14,000 around the world, with nearly $1 billion in profit generated in 2004.
  • ResCap focuses on wholesale mortgage business, buying loans from retail mortgage companies, aggregating them into pools, and selling them to institutional investors as mortgage-backed securities.
  • The consolidation is part of GMAC's efforts to secure capital resources and fuel growth, with a possible majority stake sale of GMAC to raise capital.
  • GMAC's Residential Funding Corp. was merged with GMAC Mortgage to form ResCap, with David Applegate named chief operating officer and president of the U.S. Residential Finance Group.

Statistics:

  • ResCap employs 1,700 in the Twin Cities and 14,000 around the world.
  • ResCap generated nearly $1 billion in profit in 2004.
  • GMAC raised $4 billion in a recent private bond offering.
  • GM posted a $1.6 billion third-quarter loss on weak car and truck sales.
  • ResCap is one of the nation's 10 largest mortgage-finance firms.

Sources:

  • "After successfully accomplishing several key milestones in launching ResCap, including raising $4 billion in a recent private bond offering, ResCap needs to focus on attacking market opportunities," GMAC Chairman Eric Feldstein said in a prepared statement. [1]
  • "This is the biggest Minnesota company you've never heard of," Paradis quipped in a recent interview. [2]
  • Bloomington-based "ResCap" generates about half the profits coming from the money-making finance businesses of General Motors Corp. [3]

References:

[1] Neal St. Anthony; Staff Writer, "GM's unit names new CEO", Minneapolis Star Tribune, November 11, 2005.

[2] Neal St. Anthony; Staff Writer, "GM's unit names new CEO", Minneapolis Star Tribune, November 11, 2005.

[3] Neal St. Anthony; Staff Writer, "GM's unit names new CEO", Minneapolis Star Tribune, November 11, 2005.