July 30, 2003
It's no secret that business is bad for American automakers, what with slow sales and the discounted financing and rebates. You might be tempted to wonder how GM and Ford can stay in business. The answer? They've basically become banks that give away car loans instead of toasters.
In the last quarter, both companies made nearly all of their profit from lending money rather than slapping cars together. Ford made all but $16 million of its $417 million profit from Ford Credit. GM made $834 million of tis $901 million from General Motors Acceptance Corp. (GMAC).
What's most striking about GMAC is that it made more money on commercial and home mortgages than it did financing cars. GMAC's mortgage arm is the nation's largest commercial mortgage company and its one of the top 10 residential lenders.
One of GMAC's fastest-growing units is Ditech.com, the online residential lender that's been heavily promoting its refinancing and home equity loans lately. But the boom in home refinancings may be winding down and Ditech.com's attempt to conduct complex mortgage transactions via the Web has left many consumers fuming, raising questions about its ability to attract repeat business.
Ditech.com told ConsumerAffairs.com he "horrible journey" with Ditech.com lasted six weeks, with numerous closings cancelled because of missing paperwork and costs that were $1,000 more than he'd been told to expect.
"This has been the most painful mortgage refi experience I have endured over the past 20 years," said a New Hampshire homeowner. "Simple refi, excellent credit and equity, and was promised a closing within 2 weeks. It's been well over a month now, and we 'closed' on our loan over 2 weeks ago. Ditech.com has still not paid off the original loan!"
If the mortgage boom subsides and Ditech fails to straighten out its problems, GMAC's earnings may sink as well, putting GM under pressure to produce more significant profits from its automobile business.
Ford Credit's income, by contrast, is almost entirely auto-related.
