ResCap to trim work force by 25 percent

Blame laid on rocky real estate market and credit crisis

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updated 1:29 p.m. ET Oct. 17, 2007

MINNEAPOLIS - GMAC Financial Services said on Wednesday it would cut about 3,000 jobs, or 25 percent of the work force at its Residential Capital LLC mortgage operation.

It blamed the cuts on "sharp downturns in the U.S. residential real estate markets and the global dislocation of the mortgage finance and credit markets."

ResCap employs about 12,000 people after cutting 2,000 jobs earlier this year.

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The company said the largest job cuts would happen in business units most affected by the drop-off in mortgage originations.

Spokeswoman Gina Proia said approximately 460 jobs would be eliminated in Minneapolis, where Rescap is based and employs 1,550 people. That would be the largest job losses in any one city.

She also said about 180 jobs would be eliminated in Horsham, Pa.

ResCap said it would incur restructuring charges between $90 million and $110 million. That includes severance costs of $55 million to $65 million and costs for closing facilities of $35 million to $45 million.

Most of the charges will happen in its fourth quarter.

Troubles in the subprime mortgage market have hurt GMAC. In July it said second-quarter profits fell 63 percent, primarily because of ResCap losses of $254 million.

ResCap said the restructuring of its cost structure will make it more flexible, allowing it to grow or shrink depending on what happens in the loan market.

GMAC Financial Services was formerly controlled by General Motors Corp. Cerberus Capital Management LP and the other private-equity firms bought a 51 percent stake in GMAC LLC in November, before weakness in the mortgage industry became widely known. GM maintains a 49 percent stake.