RESIDENTIAL Capital LLC, now the GMAC LLC unit, is fighting to avoid bankruptcy. It has been forced to stop making loans to borrowers with poor credit histories after losses of US$5.3 billion during the past six quarters, Bloomberg News reported.

ResCap's problems have sucked time and money from what has become a US$15 billion bet on selling cars and providing loans to the buyers. A year after it bought the 51 percent GMAC stake, New York-based Cerberus Capital Management LP paid US$7.4 billion for Chrysler LLC, including the car maker's profitable auto-loan and leasing unit. Cerberus founder Stephen Feinberg has to decide whether to inject more money into ResCap or let it die.

"At the time the deal was done, ResCap was the good part," said Tom Flaherty, a Philadelphia money manager at Aberdeen Asset Management Plc, which oversees more than US$30 billion. His team owned ResCap bonds and sold them before they were cut to below investment grade. "They're in an unexpected mess."

Minneapolis-based ResCap said yesterday that bondholders tendered US$8.6 billion of notes as part of its offer to exchange or buy back US$14 billion of debt to help to stave off bankruptcy. The transaction gives ResCap time to come up with money to pay its debts and avoid a default.

ResCap has said it may not be able to meet debt obligations unless it comes up with an additional US$600 million by the end of June. Cerberus is unlikely to step in because it won't be able to recoup an additional investment given tight credit markets, said Sean Egan, managing director of Egan-Jones Rating Co.

"They're reducing their support by not stepping up when other parties have stepped up," he said. "Cerberus has made the decision that they can't keep pace with GMAC's needs."

Brett Ingersoll, Cerberus's co-head of private equity, declined to comment directly on plans for ResCap. Gina Proia, a spokeswoman for GMAC in New York, also declined to comment.

Ingersoll said Cerberus is focused on making the auto-related strategy work. The company also owns Tower Automotive Inc, the maker of car and truck frames that filed for bankruptcy in 2005.

"Historically auto finance has done well in up and in down markets," he said. "We can be successful in troubled waters."

Ingersoll said that while Cerberus previously considered combining the auto-lending units of GMAC and Chrysler, it has "no current plans to do so."

Cerberus Capital Management LP's US$7.4 billion purchase of General Motors Corp's finance arm in 2006 won control of a mortgage unit, supplying a steady stream of cash to finance the auto lender.

But then the home-loan money disappeared in a flood of subprime losses.