GMAC LLC, the auto and home lender that received $13.5 billion in government rescue funds, told employees earlier this week it will cut $1 billion in costs this year, said a person familiar with the matter.

The cuts amount to 20 percent of GMAC’s expenses and were announced in a companywide memo, said the person, who declined to be named because the document wasn’t made public. The cost reductions are aimed at returning the company to profitability, the person said. Beth Coggins, a company spokeswoman, declined to comment.

GMAC, which was bailed out in December to help save General Motors Corp., received a second cash infusion from the government yesterday as part of an effort to keep lending available to customers and dealers of Chrysler LLC. The Treasury expects the investments to lead to a 35.4 percent equity stake in the lender. GMAC, based in Detroit, has lost money in six of the past seven quarters from mortgage defaults and 18 straight months of declining auto sales.
Source: bloomberg.com

Categories: US Markets, World Economy
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