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GMAC's woes hurt GM profit

But its North American auto operations loss worried analysts more.

DETROIT - The troubled mortgage market spilled onto General Motors Corp.'s balance sheet in the first quarter as its profit fell 90 percent from a year earlier mainly because of losses at GM's former financial arm.

But industry analysts were more concerned that the nation's largest automaker lost money on its North American auto operations than about the losses at GMAC Financial Services, because the company is more than a year into a massive restructuring plan that includes cost cuts and multiple new products.

GM announced the quarterly results yesterday. The net profit of $62 million, or 11 cents a share, for the January-to-March period was GM's second consecutive quarterly profit, although it was down from $602 million, or $1.06 a share, in the 2006 quarter.

The company reported record worldwide sales of 2.26 million vehicles and showed improvements in its automotive operations in the latest quarter.

Earnings excluding onetime items fell short of Wall Street's expectations, and its shares declined $1.75, or 5.4 percent, to close yesterday at $30.69 on the New York Stock Exchange.

The company attributed the year-over-year decline to losses in GMAC's residential-mortgage business. GM sold a 51 percent stake in GMAC to private-equity investors last year, but still owns 49 percent of the business.

GMAC's commercial-mortgage business was based in Horsham, Pa. It remains there under new ownership and a new name, Capmark Financial Group Inc.

GM's chief financial officer, Fritz Henderson, attributed the decline in profit primarily to a $115 million loss from the company's stake in GMAC. The financial company posted a first-quarter loss of $305 million Wednesday, mainly because of a $910 million loss from its troubled residential-loan business.

While GM's North American performance improved, the company still lost an adjusted $85 million on its core operations. A year ago, GM reported an adjusted loss of $251 million in North America.

Industry analysts focused on North America, with some questioning whether GM's earnings would continue to be dragged down by GMAC, and whether GM had cut its costs enough.

Lehman Bros. Holdings Inc. analyst Brian Johnson questioned his own earlier assumption that GM would see improvement from the rollout of new pickups.

"Without substantial labor concessions, meaningful improvements in profitability are unlikely in our view," he said in a note to investors yesterday.