General Motors finance arm has said it expects to beat its previous estimate of $US2.5 billion in net income this year despite lower profits from its auto financing business and other challenges.

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In a conference call with investors, GMAC Financial Services chairman Eric Feldstein said the division will deliver more than $2 billion in dividends to its parent company this year – the automaker has depended heavily on GMAC in recent years to boost profits, according to the Associated Press.


But Feldstein reportedly said GMAC’s borrowing ability has been hurt by the downgrade of its debt to “junk” status. Standard & Poor’s Ratings Services and Fitch Ratings downgraded GM and GMAC in May.


“If access to unsecured borrowing remains impaired, it probably will be very challenging for GMAC to offer a full range of auto financing support to GM customers,” Feldstein told AP.


Feldstein reportedly said the decision to sell up to $55 billion in US auto loans to Bank of America Corp. will give it cash to reinvest in more profitable areas, such as its insurance and mortgage businesses.

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Feldstein also said GMAC and GM are exploring ways to become more distinct entities without severing ties altogether, in order to help GMAC raise its credit rating, AP noted.


“The trick is to see if enough separation between GM and GMAC can be introduced so that GMAC can command a higher rating,” Feldstein said, according to the Associated Press.


Feldstein reportedly said GMAC also is close to finalising a previously announced sale of a majority interest in its commercial mortgage business to a group of private investors.